Compounding of offences under section 279(2) of IT Act, 1961 - Income Tax - Instruction No. 27

Instruction 27 Section(s) Referred: 279(2) Statute: Income - Tax Act, 1961 Date of issue : 21/3/1969 1. It was emphasised that a prosecution should not ordinarily be compounded if the prospects of success were good. The Board desires that in such cases the request of the assessee for having the offence compounded should not ordinarily be recommended to the Board. 2. The provisions of section 279(2) give a discretion- to the Commissioner to compound any offence under the I.T. Act and this discretion is an unfettered one. Even so it has to be exercised in a judicial manner. Although it is neither possible to precisely lay down all the circumstances in which an offence may be compounded nor it is intended to fetter the Commissioner s discretion in this matter, it is nevertheless necessary to have a uniform policy for exercising the discretion in a judicial manner. 3. Some of the points which have to be considered before deciding to compound an offence are indicated below. i). Compounding of an offence may be considered only in those cases in which the assessee comes forward with a written request for compounding the offence; ii). Cases in which the prospects of a successful prosecution are good, should not ordinarily be compounded; iii). Bearing in mind the deterrent effect of a prosecution it should be considered whether the purpose will be more effectively served by making the assessee pay a deterrent composition fee or by obtaining a conviction; iv). In cases where subsequent to the launching of prosecution fresh evidence becomes available which may show that the case for the prosecution is weals and the assessee is agreeable to have the offence compounded it may be advisable to compound the offence and not to proceed with the prosecution. 4. Ultimately the answer to the question whether the prosecution should be compounded or not will depend on the facts of each case. The above aspects are only intended to provide broad guidelines. The previous approval of the Board should always be obtained before deciding to compound an offence. No assurance of any kind should be given to the assessee before obtaining the Board s approval.