Facts of the Case

The petitioner challenged the order dated 09.03.2018 passed under Section 279(2) of the Income Tax Act, whereby his application for compounding of offences under Sections 276C(1) and 277 for Assessment Year 2007–08 was rejected.

The rejection was primarily based on the allegation that the petitioner failed to furnish complete bank statements relating to accounts held in the Geneva Branch of HSBC Bank.

Subsequently, the petitioner also challenged the order dated 30.05.2019 rejecting his rectification application.

The petitioner contended that:

  • Consent waiver forms were submitted to facilitate procurement of bank statements.
  • Bank statements were later made available covering the relevant period.

Issues Involved

  1. Whether rejection of the compounding application due to non-submission of bank statements was justified.
  2. Whether subsequent availability of bank statements warranted reconsideration of the application.
  3. Whether the authority was required to re-adjudicate the compounding application afresh.

Petitioner’s Arguments

  • The petitioner had complied with requirements by submitting consent waiver forms for obtaining bank statements.
  • The bank statements were eventually available and furnished, albeit after the impugned order.
  • The rejection of the compounding application was unjustified and required reconsideration.
  • The petitioner sought either compounding of offences or fresh consideration of the application in accordance with law.

Respondent’s Arguments

  • The Revenue contended that the petitioner failed to provide complete bank statements at the time of consideration.
  • It was argued that timely submission of the documents would have avoided the rejection.
  • The absence of crucial financial records justified denial of compounding.

Court’s Findings / Order

  • Since the bank statements are now available, the matter should be reconsidered.
  • The impugned orders dated 09.03.2018 and 30.05.2019 were set aside.
  • The authority was directed to:
    • Decide the compounding application afresh
    • Provide opportunity of personal hearing
    • Pass a reasoned (speaking) order
    • Complete the process within 8 weeks
  • Interim protection granted earlier was directed to continue during reconsideration.
  • The Court clarified that no opinion on merits was expressed.

Important Clarification

  • The Court emphasized procedural fairness and reconsideration when relevant documents become available.
  • The judgment reinforces that technical deficiencies at initial stages should not defeat substantive justice, especially in compounding matters.
  • Authorities must pass speaking orders and ensure opportunity of hearing.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS08112023CW120922019_140058.pdf.

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