TaxTMI 
TaxTMI 
Guidelines for Compounding of Offences under the Income-Tax Act, 1961
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....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 ....
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....he 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/ 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 ....
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....fined 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....
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....vant 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 juris....
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.... 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 ....
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....ia, 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 ....
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.... 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 ....
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....- 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....
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.... 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. ....
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....treme 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 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 ....
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....h 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 pe....
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.... 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....
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....nature: Name: Designation: Date: Recommended by: 1. Jt.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.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 I, the Principal Chief Commissioner/Chief Com....