Kabir Ahmed Shakir Vs Chief Commissioner of Income Tax (Madras High Court)
Madras High Court has overturned an order by the Chief Commissioner of Income Tax that rejected a compounding application filed by Kabir Ahmed Shakir. The rejection was based on a delay beyond the time limit specified in a Central Board of Direct Taxes (CBDT) circular. The court ruled that Section 279(2) of the Income Tax Act, 1961, which governs compounding of offenses, does not prescribe any time limit for filing such applications.
The petitioner argued that the CBDT circular’s time limit contravened the Act’s provisions. The petitioner’s counsel cited a precedent set in Jayshree vs. CBDT, where the Madras High Court had struck down a similar time limit provision in a CBDT circular, ruling that the board cannot issue circulars that contradict the Act’s objectives.
The court acknowledged the precedent and emphasized that Section 279(2) allows for compounding of offenses “either before or after the institution of proceedings,” without any temporal restrictions. The court held that the CBDT’s power to issue circulars is limited to implementing the Act’s provisions, not to adding restrictions like time limits that are not present in the statute itself.
The respondent argued that the petitioner was a habitual offender, but the court noted that the petitioner’s prior compounded offence could not be counted towards the habitual offender clause, as per the guidelines. Consequently, the court quashed the impugned order and remanded the matter back to the respondent. The respondent was directed to consider the compounding application on its merits and in accordance with the law, within eight weeks. The court declined to set a date for compliance reporting, accepting the respondent’s assurance that the order would be implemented.
