M/S.SMV BEVERAGES PVT. LTD. JAGATPUR V. PRINCIPAL CHIEF COMMNR. OF INCOME TAX, BBSR

WP(C)/14369/2023

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The case involves M/s. SMV Beverages Private Ltd., the petitioner, challenging the rejection of their application for compounding an offence under Section 276 B of the Income Tax Act. The application was initially rejected on the grounds that it was not filed within the prescribed 12-month period. The petitioner argued that the application was filed within the stipulated time, referencing a circular dated 14.06.2019 which provided guidelines for such applications. The court found that the affidavit submitted to support the application was merely to rectify a defect and should not be considered as a separate application. Consequently, the court set aside the rejection and remanded the case for a decision on its merits.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 672639 (HC-ORISSA)
• Appeal Type: Others
• Pronouncement Date: 20-05-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: T K SATAPATHY
• Assessee Lawyers: R P KAR
• Keywords: Affidavit; Compounding application; Income Tax; Technical Approach; Verification of statements
• Section: 276-B

Judgement Text

" IN THE HIGH COURT OF ORISSA AT CUTTACK WP(C) No.14369 of 2023 M/s. SMV Beverages Private Ltd. …..…. Petitioner Mr. R.P. Kar, Adv. -Versus- Principal Chief Commissioner of Income Tax, ..…… Opp. Parties Bhubaneswar & Anr. Mr. T.K. Satapathy, Sr. Standing Counsel (IT) CORAM: JUSTICE S. TALAPATRA JUSTICE SAVITRI RATHO ORDER 16.05.2023 Order No. 01. 1. This matter is taken up through Hybrid Arrangement (Virtual/Physical Mode). 2. Heard Mr. R.P. Kar, learned counsel appearing for the petitioner. 3. By means of this writ petition, the petitioner has challenged the order dated 11.02.2022 (Annexure-1 to the writ petition) whereby the petitioner’s application for compounding the offence under Section 276 B of the Income Tax Act has been rejected, on the solitary ground that the application was not filed within the prescribed period of 12 months. 4. Mr. Kar, learned counsel has drawn our attention to the said application which the petitioner filed on 17.01.2020 (Annexure-5 to 2 the writ petition) and contended that the application was filed within the period of 12 months as prescribed by the Circular dated 14.06.2019 (Annexure-2 to the writ petition). 5. Mr. Kar, learned counsel has submitted that the said application was filed inadvertently without an affidavit, as required. 6. On 04.02.2020, to cure the defect, the petitioner filed the requisite affidavit with an application to the Principal Chief Commissioner of Income Tax, BBSR for consideration of his prayer for compounding. 7. By the impugned order dated 11.02.2020 (Annexure-1 to the writ petition), it has been observed that the compounding application cannot be filed after the end of 12 months from the end of the month in which the prosecution complaint is filed in a court of law. 8. By the circular No.1 of 2020 dated 03.01.2020, the period of limitation has been stipulated. The application was supposed to be filed by 31.01.2020. But that was not so filed and according to the Income Tax Officer, since the application was filed on 05.02.2020, the said application was invalid and on the basis of the said application, no compounding can be allowed. 9. Mr. Kar, learned counsel has submitted that the affidavit filed on 05.02.2020 is a mere affidavit to remove the defect. It is not the application for compounding. The said affidavit was filed on 3 05.02.2020 in support of the said application dated 17.01.2020. As such, the said affidavit should be treated (Annexure-1 to the writ petition) as the part of the application dated 17.01.2020. Moreover, Mr. Kar, learned counsel has referred to the circular dated 14.06.2019 (Annexure-2 to the writ petition) which provides the guidelines including the eligibility conditions of compounding. In Para-7(ii) of the said guidelines, it has been clearly stated that no application of compounding can be filed after the end of 12 months from the end of the month in which the prosecution complaint has been filed in the court of law, in respect of the offence against which compounding is sought. 10. Mr. Kar, learned counsel has drawn our notice to Para-9.1 of the said circular dated 14.06.2019 (Annexure-2 to the writ petition). Para-9.1 of the said circular provides as follows: “The restrictions imposed in Para 7(ii) of these Guidelines for compounding of an offence in a deserving case may be relaxed, where application is filed beyond 12 months but before the completion of 24 months from the end of month in which complaint was filed, by the Committee defined in Para 10 of these Guidelines, provided that such delay should be attributable to reasons beyond the applicant’s control. However, a plea of pendency of appeal at any stage or before any authority cannot be treated as a reason beyond the applicant’s control, because furnishing an undertaking to withdraw the appeal(s) having bearing on the offence is a prerequisite as per clause 7(v) above.” 4 11. According to us, the said provision will not help the petitioner, as the petitioner has nowhere stated what was that exceptional reason which prevented him from filing the application within the time. 12. Mr. T.K. Satapathy, learned Senior Standing Counsel appearing for the Income Tax Department has submitted that there is no infirmity in the impugned order because the Income Tax Officer has correctly taken the day i.e. 05.02.2020 as the relevant date for filing the compounding application in as much as on that day only, by filing the affidavit, the application was made complete. 13. Having appreciated the submissions made by the counsel for the parties, we observe that when the power of relaxation has been granted to the authority who considers the compounding application, such power shall be invoked in appropriate cases to advance the cause of justice. In this case, we have found that the application was filed on 17.01.2020 for compounding the offence under Section 276 B of the Income Tax Act. But that was not supported by an affidavit and as such, it could be stated that the application was not complete. 14. But when on 05.02.2020, the affidavit was filed, that affidavit was filed to verify the statements made in the application dated 17.01.2020. The appropriate authority, having adopted a technical approach, held the main application to have filed beyond the 5 prescribed period i.e. 31.01.2020. In our considered view, that was a wrong approach. First of all, the affidavit was filed for verification of the statements in the application dated 17.01.2020. By filing the affidavit, the defect in the application stood removed. Thereafter, it cannot be held that the application for compounding was filed on 05.02.2020 or the compounding application was time-barred. 15. Having observed thus, we interfere with and set aside the order dated 11.02.2020 (Annexure-1 to the writ petition) and remand the matter back to the Income Tax Officer (Judl. & Tech.) in the Office of the Principal Chief Commissioner of Income Tax for deciding the application of compounding on merit within a period of 30 days after giving the opportunity of personal hearing to the assessee. 16. In terms of the above, this writ petition stands allowed and disposed of. (S. Talapatra) Judge (Savitri Ratho) Judge Rati Ranjan Digitally Signed Signed by: RATI RANJAN NAYAK Reason: Authentication Location: High Court of Orissa, Cuttack Date: 20-May-2023 14:16:03 Signature Not Verified "