New Delhi, February 7, 2025 – The Supreme Court of India has set aside the Gujarat High Court’s order rejecting the writ petition filed by Vinubhai Mohanlal Dobaria, paving the way for the appellant to file a fresh compounding application in connection with an alleged offence under Section 276CC of the Income Tax Act for Assessment Year (AY) 2013-14.
A Bench of the Supreme Court held that the Chief Commissioner of Income Tax (CCIT), Vadodara, erred in rejecting the appellant’s compounding application solely on the ground that the alleged offence did not qualify as a “first offence” under the 2014 Guidelines on Compounding of Offences. The Court observed that the appellant’s case indeed fell within the purview of a “first offence” as defined in the 2014 guidelines and, therefore, should not have been dismissed on this technical ground alone.
Key Directions from the Supreme Court Order
Fresh Compounding Application: The Supreme Court directed the appellant to file a fresh compounding application before the competent authority within two weeks from the date of the judgment.
Adjudication Timeline: The competent authority must decide on the application within four weeks, considering the appellant’s conduct, nature of the offence, and case-specific facts.
Stay on Trial Proceedings: The pending trial proceedings will remain stayed until the competent authority takes a final decision on the compounding application.
Impact of the Compounding Decision: If the compounding application is accepted, the trial proceedings will stand abated. However, if the application is rejected, the trial will continue until its logical conclusion.
The Supreme Court’s ruling comes as a significant relief to the appellant, reaffirming the legal principle that procedural fairness must be upheld in tax compounding cases. The decision also sets a precedent in cases where compounding applications are rejected based on misinterpretation of guidelines.
The appeal has now been disposed of in these terms, and all pending applications, if any, stand closed. This ruling underscores the judiciary’s commitment to ensuring a fair and just application of tax laws in compounding matters.
