TaxTMI 
TaxTMI 
Frequently Asked Questions (FAQs) on Guidelines for Compounding of Offences under the Income-Tax Act, 1961 dated 17.10.2024
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.... 275A and 276B of the Act, removing the existing time limit for filing application viz 36 months from the date of filing of complaint, etc. 3. For better awareness and understanding among the stakeholders with respect to the revised guidelines dated 17.10.2024, clarifications are provided by issue of a Circular in the form of answers to the frequently asked questions (FAQs) as follows: A. Compounding of offence Q. 1 What is compounding of offence? Ans: Compounding of an offence is a mechanism whereby the defaulter is reprieved of major legal consequences by affording him an opportunity to pay certain sum of money to escape prosecution. The specified offences can be compounded by the competent authority either before or after the initiation of proceedings. Q.2 Whether compounding of an offence constitute as an admission of an offence by the applicant? Ans: No, compounding is intended to resolve the offence(s) and it is not to be construed as an admission of such offence(s) by the applicant. (Ref: para 9.11 of the guidelines) Q.3 Are there any offence(s) under Income Tax Act which are not compoundable? Ans: No, all offence under Income Tax Act have been made c....
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....17.10.2024. (Ref: para 4.2.4 of the guidelines) Q.10 Whether compounding application fee is adjustable against compounding charge payable? Ans: Yes, compounding fee is adjustable but only against compounding charges payable for the offence(s) sought to be compounded in the particular application. Cross application adjustment is not allowed. However, if compounding application is rejected for any reasons, the application fees shall neither be refundable nor adjustable against any subsequent application. (Ref: para 4.2.2 of the guidelines) Q.11 Whether compounding is allowed if the application for such an offence was previously rejected? If so, whether separate applications need to be filed for more than one applications rejected under the previous guidelines? How will the compounding application fees be charged? Ans: Yes, an applicant may apply for compounding of offence(s) through a single consolidated application, if one or more applications had been rejected under previous guidelines. However, the fresh application can only be filed if such rejection(s) were on account of curable defects (illustrative examples in para 3.2 of the revised guidelines) and no application ....
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....ara 6.1(a) and (b) of the guidelines) Q.17 Whether applicant can file a compounding application if his application is returned back due to defect(s)? Ans: Yes, defective application can be revived by removing defects within a period of one month from date of intimation of defects(s). If defects are not cured within such time, the application will be returned back to the applicant and shall be deemed to be rejected. In such case, applicant may apply again which shall be treated as a subsequent compounding application for the purpose of determination of compounding charges. (Ref: para 5 and 10 of the guidelines) Q.18 In terms of Para 10.7, what will be the date of applications in case of carried forwarded applications - original date of application or date of issue of new Guidelines? Ans: The application pending as on 17.10.2024 shall be governed under new guidelines. However, date of such pending application shall be the original date of application for any purpose. Q.19 Whether the applicant whose application was rejected on account of not being filed in time as provided for in the earlier guidelines, i.e. within expiry of 12/24/36 months from the end of the month of....
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....y. However, if the applicant is found to be involved in such activity, the offence shall be compounded only with the approval of Chairman, CBDT, as per para 6.1(c) of the revised guidelines. (Ref: para 6.1(c) of the guidelines) Q.24 If the main accused has more than one director/partner and one of these directors/partners file an application for compounding of offence(s), where it is found that the other director(s)/partner(s), who have not filed the compounding application, comes under the conditions as mentioned in Para 6.1 (d) (facilitated tax evasion through mechanisms such as use of entities for laundering of money, generation of bogus invoices of sale/purchase without actual business by accommodation entries or in any other manner) of these guidelines, whether approval of Higher Authority is required for deciding the compounding application? Ans: If a case involves multiple offences and one of those offences requires approval from a higher authority under paragraph 6.1 of the guidelines, the compounding application will be processed based on the offence for which the application has been filed, as explained below: i. If the application has been filed by the mai....
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....ines) Q.28 If a new consolidated application includes a year for which application was filed earlier and then withdrawn, whether partial compounding charges paid for such year for which application is withdrawn can be adjusted against total compounding charges towards consolidated application? Ans: No. Partial compounding charges paid for the year for which application is withdrawn can be adjusted in new consolidated application only towards the offence and particular year for which payment was made. (Ref: para 3.2 of the guidelines) Q.29 An applicant has filed compounding applications under earlier guidelines, two of which were rejected on account of curable defects, two were compounded and three are pending as on issuance of this guideline. How should the applicant file a compounding application after issuance of these guidelines and how shall the new application be treated? Ans: No action is pending for the applications which have been compounded. A consolidated application may be filed for all applications which were rejected (on account of curable defects) and no fresh application is required to be filed for pending applications. All pending applications, whether f....
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....n required) NA Normal rate 01/11/2024 (filed under revised guidelines) Single application for earlier application rejected) 276B (2013-14) Second Yes, in applications dated 15/01/2021 and 18/08/2023. (considered as 2^nd time) * 1.2 times of normal rate 18/12/2024 (filed under revised guidelines) Consolidated application 276B (2017-18) Third Yes, in applications dated 15/01/21, 18/08/2023 & 01/11/2024 (3 ^rd time) # 1.4 times o normal rate 276C (1) (2019-20) Yes, in application dated 17/10/2022 (2^nd time) 1.2 times o normal rate 275A (2023-24) No, first time applied for (1^st time) Normal rate * It is noted that the applicant has opted for compounding for this offence for the third time in third application and accordingly compounding charges at 1.4 times of normal rate should apply. However, since both applications were filed under previous guidelines, all such applications will ....
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....17/10/2024) Less than 12 months Normal compounding charge as per Annexure-4 Rs 45,000/- Case-2 31/10/2024 (filed under revised guideline) More than 12 months Increase by 50% of normal compounding charge as per Annexure-4 Rs 67,500/- (1-5*Rs 45,000) Scenario-2 First application ejected, revised application filed) Case-3 12/10/2022 (Rejected) Less than 12 months NA(application rejected) NA 31/10/2024 (filed under revised guideline) More than 12 months 1.2 times of normal compounding charge in by 50% Rs 81,000/- {1.5* (1.2* Rs 45,000)} Q.33 How to compute compounding charges for offence u/s 276CC in the absence of information on tax sought to be evaded or the tax on under-reported income due to assessment/reassessment being not carried out? Ans: In such cases, compounding charges shall be the minimum compounding charge applicable for compounding of offence u/s 276CC as per Annexure-4 of the guideline....
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....ines? Ans: For applications pending as on 17.10.2024, wherein compounding charges were not fully paid within time allowed as per earlier Guidelines or wherein time allowed had not elapsed, the period of 24 months will commence from the end of the month of issuance of these guidelines viz October 2024. The extension of timelines will require approval as prescribed in para 9.4 of the Guidelines.(Ref: para 3.1 and 9.4 of the guidelines) Q.40 Are extension for payment of compounding charges subject to interest or additional charges? Ans: No, interest or additional charges are not applicable on extension allowable under para 9.4 of the guidelines. Further, for cases pending as on date of issuance of revised guidelines, additional compounding charge (chargeable under previous guidelines) shall not be applicable and compounding charge shall be determined as per Para 10 of the guidelines. (Ref: para 9.4 and 10 of the guidelines) H. Co -accused and abettors-offence by Companies and HUF Q.41 Whether co-accused can file compounding application under revised guideline? Ans: Yes, co-accused may apply for compounding of offence separately or conjointly. (Ref: para 11 of the gui....
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....both of them conjointly, the Competent Authority shall compound concerned offences for main accused as well as all the co-accused. (Ref: para 11 and 10 of the guidelines) Q.46 Whether any person other than main accused or co-accused can file compounding application for compounding of an offence of company or HUF? Ans: No, person other than main accused or co-accused cannot file compounding application. The applicant is required to disclose his status as main accused or co-accused in the serial no. 4 of compounding application (Annexure-I of revised guidelines). (Ref: para 11 and Annexure -1 of the guidelines) Q.47 What will happen if co-accused has not been identified by the department for offences u/s 278B? Ans: In cases where co-accused have not been identified or such identification is under progress u/s 278B of the Income Tax Act, either the main accused or any person who can substantiate along with supporting documents that he was in-charge or responsible for conduct of the business of the company during the time of commission of offence, to be considered as 'deemed to be guilty' u/s 278B(1), can file an application as co-accused. (Ref: para 11 of the guide....