No Limitation Period Prescribed for Compounding of Offences Under Income Tax Act | HC
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Case Details: Photon Kathaas Production (P.) Ltd. v. DGIT (Investigation) - [2024] 159 taxmann.com 119 (Madras)
Judiciary and Counsel Details
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- Senthilkumar Ramamoorthy, J.
- Revathi Manivannan for the Petitioner.
- A.N.R. Jayaprathap, Jr. SC for the Respondent.
Facts of the Case
Assessee faced a delay in filing its income tax return due to a disagreement between auditors in India and Singapore. The return was filed on 14.05.2018, followed by prosecution initiated on 03.01.2019, with summons issued on 09.11.2021.
After receiving the summons on 19.05.2022, the assessee filed a compounding application, which was rejected for being beyond the time limit specified in the guidelines issued by the Central Board of Direct Taxes (CBDT) on 14.06.2019.
Assessee filed the writ petition before the Madras High Court.
High Court Held
The Madras High Court held that the provision outlined in subsection (2) of Section 279, pertaining to the compounding of offences, grants the Commissioner the authority to compound such offences either before or after the commencement of proceedings.
Neither subsection (2) nor any of the other sub-sections of Section 279 prescribe a period of limitation with regard to the compounding of offences.
By taking note of this aspect, the guidelines issued by the CBDT were quashed by the Madras High Court in the case of Jayshree vs. the Central Board of Direct Taxes W.P.No.2968 & 2970 of 2023, dated 03-11-2023.
Even otherwise, the complaint was lodged on 03.01.2019, about fifteen months lapsed between the date of the complaint and the onset of the COVID-19 pandemic. If the period excluded under orders of the Supreme Court, i.e. the period running from 15.03.2020 to 28.02.2022, is excluded, the compounding application filed on 19.05.2022 would be within the period prescribed in the guidelines.
Thus, CBDT was directed to dispose of the compounding application within a maximum period of one month from receipt of a copy of the order after providing a reasonable opportunity.
List of Cases Reviewed
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- W.P.Nos.2968 and 2970 of 2023 dated 03.11.2023 (para 6) – followed.
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