Order Quashed: Reconsider Compounding Application on Merits Without Time Limit, Says Court.

The HC quashed the impugned order rejecting the petitioner's compounding application for being untimely, directing the first respondent to reconsider the application on its merits within one month. The Court found the conclusions in the order unsustainable, noting the absence of a specific limitation period under Section 279 of the Income Tax Act, 1961. No costs were imposed.

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Issues involved:
The rejection of the compounding application by the first respondent, based on the time limit specified in guidelines issued by the Central Board of Direct Taxes, and the challenge to this decision by the petitioner.

Summary:
The petitioner, a subsidiary of a company in Singapore, faced prosecution for belated filing of returns due to a difference of opinion between auditors in India and Singapore. The compounding application was rejected for being filed beyond the time limit specified in guidelines. The petitioner argued that the application was filed within a reasonable timeframe considering the exclusion of time due to the Covid-19 pandemic and the quashing of the guidelines by the Court.

The petitioner contended that the exclusion of time due to the Covid-19 pandemic should be considered, making the compounding application timely. Additionally, the petitioner argued that since the guidelines were quashed by the Court, the application could be filed at any time during the proceedings before the Magistrate.

The respondent, however, mentioned that a review application against the quashing of the guidelines was dismissed, and they intend to file an appeal. The legal provision regarding the compounding of offences under Section 279 of the Income Tax Act, 1961, does not prescribe a specific period of limitation.

The Court held that the conclusions in the impugned order were unsustainable, and thus quashed the order. The first respondent was directed to consider and dispose of the compounding application on its merits within one month. The case was disposed of accordingly, with no costs imposed.

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