Law:

Section:

Section 279, read with section 119, of the Income-tax Act, 1961 - Offences and prosecution - Prosecution to be at instance of Chief Commissioner/Commissioner - Assessment year 1983-84 - Whether Commissioner has to exercise discretion under section 279(2) for compounding offences in conformity with instructions issued by Central Board of Direct Taxes (CBDT) under section 119(1) from time to time - Held, yes Circulars and notifications : CBDT's Instruction No. 1317, dated 11-3- 1980 FACTS The assessee-company filed its return, which was verified by petitioner No. 2 in his capacity as the assessee's director. Upon scrutiny of the return, the Assessing Officer found that the assessee had made misdeclaration in respect of certain receipt. Consequently, he passed assessment order adverse to the assessee and also filed a complaint under sections 276C(1) and 277 before the trial court, which convicted the assessee and its directors and sentenced them accordingly. While the criminal revision petition preferred by them against said was pending before the High Court, they deposited the amount as per demand raised by the department and filed an application for compounding the offence under section 279(2). The Commissioner issued a letter to the assessee quantifying the composition fee for compounding the offence and directing the assessee to convey its willingness to pay the composition fee. The assessee communicated its 'willingness' immediately. However, thereafter, the Chief Commissioner informed the assessee that since the CBDT had rejected its application for compounding, he was rejecting the said application. In the instant writ petition, the assessee contended that the power to compound an offence is specifically vested in the Chief Commissioner under section 279(2) and, thus, the rejection of the application at the sole instance of the CBDT without any reason, was wholly arbitrary and unjust. HELD As was clear from the facts of the case, the CBDT had rejected the application for compounding and, hence, the Chief Commissioner had rejected the application of the assessee for compounding. Reading section 279(2) along with the Explanation, there would be no manner of…

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