TaxTMI 
TaxTMI 
TaxTMI 
Guidelines for Compounding of Offences under the Income-Tax Act, 1961
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....nded 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 ....
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....o 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 cou....
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...., 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/complai....
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.... 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 co....
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....proval 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. ....
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....rges 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....
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....ax, 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 ....
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....f 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 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(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 filing return of income within due date prescribed u/s139....
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....ly 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 A....
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.... Yours faithfully, Novel Roy Deputy Secretary (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 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....
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.... 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)/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 pa....
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....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 0 (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 manner. b) Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. c) Prohibition of Benami Property Transactions Act. No If yes, give details in brief. Add annexure if required. On Page 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....
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....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 fi....