All That Jazz Vs Union of India and others (Orissa High Court)
In All That Jazz vs. Union of India and others, the Orissa High Court ruled that offences under Section 279 of the Income Tax Act, 1961 can be compounded either before or after legal proceedings have begun. The petitioners challenged an order by the Principal Chief Commissioner of Income Tax (PCCIT), which denied their compounding application as untimely. They argued that their application should still be considered valid since the proceedings were ongoing, and sought relief from the court. The government counsel pointed out that revised guidelines were issued in October 2024 to relax time limits for compounding applications. In response, the petitioners referred to a precedent from the Madras High Court, which had previously struck down a similar time restriction guideline.
The court reviewed Section 279(2) of the Income Tax Act, which permits compounding of offences related to income tax violations, explicitly allowing compounding applications to be filed “either before or after the institution of proceedings.” The High Court interpreted this provision as supporting the petitioners’ right to apply for compounding at any stage, as long as proceedings were ongoing, and stated that the PCCIT’s decision to reject the application based on timing was inconsistent with the Act. Consequently, the court set aside the PCCIT’s rejection order and directed the tax authority to reconsider the application without undue delay.
