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I-T - Application for compounding of offence cannot be rejected on ground of limitation, when no such limitation period is prescribed under CBDT circular issued in that behalf: HC

By TIOL News Service

NEW DELHI, APRIL 21, 2017: THE ISSUE IS - Whether an application for compounding of offences can be rejected on the ground of limitation when no such limitation period is prescribed in the CBDT circular issued in that behalf. NO is the verdict.

Facts of the case:

The present writ petition was filed at a stage when the Petitioner's application for compounding of offences u/s 279 (2), was still pending. In response to the Petitioner's application, he was sent the a communication. In terms thereof, the Petitioner was required to pay a sum of Rs. 69, 67,699/- even for his application to be considered. This was purportedly in terms of a circular dated 23rd December, 2014 issued by CBDT issuing the guidelines for compounding of offences under Direct Taxes Law & Practice, 2015. The Petitioner contends that the above levy of compounding charges of nearly Rs. 70 lakhs, even before its application could be considered was exorbitant and without any authority of law. In those circumstances, the present writ petition, sought the quashing of the above circular and, in particular, para 12 thereof which sets out the fee for compounding.

In response to the notice issued in the present writ petition, a reply was filed by the Department setting out the basis for calculation of the compounding charges. Enclosed with the counter affidavit is an order dated passed by the CCIT declining the Petitioner's application for compounding of offences u/s 275C(1), 276C(2) & 277 on the ground that "there is inordinate delay of 9 years in filing of application for compounding of offences by the assessee. On the strength of the above order, it was urged by the counsel that the rejection of the application for compounding was not on the ground of failure to pay the compounding fee, but on the ground of the delay in filing the application.

On appeal, the HC held that,

++ the circular dated 23rd December, 2014 does not stipulate a limitation period for filing the application for compounding. What the said circular sets out in para 8 are "Offences generally not to be compounded". In this, one of the categories which is mentioned in sub-clause (vii) is: "Offences committed by a person for which complaint was filed with the competent court 12 months prior to receipt of the application for compounding". The above clause is not one prescribing a period of limitation for filing an application for compounding. It gives a discretion to the competent authority to reject an application for compounding on certain grounds. Again, it does not mean that every application, which involves an offence committed by a person, for which the complaint was filed to the competent court 12 months prior to the receipt of the application for compounding, will without anything further, be rejected. The grounds on which an application may be considered, should not be confused with the limitation for filing such an application. The reason given in the impugned order dated 3rd November, 2016 for rejection of the Petitioner's application does not satisfy the criteria spelt out in the guidelines issued by the Department by its Circular dated 23rd December 2014. It has proceeded on a ground that is not available to the Department viz., that the application is inordinately delayed. Since there is no other reason given for the rejection of the application, the Court is unable to sustain the order dated 3rd November, 2016 of the CCIT by which the Petitioner's application for compounding was rejected. The said order is hereby set aside. The Petitioner's application for compounding will have to considered afresh by the CCIT.

(See 2017-TIOL-771-HC-DEL-IT)


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