Compounding of Income-tax offences cannot be denied for delay where the statute itself prescribes no filing limitation.

Section 279(2) of the Income-tax Act permits compounding of offences before or after institution of proceedings and does not prescribe any limitation period for filing such an application. A CBDT circular cannot impose a time bar inconsistent with the statute or curtail the substantive right to seek compounding. On that basis, rejection of the compounding application as time-barred was unsustainable, and the rejection was set aside. The application was directed to be taken on record and considered on merits in accordance with law.

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Issues: Whether rejection of the compounding application on the ground that it was filed beyond the time limit prescribed in the CBDT circular was sustainable when Section 279(2) of the Income-tax Act, 1961 does not prescribe any limitation period.

Analysis: Section 279(2) permits compounding of offences either before or after institution of proceedings and does not incorporate any time bar for filing such an application. The earlier decision relied on had already held that the CBDT cannot, by circular, impose a limitation inconsistent with the statutory scheme. A circular may regulate implementation of the provision, but it cannot curtail the substantive right to seek compounding by introducing a restriction not found in the Act.

Conclusion: The rejection of the compounding application on the ground of delay was unsustainable and was set aside. The application is to be taken on record and decided on merits in accordance with law.

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