TaxTMI 
TaxTMI 
Guidelines for Compounding of Offences under Direct Tax Laws, 2019
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....d before 17.06 2019 shall continue to be dealt with in accordance with the Guidelines dated 23.12.2014. 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(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 u/s 119 of the Act read with explanation below sub-section (3) 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 ....
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....iv. 276C(1) Willful attempt to evade tax, etc v. 276C(2) Willful attempt to evade payment of taxes, etc vi. 276D Failure to produce accounts and documents vii 277 False statement in verification etc. with reference to Category B' offences viii 277A Falsification of books of account or documents, etc. ix. 278 Abetment of false return, etc. with reference to Category 'B' offences 6.3 Offences under sections 275A, 275B and 276 of the Act will not be compounded. 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, no application of compounding can be filed after the end of 12 months f....
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.... 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. vi. 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. vii. Offences committed by a person 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 and which has a bearing on the offence sought to be compounded. viii. Offences committed by a person which, as per information available with the Pr. CCIT/CCIT/Pr. DGIT/DGIT concerned, have a bearing on 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. ix. Offences committed by a person whose application for 'plea-bargaining' under Chap....
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.... compounding of an offence in a deserving case may be relaxed, where application is filed beyond 12 months but before completion of 24 months from the end of month in which complaint was filed, by the Committee defined in Para 10 of these Guidelines, provided that such delay should be attributable to reasons beyond the applicant's control. However, a plea of pendency of appeal at any stage or before any authority cannot be treated as a reason beyond the applicant's control, because furnishing an undertaking to withdraw the appeal(s) having bearing on the offence is a prerequisite as per clause 7(v) above. 9.2 However, in all such cases where relaxation has been provided in this Para, the compounding charges would be 1.25 times 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 Pr. CCIT/CCIT/Pr. DGIT/DGIT having jurisdiction over the person, seeking Compounding of an Offence, is the Competent Authority for compounding of all Category 'A' and Category 'B' offences. However, an order in case of an application for compounding of an offence, involving ....
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.... Deputy Director concerned who shall submit it promptly along-with duly filled in check-list (Annexure-2), to the authority competent to compound, through proper channel. ii. The Competent Authority shall duly consider and dispose of every application for compounding through a speaking order in the suggested format (Annexure-3) either by rejecting or by intimating the compounding charges payable. Such order may be passed within six months from the end of the month of its receipt (excluding the time for payment of the compounding charges) 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. On written request of applicant for further extension of time under exceptional circumstances, the Pr. CCIT/CCIT/Pr. DGIT/DGIT may extend this period by three months. Extension beyond three months shall not be permissible except with the previous approval in writing of the Committee defined in Para 10 of these Guidelines. However, no extension beyond twelve m....
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....rescribed 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 The compounding charges shall include compounding fee, prosecution establishment expenses and litigation expenses, including Counsel's fee. 12.1 The compounding fee shall be computed in accordance with Para 13 of these Guidelines for various offences. Prosecution establishment expenses will be charged at the rate 10% of the compounding fees subject to a minimum of Rs. 25,000/- in addition to litigation expenses including Counsel's fees 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 counsels. 12.2 In all ....
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....of a month of the amount of tax in default. 13.1.2 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) of the Act in respect of compounding application filed. 13.2. 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 sought to be evaded exceeds Rs. 25 lakhs, 150% of the tax sought to be evaded. ii. In any other case, 125% of the tax sought to be evaded. (b) In cases involving attempt to evade only the penalty, 100% of penalty sought to be evaded. For example, penalties which are not directly related to tax evasion, such as penalty u/s 271DA etc. 13.3. 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 ....
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.... of Rs. 5000/- per day where tax on returned income as reduced by tax deducted at source and advance tax, if any exceeds Rs. 25 lakhs and. Rs. 3000/- per day in other cases, from the date specified in such notice till filing of return or assessment whichever is earlier. In case, there was also default of not filing return of income within due date prescribed u/s 139(1), then for the period between due date u/s 139(1) to the date specified in the notice u/s 148, compounding fees at the rate of Rs. 4000/- per day where the tax on returned income as reduced by tax deducted at source and advance tax, if any exceeds Rs. 25 lakhs and Rs. 2,000/- per day in other cases from the due date u/s 139(1) to the date specified in the notice u/s 148 will also be (d) In case of offence of non-compliance of notice us 153A/153C of the Act, the compounding fees shall be charged at the rate of Rs. 5,000/- per day where tax on returned income as reduced by tax deducted at source and advance tax, if any exceeds Rs. 25 lakhs and Rs. 3,000/- per day in other cases, from the date specified in such notice till filing of return or assessment whichever is earlier. In case, there was also default of no....
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....nces under these sections by treating them as one offence. 13.8.2 Where same set of facts and circumstances attract prosecution u/s 277 in addition to another offence in connection with which prosecution u/s 277 was attracted in case of the same person, no separate compounding fee shall be charged for offence u/s 277. For example, where a person is charged with an offence u/s 276C(1) as also u/s 277, 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 Where same set of facts and circumstances attract prosecution under any offence as well as u/s 277 and/or 278, normally, 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 authority competent to compound, 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 ....
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.... mutatis mutandis to offences under other Direct Tax Laws and the compounding fee for offences under the other Direct Tax Laws will be same as prescribed supra for the corresponding provisions of offences under the Income-tax Act, 1961. 16. The Pr. CCsIT/CCsIT/Pr. DGsIT/DGsIT are requested 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, Mamta Bansal Director (Inv.V), CBDT, New Delhi 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 ....
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....n offence relating to undisclosed foreign bank account/assets in any manner 21. Whether it is an offence which has bearing on any offence under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. 22. Whether it is an offence which has bearing on any offence under The Benami Transactions (Prohibition) Act, 1988. 23. Whether it is an offence u/s 275A, 275B and/or 276 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(Inv.V) dated 14.06.2019 on Compounding of Offences (To be submitted by AO/ADIT/....
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....Paras 12 & 13 of the Guidelines. Yes On Page no 5. 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 receipt of application for compounding. No On Page no......... 6. Whether the offence is under the same section under which offences have been committed by the applicant earlier and which have been compounded three times prior to the present application. NOTE: THIS IS APPLICABLE ONLY IN CASE OE A CATEGORY TV OFFENCE. No If no, 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 yes, 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 ....
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....nder the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. No If yes, give details in brief. Add annexure if required. On Page no.... 17. Whether it is an offence which has bearing on any offence under The Benami Transactions (Prohibition) Act, 1988 No If yes, give details in brief. Add annexure if required. On Page no.... 18. Amount of compounding charges computed by AO/ADIT/DDIT as per Paras 12 & 13 of the Guidelines. Rs. On Page no ........ 19. The compounding charges are in accordance with Paras 12 and 13 of the Guidelines Yes If no, give reasons. On Page no,... 20. 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.... 21. Whether the cases of Co-accused are being considered as per Para 13.8 Yes/Not Applicable If yes, give details in....
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....come-tax Copy to: The Commissioner of Income Tax/ 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 Format for Order u/s 279(2) of the Income-tax Act, 1961 for rejecting the Compounding of an Offence as mentioned in Para 11 (ii) of the Guidelines issued by the CBDT vide F. No, 285/08/2014-IT(Inv.V) dated 14.06.2019 on Compounding of Offences Order u7s 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)/ :- ....