Prosecution Establishment Expenses. - Income Tax - 1718/CBDT

INSTRUCTION NO. 1718/CBDT Dated: July 9, 1986 Board issued Instruction No. 1661, dated 18-11-85 for charging of prosecution establishment expenses. These instructions were made effective from 18-11-85. From time to time, some representations have been received from the field authorities seeking clarifications. After considering the representations, and other material available on record, the necessary clarifications are as under :- Query- Whether prosecution establishment expenses have to be charged for every year in default ? Reply- Prosecution establishment expenses have not to be charged for every year in default. First of all compounding fees payable for all the years in default have to be calculated as per the Board's Instruction No. 1317, dated 11-3-1980. Depending upon the amount of compounding fees, the prosecution establishment expenses would be working out i.e. if the compounding fees is less than Rs. 50,000 the prosecution establishment expenses of Rs. 5,000 would be charged irrespective of the number of years for which the offence has been committed. In some charges, it is observed that prosecution establishment expenses have been charge a for each year in default. Such cases may not be reopened now. In future the procedure as out-lined here may be followed. Query- Whether prosecution establishment expenses have to be charged even when no prosecution is launched. Reply- As per the Board's instruction dated 7-6-1984, the Commissioner of Income-tax has been authorised to compound the offence in cases of minor defaults relating to TDS (before launching prosecution). Even on these cases, the prosecution establishment expenses would be charge before passing the order for compounding the offence. Query- Whether prosecution establishment expenses have to be charged in those cases where prior to 18-11-85 it was agreed to compound the offence. Reply- Orders for charging of prosecution establishment expenses were issued by the Board and made effective w.e.f. 13-11-85. In cases where the administrative approval from the Board for compounding the offence was received prior to this or where the Commissioner of income-tax has agreed for compounding the offence (as per the delegated powers in cases of minor defaults relating to TDS) and as a result thereof, the assessee has made the payment of compounding fees, the prosecution establishment expenses may not be charged.