Guidelines for compounding of offences. - Income Tax - 5255/1995

INSTRUCTION NO. 5255/1995 Dated: October 20, 1995 Section(s) Referred: 279(2) Statute: Income - Tax Act, 1961 The existing guidelines for compounding of offences under the Direct Tax Laws were issued vide F.No. 285/161/90-IT(Inv) dated 30/9/1994 and were circulated under a separate forwarding letter of even number and date. During the operation of these guidelines certain ambiguities were noticed and, hence, clarifications were sought by the field officers. For instance, in some regions, CCs were calculating the compounding fee for offence u/s.276(c)(1) only on the tax sought to be evaded by the assessee while in others the compounding fee was calculated by aggregating the tax, interest and penalties sought to be evaded by the assessee. 2. Doubtless, there is need for uniformity in the application of the guidelines and in the interpretation of the phrase "amount sought to be evaded." Accordingly, after careful consideration of the matter, the following clarification is hereby issued:- Para 4C(iii) of the forwarding letter will now read as under: "Section 276C(1) Amount of tax calculated at the maximum marginal rate on the income sought to be concealed." 3. Likewise in Para 9.5 of the compounding guidelines, the phrase 'amount sought to be evaded' is mentioned; whereas in Para 4C(iii) of the forwarding letter, the phrase 'amount in default' or the "amount involved in the offences" is likely to convey different meanings. The clarification in regard to Section 276C(1) will, it is hoped make the matter clear and unambiguous. 4. To sum up, henceforth, the compounding fee would be worked out at 100% of the tax calculated at the maximum marginal rate of the income sought to be concealed, where the amount is less than Rs. 1 lakh and @ 200% if the income sought to be concealed exceeds Rs. 1 lakh. F.No. 285/82/90-IT(Inv)/1154