In a significant case, the Orissa High Court held that offence can be compounded under section 279 of Income Tax Act, 1961 as provision specified that it either before or after institution of proceedings. The Court further set aside the order rejecting the compounding of offence.
M/s. All That Jazz, the petitioner challenged the order made by the Principal Chief Commissioner of Income Tax ( PCCIT ) rejecting his client’s application made under sub-section (2) in section 279 of Income Tax Act, 1961, for compounding. Reason given is that the application was filed out of time. On query from Court, it was found that the proceedings are still pending.
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The Revenue submitted that there has been issued guidelines dated 17th October, 2024 relaxing prescribed time for filing application for compounding. On the other side, the petitioner argued that the Madras High Court had struck down an earlier guideline prescribing time.
As per Sub-section (2) in section 279, “Any offence under this Chapter may, either before or after the institution of proceedings, be compounded by the Principal Chief Commissioner or Chief Commissioner or a Principal Director General or Director General.”
A division bench of Justice Arindam Sinha and Justice M.S. Sahoo ascertained that the proceedings are pending. It was observed that the provision says any offence in the Chapter, may either before or after institution of the proceedings, be compounded. The Court viewed that the petitioners are clearly entitled and thus had duly applied.
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The Court set aside and quashed the Impugned order rejecting the application as made out of time.
While allowing the petition, the bench restored the applications for the authority to deal with, expeditiously.
Mr. Lal, advocate appeared on behalf of petitioners and Mr. Kedia, advocate, Junior Standing Counsel appeared on behalf of revenue.
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