The Delhi High Court has held that co-accused may apply separately for compounding of offences under section 276B and 278B Of Income Tax Act, 1961.
The bench of Acting Chief Justice Vibhu Bakhru and Justice Tushar Rao Gedela has relied on the guidelines of the Central Board of Direct Taxes (CBDT) which states that where an offence under this Act has been committed by a Company or HUF as defined in section 278B or 278C of the Income Tax Act, an application for compounding may be filed separately or conjointly by the main accused i.e., Company, or HUF and/or any of the person(s) deemed to be guilty of the offence under section 278B or 278C of the Income Tax Act, to be referred as “Co-accused” for the purpose of compounding under these guidelines. The Competent Authority may decide the application accordingly subject to the payment of compounding charges as per these guidelines.
The petitioner/assessee stated that he was a director of the company at the material time. He had received the show cause notice under Section 2(35) of the Income Tax Act for the financial year (FY) 2012- 13 and 2013-14, calling upon the petitioner to show cause as to why he should not be considered as the principal officer of the company and the prosecution under Section 276B not be launched against him for defaults in depositing the Tax Deducted at Source (TDS).
The assessee has challenged the order rejecting the petitioner’s application for compounding of the offences under Section 276B and 278B of the Income Tax Act, 1961.
A plain reading of the order indicates that the same was rejected as the main accused had not filed any application for the compounding of the offences before the competent authority as the authority was of the view that the petitioner’s application for compounding could not be considered on a stand alone basis.
The Central Board of Direct Taxes (CBDT) has recently, on 17.10.2024, issued fresh guidelines for compounding of the offences under the Income Tax Act. The CBDT clarified that the co-accused are now entitled to apply separately for compounding of the offences.
The court set aside the order and remand the matter to the competent authority to decide afresh in the light of the current guidelines.
Case Details
Case Title: Sumit Bharana Versus UOI
Case No.: W.P.(C) 16701/2024 & CM APPL. 70662/2024
Date: 12.12.2024
Counsel For Petitioner: Tanmay Nagar
Counsel For Respondent: Saroj Bidawat
