# M/s G.P. Engineering Works Kachhwa, Mirzapur & Ors v. Union of India & Ors. 506 INDIAN LAW REPORTS ALLAHAB

- **Citation:** (2022) 2 ILRA 505
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022
- **Case number:** Writ Tax No. 1160 of 2021
- **Bench:** Surya Prakash Kesarwani, Jayant Banerji
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-g-p-engineering-works-kachhwa-mirzapur-ors-v-union-of-india-ors-506-indian-48131
- **Pages:** 7

## Headnote

(A) Income Tax Act, 1961, S. 279 (2) -
Compouding of offence - As per subsection (2) of Section 279, any offence
under Chapter XXII of the Act, 1961 may
be compounded by the authorized officer
either before or after the institution of the
proceedings - Limitation & delay - No
limitation for submission or consideration
of compounding application has been
provided under sub-section (2) of Section
279 of the Act, 1961 - However CBDT by a
circular
dated
14.06.2019,
provided
compounding guidelines "No application
of compounding can be filed after the end
of 12 months from the end of the month in
which prosecution complaint, if any, has
been filed in the court of law - specific
limitation has been provided in the
compounding guidelines - Held - CBDT by
a circular, issued in purported exercise of
power
under
second
Explanation
to
Section 279(2), can neither provide
limitation for the purposes of sub-section
(2) nor can restrict the operation of subsection (2) of Section 279 of the Act, 1961
- Circular cannot prescribe a period of
limitation where none has been provided
by either the Act, 1961 or the Rules -
Board
has
sought
to
introduce
the
provision
of limitation
by
means
of
circular that is not contemplated by the
second Explanation - second Explanation
to Section 279(2) of the Act, 1961 merely
enables the Board to issue instructions or
directions to other Income Tax authorities
for the proper composition of offences
under that Section. (Para 9, 11)

Interpretation of Statues - Circular - A
circular is subordinate to the principle Act
or Rules, it cannot override or restrict the
application of specific provision enacted
by legislature - A circular cannot travel
beyond the scope of the powers conferred
by the Act or the Rules - Circulars
containing
instructions
or
directions
cannot curtail a statutory provision -
Board
has
sought
to
introduce
the
provision
of limitation
by
means
of
circular that is not contemplated by the
second Explanation (Para 10, 11)

Interpretation of Statues - Explanation to
a
statutory
provision
-
Object
-
Explanation merely explains the main
section and is not meant to carve out a
particular exception to the contents of the
main section - Explanation explain the
meaning and intendment of the Act itself,
where there is any obscurity or vagueness
in the main enactment, to clarify the same
so as to make it consistent with the
dominan

## Text

2 All. M/s G.P. Engineering Works Kachhwa, Mirzapur & Ors. Vs. Union of India & Ors.
505
the tenure-holder who has been heard,
claims. The fact that the petitioner could
have filed an objection under Section 11(2)
will not breathe life into or validate these
dead proceedings.

11. It was urged that since the petitioner
knew of these proceedings he kept silent all
this while, this Court need not interfere in
exercise of its discretionary jurisdiction
under Article 226 of the Constitution. It is
well settled that an objection to lack of
jurisdiction can be taken at any stage of the
proceedings
and
even
in
collateral
proceedings (See Kiran Singh v. Chaman
Paswan (AIR 1954 SC 340)). Consent or
waiver cannot be a ground for refusing to
entertain such an objection. We hence cannot
deny relief to the petitioner on the ground of
alternative remedy. It is equally settled that
existence of jurisdiction cannot be conferred
by consent or waiver. This plea is only
relevant to the exercise of jurisdiction. Here
there was lack of jurisdiction by reason of
non-compliance of the first proviso to Rule 8.

12. It was also urged that the
petitioner's father took all possible pleas and
the petitioner has no bona fide case. The
petitioner has alleged that the sale deed in his
favour was bona fide and for adequate
consideration.
It
was
not
a
Benami
transaction and was not for the immediate or
deferred benefit of the tenure-holder or other
members of his family. No such plea was
taken by the petitioner's father. If the
petitioner is successful in establishing this
plea his land may be liable to be exempted.
The proviso to sub-section (6) of Section 5
exempts land covered by--

"a transfer proved to the satisfaction of
the prescribed authority to be in good faith
and for adequate consideration and under an
irrevocable instrument not being a benami
transaction or for the immediate or deferred
benefit of the tenure-holders or other
members of his family."

31. Admittedly, the petitioners' names
were recorded on the date when the notice
was issued. Rule 8 of the Rules, 1961
mandates issuance of notice to every such
tenure holder and no notice was issued to the
petitioners by the Prescribed Authority and
notice was issued only to their father on
16.03.1974,
therefore,
the
proceedings,
culminated in respect of notice issued to the
father of the petitioners, would not bind the
petitioners. The Prescribed Authority, on
remand from the Appellate Authority, had
adjudicated the objections filed by the
petitioners after taking into consideration the
evidence, oral and documentary, and found
that on the basis of the memorandum of
family settlement of 1969, the petitioners'
names got mutated in the revenue record and,
they were put in possession of respective
shares. Such a finding of the Prescribed
Authority cannot be said to be incorrect or
illegal.

32. In view thereof, the writ petition is
allowed.
The
impugned
order
dated
18.10.1994
passed
by
the
Additional
Commissioner, Lucknow Division (Judicial),
copy of which is contained in Annexure-1 to
the petition, is quashed.
----------
(2022)02ILR A505
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 08.02.2022

BEFORE

THE HON'BLE SURYA PRAKASH
KESARWANI, J.
THE HON'BLE JAYANT BANERJI, J.

Writ Tax No. 1160 of 2021

M/s G.P. Engineering Works Kachhwa,
Mirzapur & Ors. ...Petitioners
Versus
Union of India & Ors. ...Respondents
506 INDIAN LAW REPORTS ALLAHABAD SERIES
Counsel for the Petitioners:
Sri Shakeel Ahmad

Counsel for the Respondents:
Sri Gaurav Mahajan

(A) Income Tax Act, 1961, S. 279 (2) -
Compouding of offence - As per subsection (2) of Section 279, any offence
under Chapter XXII of the Act, 1961 may
be compounded by the authorized officer
either before or after the institution of the
proceedings - Limitation & delay - No
limitation for submission or consideration
of compounding application has been
provided under sub-section (2) of Section
279 of the Act, 1961 - However CBDT by a
circular
dated
14.06.2019,
provided
compounding guidelines "No application
of compounding can be filed after the end
of 12 months from the end of the month in
which prosecution complaint, if any, has
been filed in the court of law - specific
limitation has been provided in the
compounding guidelines - Held - CBDT by
a circular, issued in purported exercise of
power
under
second
Explanation
to
Section 279(2), can neither provide
limitation for the purposes of sub-section
(2) nor can restrict the operation of subsection (2) of Section 279 of the Act, 1961
- Circular cannot prescribe a period of
limitation where none has been provided
by either the Act, 1961 or the Rules -
Board
has
sought
to
introduce
the
provision
of limitation
by
means
of
circular that is not contemplated by the
second Explanation - second Explanation
to Section 279(2) of the Act, 1961 merely
enables the Board to issue instructions or
directions to other Income Tax authorities
for the proper composition of offences
under that Section. (Para 9, 11)

Interpretation of Statues - Circular - A
circular is subordinate to the principle Act
or Rules, it cannot override or restrict the
application of specific provision enacted
by legislature - A circular cannot travel
beyond the scope of the powers conferred
by the Act or the Rules - Circulars
containing
instructions
or
directions
cannot curtail a statutory provision -
Board
has
sought
to
introduce
the
provision
of limitation
by
means
of
circular that is not contemplated by the
second Explanation (Para 10, 11)

Interpretation of Statues - Explanation to
a
statutory
provision
-
Object
-
Explanation merely explains the main
section and is not meant to carve out a
particular exception to the contents of the
main section - Explanation explain the
meaning and intendment of the Act itself,
where there is any obscurity or vagueness
in the main enactment, to clarify the same
so as to make it consistent with the
dominant
object
which
it
seems
to
subserve, to provide an additional support
to the dominant object of the Act in order
to make it meaningful and purposeful - an
Explanation cannot in any way interfere
with or change the enactment or any part
thereof but where some gap is left which
is
relevant
for
the
purpose
of
the
Explanation, in order to suppress the
mischief and advance the object of the Act
it can help or assist the Court in
interpreting
the
true
purport
and
intendment
of
the
enactment
-
Explanation cannot take away a statutory
right with which any person under a
statute has been clothed (Para 10)

Interpretation of Statues -Instruction or
directions
-Income
tax
Act,
Section
279(2),
second
Explanation-
second
Explanation merely enables the Board to
issue instructions or directions to other
Income Tax authorities for the proper
composition
of
offences
under
that
Section - instructions or directions may
prescribe the methodology and manner of
composition of offences to clarify any
obscurity or vagueness in the main
provisions to make it consistent with the
dominant object of bringing closure to
such
cases
which
may
be
pending
interminably in our Court system - Such
instructions
or
directions
that
are
prescribed by the Explanation cannot take
away a statutory right with which an
assessee has been clothed, or set at
naught the working of the provision of
compounding of offences (Para 13)
2 All. M/s G.P. Engineering Works Kachhwa, Mirzapur & Ors. Vs. Union of India & Ors.
507
On 29.03.2000, prosecution launched against
petitioner u/s 276C(1) of the I.T. Act for wilful
attempt to evade tax relating to A.Y. 1990-91 -
After delay of more than 20 years, petitioner
filed an application for compounding of the
offences on 23.4.2021 - Chief Commissioner of
Income Tax issued a show cause notice dated
16.11.2021 to show cause why compounding
application may not be rejected - Held -
compounding application of the petitioner
cannot be rejected by the Income Tax Authority
concerned on the ground of delay in filing the
application (Para 14)

(Delivered by Hon'ble Surya Prakash
Kesarwani, J. &
Hon'ble Jayant Banerji, J.)

1. Heard Shri Shakeel Ahmad,
learned counsel for the petitioner and Shri
Gaurav Mahajan, learned counsel for the
Income Tax Department.

2. This writ petition has been filed
praying for the following relief:

"I. Issue a writ order or direction in
the nature of certiorari quashing the show
cause notice dated 16.11.2021 (Annexure
No. 4) issued by respondent no. 2 and
direct the respondent no. 2 to compound
the case of the Petitioner.

II. Issue a writ order or direction in
the nature of mandamus directing the
respondent no. 2 to compound the case of
the Petitioner."

3. Briefly stated facts of the present
case are that a criminal case no. 193 of
2000 (Union of India Vs. M/S G.P.
Engineering Works Mirzapur and three
others) was filed in the Court of Special
C.J.M., Varanasi under Section 276C(1)
read with Section 277 and 278B of the
Income
Tax
Act,
1961
against
the
petitioner on 29.3.2000 praying that the
accused
opposite
parties
may
be
summoned,
tried
and
punished
in
accordance with law.

4. The petitioner filed an application
for compounding of the offences which
was received in the Office of the Chief
Commissioner, Income Tax on 23.4.2021.
The Chief Commissioner of Income Tax
Allahabad issued a show cause notice dated
16.11.2021 which is reproduced below:

"F.No.-CCIT/Alld./ITO(Hq.-
Tech.)/Compounding(Pros.)/2021-22/3081
Date-
16.11.2021

To,

M/s G.P. Engineering Works

R/o Kachhwa

P.S. Kachhwa, Mirzapur

Sir,

Sub-
Application
for
compounding of prosecution u/s 276C(1) of
the I.T. Act in the case of M/s G.P.
Engineering Works R/o Kachhwa, P.S.
Kachhwa, Mirzapur relating to A.Y. 199091 for willful attempt to evade tax in
accordance with the section 139(1) of the
Income Tax Act, 1961-Regarding-

Kindly refer to your application
dated 22/04/2021 received in this office on
23/04/2021 on the subject mentioned
above, for compounding of offence willful
attempt to evade tax for A.Y. 1990-91.

2. After perusal of your aforesaid
application, I am directed to state that it is
noticed that prosecution was launched in
your above mentioned case on 29.03.2000
and your application has been received on
23.04.2021 in this office. Thus you have
filed compounding application after a delay
of more than 20 years from the end of
month in which complaint was filed. As per
508 INDIAN LAW REPORTS ALLAHABAD SERIES
para 7(ii) of the compounding guidelines
circulated
vide
F.No.285/08/2014IT(Inv.V)/147 dated 14.06.2019 of CBDT
"No application of compounding can be
filed after the end of 12 months from the
end of the month in which prosecution
complaint, if any, has been filed in the
court of law."

A relaxation had been provided
by CBDT's circular 25/2019 circulated vide
letter
F.No.285/08/2014-IT(Inv.V)/350
dated 09.09.2019 as a one time measure,
through
which
the
condition
that
compounding application shall be filed
within
12
months
was
relaxed
till
31.12.2019
and
further
extended
till
31.01.2020 vide circular no. 1/2020 dated
03.01.2020.
However,
your
above
mentioned application does not fall in
effective time duration of circular 25/2019
and circular 01/2020.

3. Accordingly, in view of the
above, I am further directed to require you
to show cause as to why your application
for
compounding
of
offence
dated
23.04.2021 may not be rejected. Your reply
must reach this office latest by 29.11.2021,
failure to which it will be considered that
you don't have to say anything in this
regard and decision will be taken on the
material available on record.

Yours faithfully,

(S.K. Singh)

Income Tax Officer (Hq.)/(Tech.)
O/o Chief Commissioner of Income Tax,

Allahabad"

5. Learned counsel for the petitioner
submits that the impugned show cause
notice relying upon the circular dated
14.6.2019 is wholly illegal and without
authority of law to the extent it intends to
reject the compounding application on the
ground of delay. He, therefore, submits that
since the circular dated 14.6.2019 of CBDT
is binding on the Income Tax Authority,
therefore, submission of reply before the
concerned Tax Authority shall be an empty
formality.

6. Learned counsel for the respondent
submits that the present writ petition has
been filed merely against a show cause
notice, therefore, it is not maintainable.

7. We have carefully considered the
submission of the learned counsel for the
parties.

8. Section 279 of the Income Tax Act,
1961 (hereinafter referred to as the 'Act,
1961'), provides as under:

"279. Prosecution to be at instance of
[Principal Chief Commissioner or] Chief
Commissioner
or
[Principal
Commissioner or] Commissioner. - [(1) A
person shall not be proceeded against for
an offence under section 275-A, [section
275-B], section 276, section 276A, section
276B, section 276BB, section 276C,
section 276CC, section 276D, section 277,
[section 277A] or section 278 except with
the previous sanction of the [Principal
Commissioner
or]
Commissioner
or
Commissioner
(Appeals)
or
the
appropriate authority:

Provided
that
the
[Principal
Commissioner or] Chief Commissioner or,
as the case may be, [Principal Director
General or] Director General may issue
such instructions or directions to the
aforesaid income-tax authorities as he may
deem fit for institution of proceedings
under this sub-section.

Explanation.- For the purposes of this
section, "appropriate authority" shall have
the same meaning as in clause (c) of
section 269-UA.]
2 All. M/s G.P. Engineering Works Kachhwa, Mirzapur & Ors. Vs. Union of India & Ors.
509

[(1A) A person shall not be proceeded
against for an offence under section 276C
or section 277 in relation to the assessment
for an assessment year in respect of which
the penalty imposed or imposable on him
[section 270A or] under clause (iii) of subsection (1) of section 271 has been reduced
or waived by an order under section 273A.]

[(2) Any offence under this Chapter
may, either before or after the institution
of proceedings, be compounded by the
[Principal Chief Commissioner or] Chief
Commissioner or a [Principal Director
General or] Director General.]

[(3) Where any proceeding has been
taken against any person under sub-section
(1), any statement made or account or
other document produced by such person
before any of the income-tax authorities
specified in [clauses (a) to (g)] of section
116 shall not be inadmissible as evidence
for the purpose of such proceedings merely
on the ground that such statement was
made or such account or other document
was produced in the belief that the penalty
imposable would be reduced or waived,
[under section 273A] or that the offence in
respect of which such proceeding was
taken would be compounded.]

[Explanation. - For the removal of
doubts, it is hereby declared that the power
of the Board to issue orders, instructions,
or directions under this Act shall include
and shall be deemed always to have
included the power to issue instructions or
directions
(including
instructions
or
directions to obtain the previous approval
of
the
Board)
to
other
income-tax
authorities for the proper composition of
offences under this section.]"

9. From a bare perusal of sub-section
(2) of Section 279, it is evident that any
offence under Chapter XXII of the Act, 1961
may be compounded by the authorized
officer either before or after the institution of
the proceedings. No limitation for submission
or consideration of compounding application
has been provided under sub-section (2) of
Section 279 of the Act, 1961. Therefore, the
Central Board of Direct Taxes by a circular
can neither provide limitation for the
purposes of sub-section (2) nor can restrict
the operation of sub-section (2) of Section
279 of the Act, 1961, in purported exercise of
its power to issue circular under the second
Explanation appended to Section 279 of the
Act, 1961. It has not been disputed before us
by the learned counsel for the respondent or
in the impugned show cause notice that the
criminal case in question is still pending.

10. A circular is subordinate to the
principle Act or Rules, it cannot override or
restrict the application of specific provision
enacted by legislature. A circular cannot
travel beyond the scope of the powers
conferred by the Act or the Rules. Circulars
containing instructions or directions cannot
curtail a statutory provision as aforesaid by
prescribing a period of limitation where
none has been provided by either the Act,
1961 or the Rules. The authority to issue
instructions or directions by the Board
stems
from
the
second
Explanation
appended to Section 279 of the Act, 1961.
It is well settled that the Explanation
merely explains the main section and is not
meant to carve out a particular exception to
the contents of the main section (Sonia
Bhatia Vs. State of U.P., (1981) 2 SCC
585 at page 597). The object of an
Explanation to a statutory provision was
elaborated by the Supreme Court in S.
Sundaram Pillai Vs. V.R. Pattabiraman,
(1985) 1 SCC 591, in which it was held as
follows:

"53. Thus, from a conspectus of the
authorities referred to above, it is manifest
510 INDIAN LAW REPORTS ALLAHABAD SERIES
that the object of an Explanation to a
statutory provision is-

"(a) to explain the meaning and
intendment of the Act itself,

(b) where there is any obscurity or
vagueness in the main enactment, to clarify
the same so as to make it consistent with
the dominant object which it seems to
subserve,

(c) to provide an additional support to
the dominant object of the Act in order to
make it meaningful and purposeful,

(d) an Explanation cannot in any way
interfere with or change the enactment or
any part thereof but where some gap is left
which is relevant for the purpose of the
Explanation, in order to suppress the
mischief and advance the object of the Act
it can help or assist the Court in
interpreting
the
true
purport
and
intendment of the enactment, and

(e) it cannot, however, take away a
statutory right with which any person under
a statute has been clothed or set at naught
the working of an Act by becoming an
hindrance in the interpretation of the same."

11. By means of para 7(ii) of the
compounding
guidelines
circulated
by
F.No.285/08/2014-IT(Inv.V)/147
dated
14.06.2019, that has been quoted in the
impugned notice dated 16.11.2021 the
period
for
filing
an
application
for
compounding has been restricted to 12
months from the end of the month in which
the prosecution complaint has been filed in
the court of law. Given the interpretation of
the Supreme Court regarding the object of
an Explanation to a statutory provision, the
Board has sought to introduce the provision
of limitation by means of circular that is not
contemplated by the second Explanation.

12. In the case of Vikram Singh Vs.
Union of India & Ors. in W.P. (C) 6825 of
2016 decided on 11.4.2017 by a Division
Bench of the Delhi High Court (enclosed as
Annexure No.5 to the writ petition), in
response to the petitioner's application for
compounding of offences under Section
279(2) of the Act, 1961, he was sent a
communication informing him the total
compounding charges payable in his case
which he was required to pay even for his
application to be considered. This was
purportedly in terms of a circular dated
23.12.2013 issued by the Board containing
guidelines for compounding of offence
under Clause 11(v). A writ petition was
filed seeking quashing of the circular dated
23.12.2014
particularly
the
paragraph
which set out the fee for compounding. In
the reply filed to the writ petition, the
Department, inter alia, stated that the
compounding
application
under
consideration was filed by the accused after
about 10 years of filing the prosecution
complaint; that para 8(vii) of the revised
guidelines
for
compounding
dated
23.12.2014
provides
that
offences
committed
by
a
person
for
which
prosecution complaint was filed by the
Department with the competent court 12
months prior to receipt of the compounding
application
are
generally
not
to
be
compounded.
With
that
reply,
the
Department had also filed an order dated
3.11.2016
passed
by
the
Chief
Commissioner of Income Tax on the
ground that there was inordinate delay of 9
years in filing of the application for
compounding of offences by the assessee.
While referring to para 8(vii) of the circular
dated 23.12.2014, the Court observed that it
did not stipulate a limitation period for
filing the application for compounding. It
gave a discretion to the competent authority
to reject an application for compounding on
certain grounds. Thus, the Court held that
resort cannot be had to para 8 of the
2 All. Pankaj Singh @ Ajay Singh Vs. State of U.P. & Ors.
511
circular to prescribe a period of limitation
for filing an application for compounding.
The Court accordingly held as follows:

"14. The Court finds nothing in
Section 279 of the Act or the Explanation
thereunder
to
permit
the
CBDT
to
prescribe such an onerous and irrational
procedure which runs contrary to the very
object of Section 279 of the Act. The CBDT
cannot arrogate to itself, on the strength of
Section 279 of the Act or the Explanation
thereunder, the power to insist on a 'predeposit' of sorts of the compounding fee
even without considering the application
for compounding. Indeed Mr Kaushik was
unable to deny the possibility, even if
theoretical,
of
the
application
for
compounding being rejected despite the
compounding fee being deposited in
advance. If that is the understanding of
para 11(v) of the above Circular by the
Department,
then
certainly
it
is
undoubtedly ultra vires Section 279 of the
Act. The Court, accordingly, clarifies that
the Department cannot on the strength of
para 11(v) of the Circular dated 23rd
December 2014 of the CBDT reject an
application for compounding either on the
ground of limitation or on the ground that
such application was not accompanied by
the
compounding
fee
or
that
the
compounding fee was not paid prior to the
application being considered on merits."

13. However, in the present case a
specific limitation has been provided by para
7(ii)
of
the
compounding
guidelines
contained in the circular dated 14.6.2019 in
purported exercise of power under the
second Explanation to Section 279(2) of the
Act, 1961. The second Explanation merely
enables the Board to issue instructions or
directions to other Income Tax authorities
for the proper composition of offences under
that Section. That is to say the instructions
or directions may prescribe the methodology
and manner of composition of offences to
clarify any obscurity or vagueness in the
main provisions to make it consistent with
the dominant object of bringing closure to
such
cases
which
may
be
pending
interminably in our Court system. Such
instructions or directions that are prescribed
by the Explanation cannot take away a
statutory right with which an assessee has
been clothed, or set at naught the working of
the provision of compounding of offences.

14. Considering
the
facts
and
circumstances of the case and the provisions
of sub-section (2) of Section 279 of the Act,
1961, the writ petition is allowed to the
extent that compounding application of the
petitioner cannot be rejected by the Income
Tax Authority concerned on the ground of
delay in filing the application. Accordingly,
we also direct that compounding application
of the petitioner shall be considered by the
Income
Tax
Authority
concerned
in
accordance with law.
----------
(2022)02ILR A511
ORIGINAL JURISDICTION
CRIMINAL SIDE
DATED: LUCKNOW 25.01.2022

BEFORE

THE HON'BLE MANISH MATHUR, J.

Application U/S 482 No.175 of 2022

Pankaj Singh @ Ajay Singh ...Applicant
Versus
State of U.P. & Ors. ...Opposite Parties

Counsel for the Applicant:
Dr. Pooja Singh

Counsel for the Opposite Parties:
G.A.