Case Law Details
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.
This ruling clarifies that Section 279(2) does not impose a rigid timeline on compounding applications and affirms that taxpayers can seek compounding of offences at any stage during ongoing proceedings. By overturning the time-barred rejection, the court reinforced that authorities should not interpret procedural guidelines in ways that restrict taxpayers’ rights under the Income Tax Act.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. Mr. Lal, learned advocate appears on behalf of petitioners and submits, impugned is order dated 10th November, 2023 made by the Principal Chief Commissioner of Income Tax (PCCIT) rejecting his client’s application made under sub-section (2) in section 279 of Income Tax Act, 1961, for compounding. Reason given is that the application was filed out of time. On query from Court he submits, the proceedings are still pending. He seeks interference.
2. Mr. Kedia, learned advocate, Junior Standing Counsel appears on behalf of revenue and submits, there has been issued guidelines dated 17th October, 2024 relaxing prescribed time for filing application for compounding. Mr. Lal submits in reply, the Madras High Court had struck down an earlier guideline prescribing time.
3. Sub-section (2) in section 279 is reproduced below.
“279(2) Any offence under this Chapter may, either before or after the institution of proceedings, be compounded by the Principal Chief Commissioner or Chief Commissioner or a Principal Director General or Director General.”
We have ascertained that the proceedings are pending. The provision says any offence in the Chapter, may either before or after institution of the proceedings, be compounded. Petitioners are clearly entitled and thus had duly applied.
4. Impugned order rejecting the application as made out of time is set aside and quashed. The applications are restored for the authority to deal with, expeditiously.
5. The writ petitions are disposed of.
Author Bio
