CBDT issues Revised Guidelines for compounding of offences under the Income tax Act, 1961
In conformity with the Government’s policy of facilitating Ease of Doing Business and decriminalisation of offences, CBDT has taken steps in this direction and issued revised Guidelines for Compounding of offences under the Income-tax Act, 1961(the ‘Act’) dated 16.09.2022 with reference to various offences covered under the prosecution provisions of the Act.
Some of the major changes made for the benefit of taxpayers include making offence punishable under Section 276 of the Act as compoundable. Further, the scope of eligibility for compounding of cases has been relaxed whereby case of an applicant who has been convicted with imprisonment for less than 2 years being previously non compoundable, has now been made compoundable. The discretion available with the competent authority has also been suitably restricted.
The time limit for acceptance of compounding applications has been relaxed from the earlier limit of 24 months to 36 months now, from the date of filing of complaint. Procedural complexities have also been reduced/simplified.
Specific upper limits have been introduced for the compounding fee covering defaults across several provisions of the Act. Additional compounding charges in the nature of penal interest @ 2% per month up to 3 months and 3% per month beyond 3 months have been reduced to 1% and 2% respectively.
F.No. 285/08/2014-1T(Inv.V)/196
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
******
C-Block, Dr. S.P. Mukherjee Civic Centre,
Minto Road, New Delhi-110002
Dated: 16.09.2022
To,
All Pr.CCsIT/ / Pr.DGsIT
All CCsIT/ DGsIT
Madam/ Sir,
Subject: Guidelines for Compounding of Offences under the Income-Tax Act, 1961 —reg.
The Guidelines on Compounding of Offences under the Income-tax Act, 1961 (herein after referred to as the Act’) have been reviewed by the Board with a view to simplify and facilitate compounding of offences.
2. Accordingly, in supersession of all earlier Guidelines on this subject, including the last Guidelines of the Board issued vide F.No.285/08/2014IT (lnv.V)/147 dated 14th June, 2019, the following Guidelines are issued, henceforth, for compliance by all concerned.
3. Compounding Provision
Section 279(2) of the Act provides that any offence under Chapter XXII of the Act may, either, before or after the institution of proceedings, be compounded by the Pr.CCIT/ CCIT/ Pr.DGIT/ DGIT. As per section 2(15A) and 2(2 I) of the Act, Chief Commissioner of Income Tax includes Principal Chief Commissioner of Income Tax and Director General of Income Tax includes Principal Director General of Income Tax. These Guidelines are issued in exercise of power conferred u/s119 of the Act read with explanation below sub-section (6) of section 279 of the Act.
4. Compounding is not a matter of right
Compounding of offences is not a matter of right. However, offences may be compounded by the Competent Authority on satisfaction of the eligibility conditions prescribed in these Guidelines keeping in view factors such as conduct of the person, the nature and magnitude of the offence in the context of the facts and circumstances of each case.
5. Applicability of these Guidelines to prosecutions under IPC
Prosecution instituted under Indian Penal Code(`IPC’), if any, cannot be compounded. However, section 321 of Criminal Procedure Code, 1973, provides for withdrawal of such prosecution. In case the prosecution complaint filed under the provisions of both the Act and the IPC are based on the same facts and, the complaint under the Act is compounded, then the process of withdrawal of the complaint under the IPC may be initiated by the Competent Authority.
6. Classification of Offences
The offences under Chapter-XXII of the Act are classified into two parts (Category ‘A’ and Category ‘B’) for the limited purpose of Compounding of Offences. The Category A offences are the ones where the offences are of technical nature caused by an act of omission. Whereas the Category B offences are non-technical offences attributed to an act of commission.
6.1 Category ‘A’
Offences punishable under the following sections are included in Category ‘A’:
| S.No. | Section | Description/Heading of section |
| i. | 276B | (Prior to 01/04/1989) – Failure to deduct or pay tax |
| (w.e.f. 01.04.1989 and up-to 30.05.1997)- Failure to pay tax deducted at source under Chapter XVII-B | ||
| Failure to pay tax deducted at source under chapter XVII-B or tax payable under section 115 -0 or 2″d proviso to section194B to the credit of the Central Government (w.e.f 01.06.1997) | ||
| ii. | 276BB | Failure to pay the tax collected at source |
| iii. | 276CC | Failure to furnish return of income |
| iv. | 276CCC | Failure to furnish return of income in search cases in block assessment scheme |
| v. | 276DD | (Prior to 1.04.1989) – Failure to comply with the provisions of section 269SS |
| vi. | 276E | (Prior to 1.04.1989) – Failure to comply with the provisions of section 269 T |
| vii. | 277 | False statement in verification etc. with reference to offences under Category ‘A’. |
| viii. | 278 | Abetment of false return etc. with reference to offences under Category ‘A’. |
6.2 Category ‘B’
Offences punishable under the following sections are included in Category ‘B’:
| S. No. | Section | Description/ Heading of section |
| i. | 276 | (w.e.f. 01.04.1989) – Removal, concealment, transfer or delivery of property to thwart tax recovery. |
| ii. | 276A | Failure to comply with the provision of sections 178(1) and 178(3) |
| iii. | 276AA | (prior to 01.10.1986)- Failure to comply with the provisions of section 269 AB or section 269 I |
| iv. | 276AB | (prior to 01.04.2022) Failure to comply with the provisions of sections 269UC, 269UE and 269UL |
| v. | 276C(1) | Willful attempt to evade tax, etc. |
| vi. | 276C(2) | Willful attempt to evade payment of taxes, etc. |
| vii. | 276D | Failure to produce accounts and documents |
| viii | 277 | False statement in verification etc. with reference to offences under Category ‘B’. |
| ix | 277A | Falsification of books of account or documents, etc. |
| x. | 278 | Abetment of false return, etc. with reference to offences under Category ‘B’. |
7. Eligibility Conditions for Compounding
All the following conditions should be satisfied for considering compounding of an offence:
i. An application is made to the Pr.CCIT/ CCIT/ Pr.DGIT/ DGIT having jurisdiction over the case for compounding of the offence(s) in the prescribed format (Annexure-1) in the form of an affidavit on a stamp paper of Rs.100/-.
ii. The compounding application may be filed suo-moto at any time after the offence(s) is committed irrespective of whether it comes to the notice of the Department or not. However, in a case in which prosecution complaint has already been filed in a court of law it should be filed not later than 12 months from the end of month of filing of complaint in Court.
Further, application of compounding filed after the end of 12 months from the end of the month in which prosecution complaint, if any, has been filed in the court of law, but within 24 months, will be subject to increased compounding charges at the rate of 1.25 times of the normal compounding charges as applicable to the offence.
iii. The person has paid the outstanding tax, interest (including interest u/s 220 of the Act), penalty and any other sum due, relating to the offence for which compounding has been sought before making the application.
However, if any related demand is found outstanding on verification by the Department, the same should be intimated to the applicant and if such demand including interest u/s 220 is paid within 30 days of the intimation by the Department, then the compounding application would be deemed to be valid.
iv. The person undertakes to pay the Compounding charges detennined in accordance with these guidelines by the Pr.CCIT/CCIT/Pr.DGIT/DGIT concerned.
v. The person undertakes to withdraw appeals filed by him, if any, related to the offence(s) sought to be compounded. In case such an appeal has mixed grounds, one or more of which may not be related to the offence(s) under consideration, an undertaking shall be given for withdrawal of such grounds as are related to the offence to be compounded.
vi. Any application for compounding of offence u/s 276B/276BB of the Act by an applicant for any period for a particular TAN should cover all defaults constituting offence u/s27613/276BB in respect of that TAN for such period.
8. Offences not to be compounded
a) Section 275A — (Contravention of order made under sub-section (3) of section 132);
b) Section 275B- ( Failure to comply with the provisions of clause (iib) of subsection (1) of section 132)
8.1 Offences normally not to be compounded:
i. Offences under Category ‘A’: on more than three occasions. However, in exceptional circumstances compounding requested in more than three occasions can be considered only on the approval of the Pr. CCIT of the Region concerned. An ‘occasion’ is as defined in Para 8.2.
ii. Offences under Category ‘B’: other than the first offence(s) as defined in Para 8.2 for the purpose of these Guidelines.
iii. Any Offence under Direct Taxes Laws for which he was convicted earlier with imprisonment for two years or more, with or without fine by a court of law.
iv. Offences committed by a person who, was convicted by a court of law for an offence under any law, other than Direct Taxes Laws, for which the prescribed _punishment was imprisonment for two years or more, with or without fine and which is directly related to the offence sought to be compounded.
v. Any offence in respect of which, the compounding application has already been rejected, except in cases where benefit of rectification is available in these Guidelines.
vi. The cases of a person as main accused where it is proved that he has enabled others in tax evasion such as, through entities used to launder money or generate bogus invoices of sale/purchase without actual business, or by providing accommodation entries in any other manner as prescribed in section 277A of the Act.
vii. Offences committed by a person who, as a result of investigation conducted by any Central or State Agency and as per information available with the Pr.CCIT/ CCIT/ Pr.DGIT/ DGIT concerned, has been found involved, in any manner, in anti-nationaUterrorist activity.
viii. Offences committed by a person which, as per information available with the Pr.CCIT/ CCIT/ Pr.DGIT/ DGIT concerned, directly related to the case under investigation (at any stage including enquiry, filing of FIR/complaint) by Enforcement Directorate, CBI, Lokpal, Lokayukta or any other Central or State Agency.
ix. Offences committed by a person whose application for ‘plea-bargaining’ under Chapter XXI-A of ‘Code of Criminal Procedure’ in respect of any offence is pending in a Court or where a Court has recorded that a mutually satisfactory disposition of such an application is not worked out and such offence directly related to offence sought to be compounded.
x. Any offence which is directly related to an offence relating to
(a) undisclosed foreign bank account/assets in any manner; or
(b) the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015; or
(c) Prohibition of Benami Property Transactions Act,1988.
xi. Any offence uls 276, where the outstanding amount in recovery has not been deposited before filing the Compounding application.
xii. Any other offence, which the Pr.CCIT/ CCIT/ Pr.DGIT/ DGIT concerned considers not fit for compounding in view of offence by habitual/repeat offender.
8.2 Meaning of terms “occasion” and “first offence” for the purpose of these Guidelines will be as under-
8.2.1 If in one instance, the assessee files multiple applications for one or more than one Assessment Year (AYs), all these applications shall be treated as one “occasion”.
8.2.2 First offence means –
(a) Offences committed prior to any of the following-
i. the date of issue of any letter/notice in relation to the prosecution or
ii. Any intimation relating to filing of prosecution complaint sent by the Department to the person concerned, or
iii. Launching of the prosecution, whichever is earlier, or
(b) Ofience(s) not detected by the department but voluntarily disclosed by a person with the filing of application for Compounding of Offence(s) in the case under the Act for one assessment year or more.
For this purpose, the offence is relevant if it is committed by the same person/entity. Further, the first offence is to he determined separately for each of the Category B offences.
8.3 Notwithstanding anything contained in these Guidelines, the Board may relax restrictions in Para 8.1 above for compounding of an offence in a deserving case, on consideration of a report from the Pr. Chief Commissioner of Income tax of the Region wherein lies the jurisdiction of the case, on the petition of an applicant.
9. Relaxation of time
9.1 The restrictions imposed in Para 7(ii) of these Guidelines for compounding of an offence in a deserving case may be relaxed with the approval of the Pr. Chief Commissioner of Income tax of the Region wherein lies the jurisdiction of the case, for application filed beyond 24 months but before 36 months from the end of month in which complaint was filed in a court.
9.2 However, in all such cases where relaxation has been provided in this Para, the compounding charges would be A1.5 times of the normal compounding charges as applicable to the offence on the date of filing of the original compounding application.
10. Authority Competent to Compound an Offence:
10.1 The jurisdictional Pr.CCIT/ CCIT/ Pr.DGIT/ DGIT, is the Competent Authority for compounding of offences under Category ‘A’ and Category ‘B’.
10.2 If a person has committed an offence u/s 276B/ 276BB of the Act for non-payment of TDS/TCS in respect of both resident and non-resident payees/ collectee and thereby, the jurisdiction over such person lies with more than one jurisdictional charge. In such cases, the Pr.CCIT/ CCIT/ Pr.DGIT/ DGIT in whose jurisdiction compounding application has been filed will be the Competent Authority.
10.3 In case an applicant having more than one TAN lying in two or more jurisdictions wants to file compounding application in respect of offences committed u/s 276B/ 276BB in respect of two or more TANs falling in two or more jurisdictions, the application shall be filed before the Pr.CCIT/ CCIT having jurisdiction over the TAN of the region in which PAN jurisdiction of the applicant is falling. Such Pr.CCIT/ CCIT having jurisdiction over such TAN will be treated as Competent Authority.
11. Compounding Procedure
i. On receipt of the application for compounding, the report on the same shall be obtained from the Assessing Officer/Assistant or Deputy Director concerned who shall submit it promptly along-with duly filled in check-list (Annexure-2), to the Competent Authority, through proper channel.
ii. (a) In cases where, the compounding application is not found to be acceptable, then the Competent Authority shall dispose of every such application through a speaking order in the suggested format (Annexure-3 Part-II). Such order may be passed within six months from the end of the month of receipt of the application as far as possible.
(b) In cases where, the compounding application is found to be acceptable, then the Competent Authority shall intimate the applicant that such application is found to be acceptable along with the compounding charges payable, and other liabilities pending. Such intimation may be issued within six months from the end of the month of receipt of the application as far as possible.
iii. Where compounding application is found to be acceptable, the Competent Authority shall intimate the amount of compounding charges to the applicant, requiring him to pay the same within one month from the end of the month of receipt of such intimation by the applicant. On written request of applicant for further extension of time under exceptional circumstances, the Pr.CCIT/ CCIT/ Pr.DGIT/ DOLT may extend this period upto 6 months. Extension beyond 6 months and upto 12 months shall not be permissible except with the previous approval in writing of the Pr. Chief Commissioner of Income tax of the Region concerned. However, no extension beyond 12 months from the end of month in which intimation of compounding charges was given to the applicant shall be given except with the previous approval of Member (Inv.), CBDT on a proposal of the competent authority concerned.
iv. Whenever the compounding charges are paid beyond one month from the end of month in which it was received by the applicant, if extended by the Competent Authority, he shall have to pay interest at the rate of 1 % per month or part of the month on the unpaid amount of compounding charges upto three months and thereafter at the rate of 2 % if the Competent Authority has extended the payment period beyond three months.
v. The Competent Authority shall pass the compounding order in the suggested format (Annexure-3 – Part-I) within one month from the end of the month of payment of compounding charges. Where compounding charge is not deposited within the time allowed, the compounding application shall be rejected after giving the applicant an opportunity of being heard only in relation to compounding charges payable.
vi. The order of acceptance/rejection of application of compounding shall be brought to the notice of the Court, where the prosecution complaint was filed/or the complaint is pending, immediately through prosecution counsel in all cases where prosecution proceedings have been instituted.
vii. Normally any offence in respect of which the compounding application has been rejected is not considered for compounding as per Para 8.1(iv). However, if any compounding application has been rejected solely on account of late payment of compounding charges or shortfall in payment of compounding charges and if such shortfall is for some bonafide mistakes or on some other technical grounds, such compounding order can be rectified at the written request of the applicant provided the payment of compounding charges was made before rejection or time allowed by the Competent Authority whichever is applicable. However, the applicant will be required to pay interest as per Clause (iv) of this Para, on the unpaid compounding charges from the due date of payment as per original intimation of compounding along with the shortfall in compounding charges.
viii. The timelines mentioned for processing the compounding applications prescribed in these Guidelines are administrative and indicative for work management and do not prescribe a limitation period for disposal of the compounding application.
ix. Wherever the facility to perform any function relating to processing of any compounding application is available on ITBA, such function should be performed on ITBA.
12. Compounding Charges
12.1 The compounding charges shall include –
> Compounding fee- shall be computed in accordance with Para 13 of these Guidelines for various offences.
> Prosecution establishment expenses — to be charged @ 10% of the compounding fee subject to a minimum of Rs.25,000/- and
> Litigation expenses, including Counsel’s fee – paid/payable by the Department in connection with offence(s) compounded by a single order. (In a case where the litigation expenses are not readily ascertainable, the competent authority may arrive at litigation expenses, inter alia, on the basis of rates prescribed by the Government and on the basis of existing records with the Government and the counsel). Reference may be made to Board’s letter F.N0.279/Misc/M-77/2011-ITJ dated 18/10/2016.
12.2 In all cases where relaxation of time as provided in Para 9 of the Guidelines is allowed, the compounding charges shall be 1.5 times of the normal compounding charges.
12.3 Wherever, extension of time allowed to pay compounding charges is allowed beyond one month from the end of intimation of compounding charges in accordance with Compounding Guidelines, the applicant shall have to pay interest @ 1 % per month or part of month on the unpaid amount of the compounding charges up to three months and thereafter at the rate of 2 % for period beyond three months.
12.4 It is clarified that the compounding charges are payable in addition to the outstanding tax, interest, penalty and any other sum, if any payable or imposable as per provisions of the Act. Such tax, interest, penalty and any other sum as mentioned in Para 7(iii) shall be paid before filing the compounding application as required in these Guidelines.
13. Compounding fee
For the purpose of computation of the compounding fee, the word “tax” means- tax including surcharge and any cess, by whatever name called, as applicable. [The component of interest is not included as it is already a penal charge on tax]
The fees for compounding of offences shall be as follows:
13.1 Section 276 (Removal, concealment, transfer or delivery of property to thwart tax recovery)
13.1.1 Compounding fee to be calculated at the rate of 75% of the outstanding recovery amount sought to be thwarted through the removal/ concealment/ transfer/ delivery of property.
13.2 Section 276B (Failure to pay the tax deducted at source) and Section 2761113 (Failure to pay the tax collected at source)
13.2.1 In respect of application for compounding of offences, the compounding fee shall be calculated as under-
(i) 2% per month or part of a month of the amount of tax in default disclosed in the compounding application in those cases, where no prosecution proceedings have been initiated, and the applicant has situ-moto filed compounding application, before any offence u/s.276B/276BB of the Act for any period is brought to his knowledge by the Department. Such type of offence would also constitute an “occasion” for the purpose of Para 8.1.
However, such offences which are detected in the course of any search and seizure or survey operation will not fall in this category.
(ii) 3% per month or part of a month of the amount of tax in default disclosed in the compounding application for first `occasion’ in cases wherein compounding application has been filed in response to intimation of prosecution proceedings by the Department.
(iii) In respect of any application for subsequent occasion, the applicable rate for compounding of such an offence will be 5% per month or part of a month of the amount of tax in default.
13.2.2 The period of default for calculating compounding fee in this category shall be calculated from the date of deduction to the date of deposit of tax deducted at source, as is done in respect of calculating interest under section 201(1A) (ii) of the Act, in respect of compounding application filed.
13.2.3 The compounding fee shall not exceed the TDS amount in default.
13.3 Section 276C (1) (Willful attempt to evade tax, etc.)
(a) In the cases involving tax sought to be evaded (where evasion of interest and penalty may be consequential)
i. Where such tax attempted to be evaded exceeds Rs. 25 lakhs, 150% of such tax amount.
ii. In any other case, 125% of the tax attempted to be evaded.
(b) In cases involving attempt to evade only the penalty, 100% of such penalty.
13.4. Section 276C(2) (Willful attempt to evade payment of any tax, interest and penalty)
3% per month or part of the month of the amount of tax, interest and penalty, the payment of which was sought to be evaded, for the period of default. The period of default for calculating the compounding fees shall be as under:
i) Where tax, interest or penalty as per notice of demand under section 156 of the Act is not paid, from the date immediately following the due date of payment till the date of actual payment.
ii) Where the self-assessment tax was not paid as specified in section 140A of the Act, from the due date of filing of return of income u/s 139(1) of the Act to the date of actual payment.
For computing the period of default, any period of stay of demand granted by any Income Tax Authority, the Appellate Tribunal or Court shall be excluded.
13.4.1 The compounding fee shall not exceed tax, interest and penalty, the payment of which was sought to be evaded.
13.5 Section276CC (Failure to furnish return of income) and Section 276CCC (Failure to furnish return of income as required under section 158BC)
13.5.1
(a) In a case of default in furnishing the return of income on or before due date u/s139(1) of the Act, the default period will be computed from the due date u/s139(1) to the date of actual filing of return or completion of assessment, whichever is earlier and compounding fees will be;
i. Rs. 4,000/- per day – Where tax on returned income as reduced by tax deducted at source, advance tax and taxes if any as enumerated in section 140A(1) of the Act are paid before the due date of filing of return of that Assessment Year, exceeds Rs. 25 lakhs;
ii. Rs. 2,000/- per day – In cases other than in (i) above.
iii. However, in cases where the difference between the aggregate of taxes paid/payable on the returned income and the aggregate of taxes already paid under any provision of the Act as enumerated in section 140A(1) of the Act, if paid before the due date of filing of return of that Assessment year, is less than Rs.1,00,000/-, the compounding fees will be restricted to that said difference amount subject to a minimum of Rs. 10,000/-.
(b) In a case of offence of non-compliance of notice u/s 142(1)(i) of the Act, the default period will be computed:
(A) from the due date u/s 139(1) to the date specified in the notice u/s142(1) and the compounding fees shall be charged at the rate of:
(i) Rs. 4,000/- per day where the tax on returned income as reduced by tax deducted at source, advance tax, taxes if any as enumerated in section 140A(1) of the Act are paid before the due date of filing of return of that Assessment Year, exceeds Rs.25 lakhs;
(ii) Rs. 2,000/- per day in other cases, and
(B) for the period between date specified in notice u/s 142(1) to the date of filing of return of income or completion of assessment, whichever is earlier, and the compounding fees shall be charged at the rate of:
i. Rs. 5000/- per day where the tax on returned income as reduced by tax deducted at source, advance tax, taxes if any as enumerated in section 140A (1) of the Act are paid before the due date of filing of return of that Assessment Year, exceeds Rs.25 lakhs; and
ii. Rs.3000/- per day – in other cases.
(c) In a case of an offence of non-compliance of notice u/s 148 of the Act, the default period will be computed:
A) from the date specified in such notice till filing of return or assessment whichever is earlier, and the compounding fees shall be charged at the rate of:
(i) Rs. 5000/- per day where the tax on returned income as reduced by tax deducted at source, advance tax, taxes if any as enumerated in section 140A(1) of the Act are paid before the due date of filing of return of that Assessment Year, if any exceeds Rs.25 lakhs and
(ii) Rs. 3000/- per day – in other cases,
B) In a case, if there is also a default of not filing of return of income within due date prescribed u/s 139(1), then compounding fee shall be computed for the period between the due date u/s 139(1) to the date specified in the notice u/s 148, at the rate of –
i) Rs. 4000/- per day where the tax on returned income as reduced by tax deducted at source, advance tax, taxes if any as enumerated in section 140A(1) of the Act are paid before the due date of filing of return of that Assessment Year, if any exceeds Rs.25 lakhs and
ii) Rs. 2,000/- per day – in other cases,
(d) In a case of an offence of non-compliance of notice u/s153A/153C of the Act (prior to 01/04/2021), the compounding fees shall be charged
A) from the date specified in such notice till tiling of return or assessment whichever is earlier, at the rate of –
(i) Rs. 5,000/- per day where the tax on returned income as reduced by tax deducted at source, advance tax, taxes if any as enumerated in section 140A(1) of the Act are paid before the due date of filing of return of that Assessment Year, if any exceeds Rs.25 lakhs and
(ii) Rs. 3,000/- per day – in other cases,
B) In such a case, if there is also a default of not tiling return of income within due date prescribed u/s 139(1), then for the period from the due date u/s139( 1 ) to the date specified in the notice u/s153A/153C (prior to 01/04/2021), compounding tees at the rate of —
(i) Rs. 4000/- per day where the tax on returned income as reduced by tax deducted at source, advance tax, taxes if any as enumerated in section 140A (1) of the Act are paid before the due date of filing of return of that Assessment Year, if any exceeds Rs.25 lakhs and
(ii) Rs. 2,000/- per day – in other cases.
(e) In a case where return of income filed is not only late but Self-Assessment Tax is not paid:
i. These constitute two separate offences which are to be handled separately under sections 276CC and 276C(2), and
ii. Action u/s 276C (2) is to be undertaken only after the issue of demand notice u/s 156 pursuant to sections 143(1)/143(3)/144 etc.
13.5.2 The compounding fee shall not exceed the tax in default on returned income or assessed income, whichever is higher.
13.5.3 In a case the income determined u/s143(1) is more than the returned income, tax on the same will be applied for computing tax slab prescribed in Para 13.5.1.
13.6 Section 276DD- (Failure to comply with the provisions of Section 269SS) (prior to 01.04.89)
A sum equal to 20% of the amount of any loan or deposit accepted in contravention of the provisions of Section 269SS.
13.7 Section 276E (Failure to comply with the provisions of Section 269T) (prior to 01.04.89)
A sum equal to 20% of the amount of deposit repaid in contravention of the provisions of Section 269T.
13.8 Section 277 (False statement in verification, etc.,) and Section 277A (Falsification of books of account or document, etc.,) and Section 278 (Abetment of false return, etc.)
13.8.1 Where same set of facts and circumstances attract prosecution u/s 277 as well as section 278, the compounding fee shall be charged for offences under these sections by treating them as one offence.
13.8.2 Where same set of facts and circumstances attract prosecution u/s 277 or 278 in addition to another offence in connection with which prosecution u/s 277 or 278 was attracted in case of the same person, no separate compounding fee shall be charged for offence u/s 277 or 278. For example, where a person is charged with an offence u/s 276C (1) as also u/s 277 or 278, in respect of the same facts and circumstances, the compounding fees shall be charged only for the offence u/s 276C (1) at the rates prescribed for the said section.
13.8.3 In a case where no offence under any other section of the Act is involved except u/s 277 or 278 of the Act, the compounding fee shall be decided by the Competent Authority having regard to the amount of tax which would have been evaded as a result of such offence u/s 277 or 278 subject to a minimum compounding fee of Rs.1,00,000/- (Rupees One Lakh) which may be increased based on the assessment of loss caused to the revenue, directly or indirectly, for each of such offence on completion of assessment/reassessment.
13.8.4 In a case where provisions of section 277A are invoked, compounding fee shall be charged at the rate of 100% of the sum equal to the aggregate amount of such false or omitted entry involved.
13.9 Co-accused and Abettor-
Section 278B (Offences by companies) and Section 278C (Offences by Hindu undivided families)
13.9.1 Where an offence under this Act has been committed by a Company or HUF, a compounding fee at the rate of 10% of the `compounding fee for the main offence’ shall be charged from each of the person charged under sections 278B or 278C.
However, the Competent Authority, after considering the extent of involvement of any or all co-accused or abettor, may enhance or reduce or waive the amount of compounding fee to be charged from any or all the co-accused or abettor. The compounding fees chargeable from the co-accused or abettor shall be in addition to the compounding fees which may be chargeable from the main accused.
13.9.2 It is further clarified that:
(a) In the case of prosecution proceedings under sections 278B or 278C of the Act unless the main accused i.e. Company/HUF comes forward for compounding, the offence of the co-accused cannot be compounded separately.
(b) If one or more co-accused has not filed the compounding application or is not agreeable to the payment of compounding charges, as the case may be, then unless the main accused, on an undertaking obtained and furnished from such co-accused, unequivocally undertakes to pay the compounding charges on his own behalf and on behalf of all such co-accused as well, the compounding of the offence of the main accused cannot be accepted.
13.10 Offences, other than those described in Para 13.1 to 13.9, for which no compounding fee has been prescribed, the Competent Authority may determine the amount of compounding fee having regard to the nature and magnitude of the offence, loss of revenue directly or indirectly attributable to such offence, subject to levy of a minimum compounding fee of Rs 1,00,000/- (Rupees One lakh) for each such offence.
13.11 The prescribed compounding charges shall be applicable while compounding any offence. However, in extreme and exceptional cases of genuine financial hardship, the compounding charges may be suitably reduced with the approval of the Finance Minister.
14. In case any penalty proceedings which is related to the offence sought to be compounded are pending at the time of filing of the compounding application, efforts should be made to conclude such penalty proceedings expeditiously and recover demand before concluding the compounding proceedings.
15. These Guidelines shall come into immediate effect and shall be applicable to all applications for compounding received on or after the issue date of these Guidelines.
16. The Pr.CCsIT/ CCsIT/ Pr.DGsIT/ DGsIT are to circulate the above revised Guidelines along with its Annexure Nos. 1, 2 and 3 among all the officers of their Region for compliance.
Yours faithfully,
Encl: As above
Novel Roy
Deputy Secretary (lnv,V),
CBDT, New Delhi
Copy to-
1. The PS to the Revenue Secretary
The Chairman, CBDT
All Members, CBDT
All officers of the rank of Joint Secretary/C IT and above in CBDT
The CIT (Media & Technical Policy), CBDT
The ADG (Systems)-4 for uploading on incometaxindia.gov.in
Additional DIT, Database cell, for uploading on irsofficersonline.gov.in
Annexure 1
Format of application in the form of Affidavit for Compounding of Offences under Income-tax Act, 1961 to be submitted separately by each applicant
|
S.No. |
Particulars | Remarks |
| 1. | Name of the applicant | |
| 2. | Status | |
| 3. | Offences committed u/s * | |
| 4. | AYs / Date/ period involved in offence | |
| 5. | Status of case (i.e., whether contemplated/ pending in Court/convicted/acquitted) | |
| 6. | Date of filing of complaint, if any | |
| 7. | Whether the offence(s) committed by the applicant is one for which complaint(s) was filed with the competent court 12 months prior to the filing of the application for compounding | |
| 8. | Particulars of offences along-with justification for compounding (separate sheet) | |
| 9. | Whether the applicant has paid the amount of tax, interest, penalty and any other sum due relating to the offence | |
| 10. | Whether the applicant undertakes to pay further tax, interest, penalty and any other amount as is found to be payable on verification of the record. | |
| 11. | Whether the applicant undertakes to pay the compounding charges as shall be intimated by the department. | |
| 12. | Whether similar offences in the case of the applicant have been compounded earlier. If yes, how many occasions, as defined in 8.2.1. Give details in annexure. | |
| 13. | Whether the offence is first offence as defined in Para8.2 of the Guidelines | |
| 14. | Whether the offence has been committed by the applicant who, as a result of investigation conducted by any Central or State agency has been found involved, in any manner, in anti-national/ terrorist activity | |
| 15. | Whether any enquiry/ investigation being conducted by Enforcement Directorate, CBI, Lokpal, Lokayukta or any other Central or State agency is pending against the applicant? If so, particulars may be given |
|
| 16. | Whether the applicant was convicted by a court of law for an offence under any law, other than the Direct Taxes Laws, for which the prescribed punishment was imprisonment for two years or more, with or without fine. If so, particulars may be given along with a copy of the court’s order. | |
| 17. | Whether, the application for ‘plea-bargaining’ under Chapter XXI-A of ‘Code of Criminal Procedure’ is pending in a Court and the Court has recorded that a mutually satisfactory disposition’ of such an application is not worked out? | |
| 18. | Whether the applicant was convicted earlier with an imprisonment for a period two years or more by a court of law, | |
| 19. | Whether it is an offence in respect of which, the compounding application has already been rejected. | |
| 20. | Whether it is an offence which is directly related to an offence relating to undisclosed foreign bank account/assets in any manner | |
| 21. | Whether it is an offence which is directly related to any offence under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. | |
| 22. | Whether it is an offence which is directly related to any offence under The Prohibition of Benami Property | |
| 23. | Whether it is an offence u/s 275A, 275B. |
VERIFICATION
I ……………………………… son/daughter of ……………………………………… in the capacity of …………………………………. certify and solemnly affirm that the information in the above columns is true and correct to the best of my knowledge and belief.
Place:
Date:
Signature
Designation—-
Current address —
* All offences for which compounding is sought
Annexure 2
Suggested Check List for Compounding as per the Guidelines issued by the CBDT vide F.No.285/08/2014-IT (lnv.V)/196 dated 16.09.2022 on Compounding of Offences
(To be submitted by AO/ADIT/DDIT to the authority competent to compound through proper channel)
(A case can be compounded only if the answers to S. No. 1 to 21 matches with the answers given below in remarks column.)
Name of the applicant :-
Status :-
Offences u/s :-
AYs/ Date/ period involved in offence :-
Date of filing of complaint, if any :-
Status of case (i.e. whether Contemplated/ :-
Pending in Court/ Convicted/ Acquitted) :-
|
S.No. |
Particulars (vis-a-vis Compounding Guidelines) | Remarks | Reference of the File submitted |
| 1. | The applicant has filed a written request for compounding the offence in the prescribed Proforma. | Yes | On Page no……… |
| 2. | Whether the applicant has paid the amount of tax, interest and penalty& any other sum due relating to the default as prescribed in the Guidelines. | Yes | On Page no….. |
| 3. | Whether on verification of record any further amount of tax, interest and penalty& any other sum was found payable by the applicant. | Yes/No, If yes date of intimation and date of payment. | If yes. give details in brief. Add annexure if required. On Page no… |
| 4. | Whether the applicant has undertaken to pay the compounding charges computed as per Para 12 & 13 of the Guidelines. | Yes | On Page no…….. |
| 5. | Whether the offence(s) committed by the applicant is one for which complaints) was filed with the competent court 12 months prior to the receipt of application for compounding | No | On Page no…….. |
| 6. | Whether the offence is covered under Category ‘A’ and beyond scope of 3 occasions as specified in para 8.1(i). | No | If yes, give details in brief. Add annexure if required. On Page no…. |
| 7. | Whether the offence is the first offence as defined in para 8.2 of the Guidelines
NOTE: THIS IS APPLICABLE ONLY IN CASE OF A Category ‘B’ OFFENCE. |
Yes | If no, give details in brief. Add annexure if required. On Page no…. |
| 8. | Whether the offence has been committed by an applicant who, as a result of investigation conducted by any Central or State agency has been found involved, in any manner, in anti-national/terrorist activity | No | If yes, give details in brief Add annexure if required.
On Page no…. |
| 9. | Whether the offence committed by the applicant is directly related to a case under investigation (at any stage including enquiry, filing of FIR/complaint) by Enforcement Directorate, CBI, Lokpal, Lokayukta or any other Central or State agency* |
No | If yes, give details in brief. Add annexure if required. On Page no…. |
| 10. | Whether the offence has been committed by the applicant who, was convicted by a court of law for an offence under any law, other than the Direct Taxes Laws, for which the prescribed punishment was imprisonment for two years or more, with or without fine* | No | If yes, give details in brief. Add annexure if required. On Page no…. |
| 11. | Whether the application for ‘plea-bargaining’ under Chapter XXI-A of ‘Code of Criminal Procedure’ is pending in a Court or a Court has recorded that a ‘mutually satisfactory disposition’ of such an application is not worked out* | No | If yes give details in brief. Add annexure if required. On Page no…. |
| 12. | Whether the offence is one committed by an applicant for which he was convicted by a court of law with an imprisonment for two years or more. | No | If yes, give details in brief. Add annexure if required. On Page no…. |
| 13. | (i) Whether it is an offence in respect of which, the compounding application has already been rejected,(ii) if yes whether it is a case where relaxation is available in the Guidelines. |
(i) Yes/N o
(ii) Yes [If (i) is yes |
If yes give details in brief. Add annexure if required. On Page no…. |
| 14. | Whether it is a case of a person who is main accused and where it is proved that he has enabled others in tax evasion such as, through shell companies or by providing accommodation entries in any other manner as mandated in sec.277A of the Act | No | If yes, give details in brief. Add annexure if required. On Page no…. |
| 15. | Whether it is an offence directly related to an offence relating to
a) undisclosed foreign bank account/assets in any b) Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. C) Prohibition of Benami Property Transactions Act. |
No
if required. On Page |
If yes, give details in brief. Add annexure no…. |
| 16. | Whether the case pertains to the issue of Removal, concealment, transfer or delivery of property to thwart tax recovery?
(i) And if yes whether the outstanding amount in recovery has been deposited before filing the Compounding application. On Page |
No | If yes, give details in brief. Add annexure if required. no…. |
| 17. | Amount of compounding charges computed by AO/ADIT/DDIT as per Paras12 & 13 of the Guidelines. | Rs. | On Page no……… |
| 18. | The compounding charges are in accordance with Paras 12 and 13 of the Guidelines | Yes | If no, give reasons.
On Page no…. |
| 19. | The factors, such as conduct of the person, nature and magnitude of the offence and facts and circumstance of the case have been considered while dealing with the compounding application and in calculating compounding charges | Yes | If no, give details in brief. Add annexure if required.
On Page no…. |
| 20. | Whether the cases of Co-accused are being considered as per Para 13.8 | Yes/Not Applicable | If yes, give details in brief. Add annexure if required.
On Page no…. |
| 21. | Any other fact relating to the person/case relevant for consideration of the Competent Authority | No | If yes, give details in brief. Add annexure if required. On Page no…. |
Signature:
Name:
Designation:
Date:
Recommended by:
1. CIT/ Addl. CIT/Jt.DIT/Addl. DIT Signature/Name/Designation/Date
2. PCIT/PDIT/CIT/DIT Signature/Name/Designation/Date
*Note: This may be given on the basis of information furnished by the applicant in his application for compounding or information already available with the Competent Authority for compounding
Annexure 3
(Suggested Format)
Part-I
Order u/s 279(2) of the Income-tax Act, 1961 for Compounding of an Offence as mentioned in Para 11 (v) of the Guidelines issued by the CBDT vide F.tio.285/08/2014-IT (Inv.V)/196 dated 16.09.2022 on Compounaing of Offences
Order u/s 279(2) of Income-tax Act, 1961
Name of the person :-
Status :-
Offences u/s :-
AYs / Date/ period involved in offence :-
Date of filing of complaint, if any :-
Status of case (i.e. whether contemplated/:- Pending in
Court/ Convicted/ Acquitted)/:-Date of hearing, if any:-
Date of order: –
Order u/s 279(2) of the Income-tax Act, 1961
I, the Principal Chief Commissioner/Chief Commissioner of Income-tax /Principal Director General/Director General of Income-tax, in exercise of powers vested in me by virtue of the provisions of sub-section 2 of section 279 of the Income-tax Act, 1961 hereby compound the offence(s) u/s……………… of the Income -tax Act, 1961 for the A.Y.(s) / Date/ period……………… , committed by/s./Shri/Ms………………..
The Statement of the facts of the case are enclosed as Annexure – ‘A’
Place:
Date:
Seal:
Signature
Principal Chief
Commissioner/Chief Commissioner
of Income-tax / Principal Director
General/Director General of
Income-tax
Copy to for information and necessary action:
The Pr. Commissioner of Income Tax/ Pr. Director of Income Tax —
The Assessing Officer/ ADIT/DDIT—
The ADIT/DDIT (Prosecution)———
The Prosecution Counsel (if the case is pending in the Court)———–
The applicant (By name)—
Guard file.
Signature
ACIT/ ITO (Hq.)
O/o the Pr. CCIT/CCIT/ Pr. DGIT/DGIT
Annexure 3
(Suggested Format)
Part-II
Order u/s 279(2) of the Income-tax Act, 1961 for rejecting the Compounding of an Offence as mentioned in Para 11 (ii)(a) of the Guidelines issued by the CBDT vide F.No. 285/08/2014-IT(Inv.V)/196 dated 16.09.2022 on Compounding of Offences
Order u/s 279(2) of Income-tax Act, 1961
Name of the person:-
Status:-
Offences u/s:-
AYs / Date/ period involved in offence:-
Date of filing of complaint, if any:-
Status of case (i.e. whether Contemplated/:-
Pending in Court/ Convicted/ Acquitted):-
Date of hearing, if any:-
Date of order:-
Order u/s 279(2) of the Income-tax Act, 1961
1, the Principal Chief Commissioner/Chief Commissioner of Income-tax/Principal Director General/Director General of Income-tax, in exercise of powers vested in me by virtue of the provisions of sub-section 2 of section 279 of the Income-tax Act, 1961 hereby decline the prayer to compound the offence(s), u/s…….. of the Income-tax Act, 1961 for the A.Y.(s) / Date/ period………….. , committed by M/s./Shri /Ms……… The case was not found to be a fit case for compounding as “…………….. (mention reasons) ………… The Statement of the facts of the case are enclosed as Annexure – ‘A’
Place:
Date:
Seal
Signature
Principal Chief Commissioner/Chief
Commissioner of Income-tax / Principal
Director Genera/Director General of
Income-tax
Copy to:
The Pr. Commissioner of Income Tax/ Pr. Director of Income Tax
The Assessing Officer/ ADIT/DDIT——
The ADIT/DDIT(Prosecution)——
The Prosecution Counsel (if the case is pending in the Court)—–
The applicant (By name)—–
Guard file
Sd/-
ACIT/ ITO (Hq.)
O/o the Pr. CCIT/CCIT/ Pr. DGIT/DGIT
Annexure
Statement of facts
The statement of facts should, inter alia, contain the following:
L Detail of application filed
An application for Compounding of Offences committed Ws………….. of the Income-tax Act, 1961 was filed in prescribed format by M/s. /Mr. /Ms. ………………. on………
2. Brief facts
3. Whether complaint has been filed
A complaint was filed in the Court of………………………………. on…………………. and the case is still pending in the court/the Court has convicted the person who has filed an appeal against the conviction order that is pending in the Court/ the Court has acquitted the person & the department has filed an appeal against the acquittal order that is pending in the Court or an appeal against the acquittal order is contemplated.
OR
The complaint is yet to be filed in the Court.
4. In case of order accepting compounding, details of payment of compounding charges by the person.
5. Direction to the AO/ Standing Counsel to take necessary action to implement the orders at the earliest.
Author Bio
THANKS FOR SHRING ARTICLE VERY INFORMATIVE & USEFUL IT IS