Y.P.CHAWLA vs SHRI M.P.TIWARI

The Supreme Court held that the Explanation to Section 279 of the Income Tax Act, 1961, inserted by the Finance Act (2) of 1991, acts as a proviso to Section 279(2), mandating that the Commissioner of Income Tax must exercise discretion in accordance with the guidelines issued by the Central Board of Direct Taxes under Section 119(1). The Court found that the High Court's quashing of these instructions was incorrect, affirming that the Commissioner is required to obtain prior approval from the Board before compounding offences. The appeals by the Revenue were allowed, reinstating the binding nature of the Board's instructions on the Commissioner.