L. T. Stock Brokers Pvt. Ltd. v. CCIT

Case snapshot

Sections / provisions: 279

Questions before the Court / Tribunal

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Material facts and background

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.

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

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.

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.

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

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

Appellant / assessee submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Revenue / respondent submissions

Ms. Shilpa Goel, learned counsel for the revenue,

(Supra) relied upon by the learned counsel for the revenue. 11.

Court / Tribunal analysis and reasoning

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.

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

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

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.

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

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.

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.

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

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

Operative decision and relief

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

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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