Bombay High Court
Ms. L. T. Stock Brokers Pvt. Ltd vs The Chief Commissioner Of Income Tax - 2, ... on 4 March, 2025
Author: M.S.Sonak
Bench: M.S. Sonak
SAYYED Digitally signed
2025:BHC-OS:3535-DB
SAEED by SAYYED
SAEED ALI
1 8.WP(L).21032.24.docx
ALI AHMED ALI
AHMED Date:
2025.03.05 Revati
ALI 14:02:52 +0530
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO. 21032 OF 2024
M/s. L. T. Stock Brokers Pvt. Ltd. ...Petitioner
Versus
The Chief Commissioner Of
Income Tax - 2, Mumbai ...Respondent
______________________________________________________
Mr Mayur Vinod Faria a/w Mr Harshal Hasmukh Savla, for
the Petitioner.
Ms Shilpa Goel, for the Respondent.
______________________________________________________
CORAM
M.S. Sonak &
Jitendra Jain, JJ.
DATED: 4 March 2025
ORAL JUDGMENT (Per M.S.Sonak,J):-
1. Heard learned counsel for the parties.
2. Rule. The rule is made returnable immediately at the
request of and with the consent of learned counsel for the
parties.
3. The petitioner challenges the Chief Commissioner's
order dated 17 January 2024, made under Section 279(2) of
the Income-tax Act, 1961, dismissing the petitioner's
application for compounding the offence.
4. On perusing the impugned order, we find that the Chief
Commissioner has dismissed this application on the sole
ground that it was filed beyond 36 months from the date of
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filing of the complaint against the petitioners. The Chief
Commissioner has relied upon paragraph 9.1 of CBDT
guidelines dated 16 November 2022 for compounding
offences under the Income Tax Act 1961.
5. Paragraph 9 of the CBDT guidelines dated 16 September
2022 reads as follows:
9. Relaxation of time
9.1 The restrictions imposed in Para 7(ii) of these Guidelines for
compounding of an offence in a deserving case may be relaxed
with the approval of the Pr. Chief Commissioner of Income tax of
the Region wherein lies the jurisdiction of the case, for application
filed beyond 24 months but before 36 months from the end of
month in which complaint was filed in a court.
9.2 However, in all such cases where relaxation has been provided
in this Para, the compounding charges would be @1.5 times of
the normal compounding charges as applicable to the offence on
the date of filing of the original compounding application.
6. The Co-ordinate bench of this Court in its judgment and
order dated 18 July 2023 disposing of the Writ Petition (L)
No.14574 of 2023 (Sofitel Realty LLP and Ors Vs Income-tax
Officer (TDS) and Ors) had the occasion to consider similar
CBDT guidelines dated 23 December 2014. In the context of
such guidelines and clauses like Clause 9 of the 2022
guidelines, this Court held that since the Income-tax Act had
provided for no period of limitation to apply for
compounding, such period could not have been introduced
through guidelines. In any event, no rigid timeline could have
been introduced through such guidelines. This Court held that
the compounding application could not have been rejected on
delay alone.
The observations of the Madras High Court in the case of
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Kabir Ahmed Shakir Vs The Chief Commissioner of Income
Tax & Ors have a similar effect.1 This decision was made in the
context of the 2022 CBDT guidelines.
7. Ms. Shilpa Goel, learned counsel for the revenue,
however, submitted that even where no limitation is
prescribed by the State, the application has to be filed within a
reasonable period. She submits that the guidelines only
specified what would be reasonable period in the given case.
Further, she referred to the decision of the Hon'ble Supreme
Court in the case of Vinubhai Mohanlal Dobaria Vs Chief
Commissioner of Income Tax & Anr.2 and submitted that the
CBDT guidelines of 2014 were upheld by the Hon'ble Supreme
court, including, the paragraph which has prescribed
limitation period to file application for compounding.
8. She emphasized on paragraph 79 of this decision. Para
79 reads as follows:
A plain reading of the 2014 guidelines reveals that while it is
mandatory that the eligibility conditions prescribed under
Paragraph 7 are to be satisfied, the restrictions laid down in
Paragraph 8 have to be read along with Paragraph 4 of the Act
which provides that the exercise of discretion by the competent
authority is to be guided by the facts and circumstances of each
case, the conduct of the appellant and nature and magnitude of
offence. Seen thus, it becomes clear that the restrictions laid
down in Paragraph 8 of the guidelines are although required to be
generally followed, the guidelines do not exclude the possibility
that in a peculiar case where the facts and circumstances so
require, the competent authority cannot make an exception and
allow the compounding application.
9. The above paragraph states that para 8 of the 2014
guidelines [which had referred to the period of limitation]
1 Writ Petition No.17388 of 2024 decided on 30 August 2024.
2 Civil Appeal No.1977 of 2025 decided on 7 February 2025
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does not exclude the possibility that in the peculiar case where
the facts and circumstances so required, the competent
authority should consider the explanation and allow the
compounding application. This means that notwithstanding
the so-called limitation period, in a given case, the competent
authority can exercise discretion and allow compounding
application.
10. The competent authority has treated the guidelines as a
binding statute in the present case. On the sole ground that
the application was made beyond 36 months, the same has
been rejected. The competent authority has exercised no
discretion as such. The rejection is entirely premised on the
notion that the competent authority had no jurisdiction to
entertain a compounding application because it was made
beyond 36 months. Such an approach is inconsistent with the
rulings of this Court, Madras High Court and the Hon'ble
Supreme Court ruling in the case of Vinubhai Dobaria
(Supra) relied upon by the learned counsel for the revenue.
11. On the above short ground, we set aside the impugned
order dated 17 January 2024 and direct the Chief
Commissioner to reconsider the petitioner's application for
compounding in the light of observations made by the Hon'ble
Supreme Court in Vinubhai Dobaria (Supra) . This means that
the Chief Commissioner will have to consider all facts and
circumstances and decide whether such facts make out the
case for exercising discretion in favour of compounding the
offence. All contentions of all parties on merits are accordingly
left open for decision by the Chief Commissioner in the first
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instance.
12. The rule is made absolute in the above terms without
any cost order.
(Jitendra Jain, J) (M.S. Sonak, J)
