Y.P. CHAWLA AND ORS versus M.P. TIWARI AND ANR.

Citation: [1992] 2 S.C.R. 440 · Decided: 31-03-1992 · Supreme Court of India · Bench: KULDIP SINGH · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
Y.P. CHAWLA AND ORS. 
v. 
M.P.TIWARI AND ANR. 
MARCH 31, 1992 
B 
[KULDIP SINGH AND R.M. SAHAI, JJ .] 
Income-Tax Act, 1961: 
Ss.279(2) Explanation and 119(1)--Compounding of offence-Discre-
C 
tion of Commissioner of Income-Tax-Exercise of-Whether curtailed by 
guidelines laid down by the Central Board of Direct Taxes under Section ~ 
119(1) requiring the Commissioner of Income-Tax to obtain Board's approval 
before deciding compounding of offence and not to give any assurance before~ 
obtaining approvaf-lnstructions issued by the Board-Whether binding on all 
officers and persons employed in the execution of the Act even if they deviated 
D from provisions of the Act. 
The first respondent, Secretary and principal omcer or a Company 
was prosecuted, along with Directors of the Company under Section 276-B 
of the Income Tax Act, 1961, on the charge that he had committed defaults 
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in depositing the income tax deducted from the salaries or the employees 
F 
of the Company during the assessment years 1970-80 to 1982-83. The 
second respondent, the Managing Director of another Company, was also~ 
prosecuted for the same offence. 
Both the respondents applied to the Commissioner, Income-tax, 
invoking his power under Section 279(2) of the Act as it stood prior to 
insertion of Explanation to the Section by Finance Act (2) of 1991, made 
sperative with effect from April 1, 1962 and seeking composition of the 
offences against them. 
j-
G 
Meanwhile, the respondents filed two separate writ petitions before 
the High Court challenging the instructions No. 1307 dated March 11, 1980 
issued by the Central Board of Direct Taxes under Section 119(1) of the 
Act providing guidelines for exercise of powers under Section 279(2) of the 
Act. 
H 
The High Court allowed the writ petitions and quashed the instruc-
440 
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Y.P. CHAWLA v. M.P. TIWARI 
441 
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tions, on the ground that the circulars had substantially curtailed the A 
powers of the Commissioner, in view of the instructions that the previous 
approval of the Board should always be obtained before deciding to 
compound an offence and that no assurance or any kind should be given 
to the assessee before obtaining approval, and that this was not the 
intention of the legislature when Section 279 of the Act was incorporated. B 
Allowing the appeals, by special leave, filed by the Revenue, this 
Court, 
HELD: The Explanation to Section 279 of the Act inserted by the 
Finance Act (2) of 1991, which has been made operative with effect from C 
April 1, 1962, is in the nature of a proviso to Section 279(2} of the Act with 
the result that the exercise of power by the Commissioner under the said 
section has to be subject to the instructions issued by the Board from time 
to time. The Explanation empowers the Board to issue order, instructions 
or directions fer the proper composition of the offences under Section 
279(2) of the Act and further specifically provides that directions for D 
obtaining previous approval of the Board ean also be issued. Reading 
Section 279(2) along with the Explanation, there is no manner of doubt 
that the Commissioner has to exercise the discretion under Section 279(2) 
of the Act in conformity with the instructions issued by the Board from 
time to time. [ 44SD·EJ 
Navnitlal C.C Javery v. Appellant Assistant to Commissioner of 
Income-tax, [1965) 1 SCR 909; Ellennen Lines Ltd. v. Commissioner of 
Income-tax, (1972) 4 S.C.C. 474 and K.P. Varghese v. Income-tax Officer, 
[1981) 4 S.C.C. 173, relied on. 
CRIMINAL APPELLATE JURISDICTION 
Criminal Appeal 
Nos. 207-208 of 1992. 
From the Judgment and Order dated 30.11.90 of the Delhi High 
Court in Crl. Writ Petition Nos. 348 and 436 of 1987. 
Altaf Ahmed, Additional Solicitor General, B.B. Ahuja and Ms. A. 
Subhashini for the Appellants. 
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F 
G 
P.C.Khanna, Ms. Ruchhi Khanna and Ms. Indu Goswamy for the 
Respondents. 
H 
A 
B 
c 
D 
E 
F 
G 
H 
442 
SUPREME COURT REPORTS 
(1992] 2 S.C.R. 
The Judgment of the Court was delivered by 
KULDIP SINGH, J. Special leave granted. 
Whether the Central Board of Direct Taxes, (the Board} under 
Section 119 of the Income-tax Act, 1962 (the Act) can issue instructions to 
control the discretion of the Commissioner of Income-tax under Section 
279(2) of the Act, to compound the offences is the short question for our 
consideration. 
M.P. Tiwari and M.L. Passi are the respondents before us in these 
appeals. M.P. Tiwari is the Secretary and principal officer of
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