Court Reaffirms Earlier Compounding Guidelines for Settled Judicial Decisions
In a landmark judgment, the Madras High Court has ruled against the retrospective application of revised compounding guidelines issued by the Central Board of Direct Taxes (CBDT) under the Income Tax Act, 1961. The case, titled K.M. Mammen v. Principal Commissioner of Income Tax, involved a senior citizen petitioner who was asked to pay compounding charges under new guidelines dated 17.10.2024, despite prior judicial decisions favoring earlier guidelines from 2008.
The judgment, delivered by Justice C. Saravanan, underscored the principle of separation of powers and the rule of law, asserting that legislative or executive actions cannot nullify judicial decisions that have attained finality. The court reaffirmed that the petitioner, K.M. Mammen, should be governed by the compounding guidelines dated 16.05.2008, which were in effect when the initial application was filed in 2011.
Justice Saravanan noted that imposing revised guidelines on settled cases contravenes the principles laid down by the Supreme Court in various decisions, including Madras Bar Association v. Union of India and others. The court emphasized that once a mandamus has been issued, subsequent amendments or guidelines cannot dilute the vested rights of the petitioner.
The judgment highlighted that the new guidelines could only apply if a fresh application was filed independently, which was not the case here. The court directed the respondents to re-calculate the compounding fee based on the 2008 guidelines and complete this exercise within three months.
This decision marks a significant affirmation of judicial decisions' sanctity and sets a precedent against retrospective application of new rules in cases where judicial orders have reached finality.
Bottom Line:
Compounding Guidelines under Income Tax Act cannot retrospectively apply to settled judicial decisions; earlier compounding guidelines to be applied.
Statutory provision(s): Income Tax Act, 1961 Section 279(2), Explanation to Section 279(6)
K.M.Mammen v. Principal Commissioner of Income Tax, (Madras) : Law Finder Doc Id # 2826967
