TaxTMI 
TaxTMI 
2023 (7) TMI 1094
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.... cause notice from the department. There is no outstanding on amount of TDS. 2. Petitioners received the show cause notice dated 30th November 2011 calling upon petitioners to show cause as to why prosecution against them be not lodged for offence under Section 276B read with Section 278B of the Income Tax Act, 1961 (the Act). On 26th March 2012, petitioners filed a compounding application dated 5th March 2012 (first application) in the prescribed format. On 25th February 2013, hearing notice was issued to petitioners and petitioners were given a personal hearing. Chief Commissioner of Income Tax, i.e., respondent no. 3 declined the prayer to compound the offence. This was because on 25th February 2013, during the personal hearing, petitioners' representative had agreed to pay the compounding fees of Rs. 7,39,984/- as calculated by CIT (TDS) Mumbai by 15th March 2013 but petitioners failed to deposit the compounding fees. The break up of Rs. 7,39,984/- is as under: Particulars Amt.(Rs.) Compounding fees 5,89,984/- Establishment Expense of accused assessee company 50,000/- Mr. Taslim A Chougule, Director, Co-accused 50,000/- Mrs. Dishad T Chougule, Dire....
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....17.07.2013 for the AY. 2009-10 is enclosed for your information. Encl: As above Yours sincerely. Meera Jadhav (LINESH N PATHAK) ACIT (OSD) to CCIT (TDS), Mumbai." 6. On 2nd March 2013, over 10 years later, department has filed evidence before the Additional Chief Metropolitan Magistrate Court. Therefore, petitioner addressed a letter on 17th March 2013 to respondent no. 3 requesting him to provide a copy of order passed in the second application. In response petitioner received a letter dated 13th April 2023 which reads as under: "No. CCIT(TDS)/Mum/Compounding/173/2023-24/22 Date: 13.04.2023 To, The Principal Officer, M/s. Sofitel Reality Pvt Ltd. Plot No 1/838, Lady Jamshedji Road, Near Bank of Maharashtra, Mahim(W). Mumbai 400 016. Sir. Sub: Application for compounding of offences u/s 276B of the I.T. Act, 1961 in the case of M/s. Sofitel Reality Pvt Ltd. TAN:MUMS60078E for A.Y.2009-10 - Reg. Ref: Your compounding application filed on 04.08.2015 for AY 2009- 10. Kindly refer to the above. 2. In this regard, I....
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.... Principal Chief Commissioner of Income Tax or Commissioner of Income Tax or Principal Director General of Income Tax or Director General. The Income Tax Officer has no power to even state that the application is null and void. We find that the application dated 8th October 2015, has not even been disposed as is also evident from the affidavit in reply filed by Shashi Shekhar Singh. 9. We have to observe, in view of the comment made by the Income Tax Officer in the affidavit in reply, that sub-section (2) of Section 279 of the Act provides for compounding of any offence by the authorised officer either before or after the institution of the proceedings. There is no limitation provided under sub section (2) of Section 279 of the Act for submission or consideration of the compounding application. What is relied upon by the Income Tax Officer is the Guidelines issued by respondent no. 4, Central Board of Direct Taxes (CBDT). CBDT by the Guidelines cannot provide for limitation nor can it restrict the operation of sub section (2) of Section 279 of the Act. Mr. Suresh Kumar submitted that the Guidelines were issued under second explanation appended to Section 279 of the Act. The Guid....
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....ia v. State of U.P. [1981] 2 SCC 585 at page 597). The object of an Explanation to a statutory provision was elaborated by the Supreme Court in S. Sundaram Pillai v. V.R. Pattabiraman [1985] 1 SCC 591, in which it was held as follows: "53. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is - (a) to explain the meaning and intendment of the Act itself, (b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve, (c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful, (d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and (e) it cannot, however, take away a statutory right with which any pe....
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.... did not stipulate a limitation period for filing the application for compounding. It gave a discretion to the competent authority to reject an application for compounding on certain grounds. Thus, the Court held that resort cannot be had to para 8 of the Guidelines to prescribe a period of limitation for filing an application for compounding. The Court accordingly held as follows: "14. The Court finds nothing in section 279 of the Act or the Explanation thereunder to permit the CBDT to prescribe such an onerous and irrational procedure which runs contrary to the very object of section 279 of the Act. The CBDT cannot arrogate to itself, on the strength of section 279 of the Act or the Explanation thereunder, the power to insist on a 'pre-deposit' of sorts of the compounding fee even without considering the application for compounding. Indeed Mr Kaushik was unable to deny the possibility, even if theoretical, of the application for compounding being rejected despite the compounding fee being deposited in advance. If that is the understanding of para 11(v) of the above Guidelines by the Department, then certainly it is undoubtedly ultra vires section 279 of the Act. ....
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....es dated 14th June 2019, are contrary to the provisions of sub-section (2) of section 279. The respondent no. 3 has failed to exercise jurisdiction vested in it while deciding the application on merits and consideration of the grounds set out when the application for compounding of offence was filed before it. On this count, the impugned order dated 1st June 2021 needs to be quashed and set aside. Accordingly, we pass the following order :- (i) The impugned order dated 1st June 2021 passed by respondent no. 3-Chief Commissioner of Income Tax (TDS), Mumbai, on the application filed by the petitioners for compounding of an offence, is quashed and set aside. (ii) Consequently, we remand the application, under the provisions of section 279(2) of the Income-tax Act, of the petitioners back to respondent no. 3 to consider afresh on its own merits. (iii) Respondent no. 3 shall dispose of the application of the petitioners preferably within a period of thirty days from the date of receipt of this judgment. (iv) Until disposal of the application of the petitioners for compounding of offence, under sub-section (2) of Section 279 of the Income-tax Act, 1961....
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....be expected to deposit the amount within the time prescribed or at least within the reasonable time. Instead of considering these factors on their merits and examining whether indeed they were true or not, the Chief Commissioner felt compelled by the text of para 8(v). That condition, no doubt is important and has to be kept in mind, cannot be only determining. In the present case, the material on record in the form of a letter by the Superintendent of CBI also shows that a closure report was in fact filed before the competent court. Having regard to all these facts, this Court is of the opinion that the refusal to consider and accept the petitioner's application under Section 279(2) cannot be sustained. The impugned order is hereby set aside." (emphasis supplied) 11. We should also note that a Division Bench of this Court in Durgeshwari Hi-Rise & Farms (P) Ltd. Vs. Chief Commissioner of Income Tax (TDS) (2019) 103 taxmann.com 292 (Bombay), was considering a matter where the assessee had filed more than one compounding application. Though court has observed that the order was being passed in peculiar facts of that case, we find that the court has observed that just ....
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....the Act. The CBDT cannot arrogate to itself, on the strength of Section 279 of the Act or the Explanation thereunder, the power to insist on a 'pre-deposit' of sorts of the compounding fee even without considering the application for compounding. Indeed Mr Kaushik was unable to deny the possibility, even if theoretical, of the application for compounding being rejected despite the compounding fee being deposited in advance. If that is the understanding of para 11(v) of the above Guidelines by the Department, then certainly it is undoubtedly ultra vires Section 279 of the Act. The Court, accordingly, clarifies that the Department cannot on the strength of para 11(v) of the Guidelines dated 23rd December 2014 of the CBDT reject an application for compounding either on the ground of limitation or on the ground that such application was not accompanied by the compounding fee or that the compounding fee was not paid prior to the application being considered on merits. 15. The question of payment of the compounding fee, if any, would arise, only if upon considering the application on merits, the Department is of the view that the prayer should be allowed subject to terms....