CBDT Compounding Guidelines Applicability – Madras HC Bars Use of 2024 Rules

Case Details: K.M. Mammen vs. Principal Commissioner of Income-tax - [2025] 181 taxmann.com 733 (Madras)

Judiciary and Counsel Details

C.Saravanan, J.
Rajagopal Vasudevan & J. Sivanandaraj, Senior Standing Counsel for the Petitioner.
A.P.Srinivas, Senior Standing Counsel & A.N.R. Jayaprathap, Junior Standing Counsel for the Respondent.

Facts of the Case

The petitioner, a senior citizen, faced prosecution for offences under the Income-tax Act arising from reassessment proceedings for the assessment year 2002-03. The petitioner had paid tax, interest, and penalty. He applied compounding of the offence under section 279(2), and the competent authority rejected the same.

The matter reached the Madras High Court, which held that the case was suitable for compounding, given the petitioner’s age and the prolonged prosecution. The court remitted the matter only for the fixation of compounding fee and held that the CBDT Guidelines dated 16-5-2008 governed the case.

The Supreme Court also dismissed the Department’s appeal and directed the authorities to compute and communicate the compounding fee within 60 days. Pursuant thereto, the petitioner was asked to pay compounding charges by applying the revised CBDT Compounding Guidelines dated 17-10-2024, including enhanced charges computed on the tax sought to be evaded. Aggrieved by the order, the petitioner filed the instant writ petition.

High Court Held

The Madras High Court held that the determination of the compounding charges payable by the petitioner as per the revised Guidelines dated 17-10-2024 is unsustainable. This was the third round of litigation and the fourth order in a row passed by the CIT.

During the last order, the revised Guidelines dated 17-10-2024 were not in force. In fact, the Circular bearing F.No.285/08/2014-IT(Inv-V)/147 dated 14-6-2019 was in force with effect from 17-6-2019, which was directed to be applied by the Court vide its order dated 31-1-2020 in Contempt Petition. However, the respondents were aggrieved by it and filed a Writ Appeal.

The Division Bench, by its order dated 11-12-2023 in Writ Appeal, also held that the petitioner was governed by the compounding guidelines dated 16-5-2008. The law on the subject is also clear. Thus, only the CBDT Guidelines in F.No.285/90/2008-IT(Inv.)/12 dated 16-5-2008 were to be applied.
Since the respondents applied the revised Guidelines dated 17-10-2024, the writ petition was allowed, and the matter was remanded to the concerned respondent to issue a fresh calculation of the compounding fee.

List of Cases Referred to

K. M. Mammen v. Dy. CIT [SLP (Crl.) No. 6179 of 2019, dated 5-3-2025] (para 3),
K.M. Mammen v. DGIT (Investigation) [W.P. No. 3929 of 2014, dated 28-8-2019] (para 5)
K.M. Mammen v. D.C. Patwari [Contempt Petition No. 2079 of 2019, dated 31-1-2020] (para 8)
D.C. Patwari v. K.M. Mammen [W.A. No. 967 of 2020, dated 11-2-2021] (para 9),
K.M. Mammen v. Pr. CIT [2022] 139 taxmann.com 57/445 ITR 266 (Mad) (para 12)
Pr. CIT v. K.M. Mammen [2024] 158 taxmann.com 46 (Mad) (para 14)
K. M. Mammen v. Dy. CIT [SLP (C) No. 7047 of 2024, dated 5-3-2025] (para 15),
Madras Bar Association v. Union of India [2021] 128 taxmann.com 218 (SC) (para 19)
Madan Mohan Pathak v. Union of India [W.P. No.108 of 1976, dated 21-2-1978] (para 19)
Y.P. Chawla v. M.P. Tiwari [1992] 63 Taxman 538/195 ITR 607 (SC) (para 21)
Cauvery Water Disputes Tribunal, In re 1993 Supp (1) SCC 96 (2) (para 41)
Medical Council of India v. State of Kerala (2019) 13 SCC 185 (para 41)
Virender Singh Hooda v. State of Haryana (2004) 12 SCC 588 (para 43)
State of Gujarat v. Raman Lal Keshav Lal Soni (1983) 2 SCC 33 (para 46)
S.R. Bhagwat v. State of Mysore (1995) 6 SCC 16 (para 47).