Madras High Court Emphasizes No Limitation for Compounding Offence Under Section 279(2) of IT Act

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Published on: January 18, 2024 at 12:10 IST

The Madras High Court, in a recent ruling, emphasized that there is no restriction or limitation for filing an application for compounding of an offence under Section 279(2) of the Income Tax Act, 1961.

The Court quashed an order rejecting the application for compounding filed by the assessee and its directors, which was deemed untimely based on a CBDT Circular.

The High Court clarified that the limitation period mentioned in the CBDT Circular, prescribing 12 months for filing such applications, is directory and not mandatory.

The Court asserted that it cannot bind the assessee or the Writ Court.

The Single Judge Bench, led by Justice C. Saravanan, remarked, “There cannot be any restriction/limitation for filing an application for compounding of an offence contrary to Section 279(2) of the IT Act, 1961. There is also no useful purpose in prosecuting an assessee who may otherwise deserve to compound the offence.”

The case involved the failure of the assessee company to pay TDS, leading to a notice to the director as the principal officer.

The assessing officer initiated prosecution against the assessee and its directors under Section 276B with Section 278B. The applications for compounding were rejected, citing a violation of the CBDT Circular.

The court clarified that Section 279(2) allows officers of specified ranks to compound offences punishable under Chapter XXII of the IT Act. While the applications were filed beyond the time specified in the CBDT Circular, no limitation is prescribed for compounding offences under Section 279(2).

The Court directed the assessee to file an amended application for compounding within thirty days, providing necessary details for consideration.

The ruling underscores the distinction between the limitations in the CBDT Circular and the statutory provision of Section 279(2) concerning compounding offences.

Case Title: Jak Communications Private Limited v. Chief Commissioner of Income Tax (TDS)

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