By TIOL News Service

NEW DELHI, JAN 25, 2017: THE ISSUE IS - Whether an application for compounding of offences u/s 279(2) initiated due to non-deposit of TDS by the assessee as per Section 276B, can be refused, if such failure was on account of ongoing CBI investigations & seizure of books. NO is the verdict.

Facts of the case:

The assesee company had omitted to deposit amounts deducted as tax, from the sums payable under various contracts. These contracts were entered into by it, towards services rendered in connection with the Commonwealth Games, 2010. Assessee was proceeded with and apparently a complaint for the offence prescribed u/s 276B was filed. It was in these circumstances that the assessee sought for compounding of offence u/s 279(2). The application filed by assessee was rejected by the Chief CIT, who had formed his opinion that the compounding was not permissible in view of guidelines issued by CBDT imposed especially in view of para 8(v) thereof. Assessee contended that the view taken by the Chief CIT could not be sustained for the reasons that the ongoing investigations had culminated in a closure report.

On appeal, the HC held that,

++ in present case assessee's failure to deposit the amount collected was beyond its control and was on account of seizure of books of accounts and documents etc. But for such seizure, the asssesee would quite reasonably be expected to deposit the amount within the time prescribed or at least within the reasonable time. Instead of considering these factors on their merits and examining whether indeed they were true or not, the Chief CIT felt compelled by the text of para 8(v). That condition, no doubt is important and has to be kept in mind, cannot be only determining. In the present case, the material on record in the form of a letter by the Superintendent of CBI also shows that a closure report was in fact filed before the competent court. Having regard to all these facts, this Court is of the opinion that the refusal to consider and accept the petitioner's application u/s 279(2) cannot be sustained. The impugned order is hereby set aside. The Chief Commissioner is hereby directed to consider the relevant facts and pass necessary orders in accordance with law within six weeks after granting a fair opportunity to the petitioner in that regard.

(See 2017-TIOL-167-HC-DEL-IT)