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Guidelines for Compounding of Offences under the Income-Tax Act, 1961

September 17, 2022

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F. No. 285/08/2014-IT (lnv.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.285/08/2014-IT (Inv.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/ COT/ Pr.DGIT/ DGIT. As per section 2(15A) and 2(21) 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/s 119 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-O or 2nd proviso to

section 194B to the credit of the Central Goverment (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.r. 0 1.04.1989) - 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.

2760

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/ CCITT 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 determined 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/s 276B/276BB in respect of that TAN for such period.

8. Offences not to he 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 (lib) of sub-section (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-national/terrorist 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 u/s 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)  Offence(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 be 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  @1.5  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/ CCITT 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/ CCITT 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

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/ DGIT 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. No.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:

13A  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 276BB (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  suo-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  Section 276CC (Failure to furnish return of income) and Section 276 CCC (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/s 153A/153C of  the Act (prior to 01/04/2021), the compounding fees shall be charged

A)  from the date specified in such notice till filing 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( I ) 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 filing 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 fees 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/s 143(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  Ws 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 (I) 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 (I) 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.

Encl: As above

 

Yours faithfully,

Novel Roy

Deputy Secretary (Inv.V),

 CBDT, New Delhi

Topics

Acts Income Tax