Compounding of offences under the provisions of the Direct Tax Laws - modification of para 10 of the existing guidelines issued vide CBDT letter F.No.285/90/2008-IT(lnv.)/12 dated 16.05.2008 - Income Tax - F.No. 385/26/2011-IT(B)/141

F.No. 385/26/2011-IT(B)/141 Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes ARA Centre, E-2, Jhandewalan Extn., New Delhi-110055. Dated: 19th March, 2012 To All CCsIT(CCA)s/DGsIT/CCsIT(Central) Sir/Madam, Sub :- Compounding of offences under the provisions of the Direct Tax Laws - modification of para 10 of the existing guidelines Comprehensive guidelines on compounding of offences have been issued vide CBDT letter F. No. 285/90/2008-IT(lnv.)/12 dated 16.05.2008 . Para 10 of the said letter deals with the prosecution establishment expense which are to be charged, and reads as under In addition to the compounding fee, the compounding- charges shall include prosecution establishment expenses. A consolidated fee for prosecution establishment will be charged which would cover the litigation expenses also. Accordingly, prosecution establishment expenses will be charged at the rate of 10% of the compounding fee subject to a minimum of Rs. 10,000/- and maximum of Rs. 50,000/-, This limit will apply even where a number of offences are compounded under a single order. 2. Reference has been received from the field formation that the above levy of prosecution establishment expenses while compounding the offence is highly disproportionate to the fees payable by the Department to the prosecution counsel and therefore, deserves to be appropriately reviewed. 3. The matter has been examined and it has been decided to modify the para 10 of the said guidelines as under: ln addition to the compounding fee, the compounding charges shall include prosecution establishment expenses and the litigation expenses. While the prosecution establishment expenses will be charged at the rate of 10% of the compounding fee subject to a minimum of Rs. 10,000/- and maximum of Rs. 50,000/-, the litigation expenses will be the fees paid/payable by the Department to the prosecution counsel till (he date of compounding of offences as per the Instruction applicable on the subject on the date of compounding. This will apply even where a number of offences are compounded under a single order. Yours faithfully, Director (Inv.)- V