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 Circular 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 Circular 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.
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 that are reasonable and subserve the object of Section 279 of the Act.
FULL TEXT OF HIGH COURT JUDGMENT
Dr. S. Muralidhar, J.:
1. The present writ petition was filed at a stage when the Petitioner’s application for compounding of offences under Section 279 (2) of the Income Tax Act, 1961 (‘Act’), was still pending with the Respondent Income Tax Department (‘Department’). In response to the Petitioner’s application filed on 1st April, 2016, he was sent the following communication on 26th April, 2016:
