Facts of the Case

     The petitioner filed a writ petition challenging:

  • Order dated 21.08.2018 rejecting his application for compounding of offences under Sections 276CC and 278E of the Income Tax Act.
  • Order dated 29.01.2020 rejecting his review application.

    The rejection was based on:

  1. Delay in filing the compounding application beyond prescribed time.
  2. Prior conviction by the ACMM Court dated 19.02.2018.

      Subsequently:

  • The petitioner filed an appeal against conviction.
  • The appellate court (Special Judge, CBI) set aside the conviction on 03.12.2018 and remanded the matter for fresh consideration.
  • Despite this, the authority rejected the review application stating that the petitioner was not acquitted and trial was still pending.

     Issues Involved

  1. Whether compounding application can be rejected on the ground of limitation despite CBDT Circular granting relaxation?
  2. Whether compounding can be denied when conviction has been set aside but trial is pending?
  3. Whether rejection of review application was legally sustainable?

     Petitioner’s Arguments

  • CBDT Circular No. 25/2019 grants relaxation in limitation period for filing compounding applications.
  • Application was filed within the extended permissible period (before 31.12.2019).
  • Conviction had already been set aside by the appellate court.
  • Pendency of trial does not bar compounding of offence.
  • Rejection of review was based on incorrect and untenable reasoning.

     Respondent’s Arguments

  • Petitioner deliberately delayed filing returns.
  • Due to such conduct, petitioner is not entitled to compounding of offence.
  • Conviction issue was still open as there was no acquittal.

    Court’s Findings / Analysis

     The Delhi High Court held:

         On Limitation

  • In light of CBDT Circular dated 09.09.2019, objection regarding limitation does not survive.

         On Conviction

  • Since conviction was set aside by appellate court, it cannot be a ground to reject compounding.

        On Review Rejection

  • Authority’s reasoning that petitioner was not acquitted is legally untenable.
  • Compounding is applicable even when prosecution is pending; acquittal is not a prerequisite.

        On Merits

  • Court refrained from deciding merits of compounding.
  • Directed authority to reconsider application independently.

     Court Order / Final Decision

  • Orders dated 21.08.2018 and 29.01.2020 were set aside.
  • Matter remanded to the competent authority.
  • Direction issued to reconsider compounding application on merits and in accordance with law.

     Important Clarification by Court

  • Compounding cannot be rejected merely because trial is pending or acquittal has not occurred.
  • Setting aside of conviction removes the ground of prior conviction.
  • CBDT Circulars granting relaxation must be given full effect.
  • Authorities must decide compounding applications on merits, not technical grounds.

 Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:797-DB/NAC25022022CW23562020_114753.pdf

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