Compounding of offences : S. 279(2) of I. T. Act, 1961 : Offences can be compounded during the pendency of appeal.

[Chairman CBDT vs. Smt. Umayal Ramanathan, 313 ITR
59 (Mad.)]

Against the conviction and sentence order passed by the
Trial Court, the respondent filed a petition u/s. 279(2) of the Income-tax
Act, 1961 seeking compounding of the offences u/s. 278 of the Act and Sections
120B, 420 read with Section 109 of the Indian Penal Code, 1860. The Joint
Director of Income-tax refused to compound the offences on the ground that the
respondent had been convicted by the Trial Court. The Single Judge set aside
the order passed by the Joint Director of Income-tax stating that the refusal
to compound the offence on the sole ground that the Criminal Court had
convicted her was discriminatory and that in the case of a similarly placed
assessee the appellants had compounded the offence.

On appeal by the Revenue, the Division Bench of the Madras
High Court upheld the decision of the Single Judge and held as under :

“i) The appeal against the order of conviction and
sentence passed by the Trial Court was a prescribed course of action for
enforcing a legal right. The appellants could have compounded the offence
sought for by the respondent during the pendency of the appeal.

ii) The Single Judge had rightly set aside the order
passed by the Joint Director of Income-tax. The respondent was permitted to
pay the amount demanded by the appellants for compounding the offence.”