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TMI BlogGuidelines for Compounding of Offences under Direct Tax Laws, 2014X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act provides that any offence under chapter XXII of the Act may, either before or after the institution of proceedings, be compounded by the CCIT/DGIT. As per section 2(15A) and 2(21) of the Act, Chief Commissioner of Income Tax includes Principal CCIT and Director General of Income tax includes Principal DGIT. 4. Compounding is not a matter of right: Compounding of offences is not a matter of right. However, offences may be compounded by the competent authority on his satisfaction of the eligibility conditions prescribed in these guidelines keeping in view factors such as conduct of the person; nature and magnitude of the offence and facts and circumstances of each case. 5. Applicability of these guidelines to prosecutions under IPC: Prosecution instituted under Indian Penal Code, if any, cannot be compounded as per these guidelines. However, section 321 of Criminal Procedure Code, 1973 provides for withdrawal of such prosecutions. 6. Classification of Offences: The offences under Chapter-XXII of the Act are classified into two parts (Category 'A' and Category 'B') for the limited purpose of compounding of the offences. 6.1 Category 'A' Offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The person makes an application to the CCIT/DGIT having jurisdiction over the case for compounding of the offence(s) in the prescribed format (Annexure-1) ii. The person has paid the outstanding tax, interest, penalty and any other sum due, relating to the offence for which compounding has been sought. iii. The person undertakes to pay the compounding charges including the compounding fee, the prosecution establishment expenses and the litigation expenses including counsel's fee, if any, determined and communicated by the CCIT/DGIT concerned. iv. The person undertakes to withdraw appeal filed by him, if any, in case the same has a bearing on the offence sought to be compounded. In case such appeal has mixed grounds, some of which may not be related to the offence under consideration, the undertaking may be taken for appropriate modification in grounds of such appeal. 8. Offences generally not to be compounded: i. A Category 'A' offence sought to be compounded by an applicant in whose case compounding was allowed in the past, in an offence under the same section for which the present compounding has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit for compounding in view of its nature and magnitude. 9. Notwithstanding anything contained in these Guidelines, the Finance Minister may relax restrictions in para 8 above for compounding of an offence in a deserving case, on consideration of a report from the Board on the petition of an applicant. 10. Authority Competent to Compound an Offence: The CCIT/DGIT having jurisdiction over the person, seeking compounding of an offence, is the competent authority for compounding of all Category 'A' and Category 'B' offences. However, an order in ease of an application for compounding of an offence appearing in Category 'B' of para 6 supra, involving compounding charges (as explained in para 13 infra) in excess of ₹ 10,00,000 (Rs. ten lakhs) shall be passed by the CCIT/DGIT concerned only on the recommendation of a committee comprising of 3 officers of the region concerned, namely (i) Principal CCIT, (ii) DGIT (Inv.) and (iii) CCIT/DGIT having jurisdiction over the case. In case such officers are not available within the region, the nearest DGIT or CCIT may be co-opted as Member. 10.1 Where Principal CCIT / DGIT(Inv) is the CCIT/DGIT having jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through prosecution counsel in the cases where prosecution had been instituted. 12. Fees for compounding: The fees for compounding of offences shall be as follows: 12.1 Section 276B- Failure to pay the tax deducted at source. Section 276BB- Failure to pay the tax collected at source. 3% per month or part of a month of the amount of tax in default disclosed in the compounding application. After compounding of the said offence, if the same person comes forward for compounding of such offence through any subsequent application, the applicable rate for compounding of such an offence will be 5% per month or part of a month of the amount of tax in default. The period of default for calculating compounding fee in the category shall be calculated from the date of deduction to the date of deposit of tax deducted at source as is done in respect of calculating interest under section 201(1A). 12.2 Section 276C(1)- Wilful attempt to evade tax etc. 100% of the amount sought to be evaded. 12.3 Section 276C(2)-Wilful attempt to evade payment of any tax etc. 3 % per month or part thereof of the amount of tax etc., the payment of which was sought to be evaded, for the period of default. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by treating them as one offence. 12.8.2 Where same set of facts and circumstances attract prosecution under section 277 in addition to the offence in connection with which prosecution under section 277 got attracted in case of the same person, no separate compounding fee shall be charged for offence under section 277. For example where a person is charged with an offence under section 276C(1) as also under section 277, for the same set of facts and circumstances, the compounding fees shall be charged only for the offence under section 276C(1) at the rates prescribed for the said section. 12.8.3 Where same set of facts and circumstances attract prosecution under any offence as well as u/s 277 and /or 278, normally, a compounding fee@10% of the 'compounding fee for the main offence' shall be charged from each of the person charged under sections 278B or 278C. However, the authority competent to compound, after considering the extent of involvement of any or all co-accused, may enhance or reduce or waive the amount of compounding fee to be charged from any or all the co-accused. The compounding fees chargeable from the co-accused shall be in addition to the compounding fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for compounding of offences under Income Tax Act to be submitted separately by each applicant S. No. Particulars Remarks 1 Name of the applicant 2 Status 3 Offences committed u/s * 4 AYs / Date/ period involved in offence 5 Status of case (i.e. whether contemplated/pending in Court/convicted/ acquitted 6 Date of filing of complaint, if any 7 Particulars of offences along-with justification for compounding (separate sheet) 8 Whether the applicant has paid the amount of tax, interest, penalty and any other sum due relating to the offence 9 Whether the applicant undertakes to pay the compounding charges as shall be intimated by the department. 10 Whether similar offences in the case of the applicant have been compounded earlier. If yes, how man times 11 Whether the offence is first offence as defined in para 8 (ii) of the guidelines 12 Whether the offence has been committed by the applicant who, as a result of investigation conducted by any Central or State agency has been found involved, in any manner, in anti-national/terrorist activity 13 Whether any enquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty & any other sum due relating to the default as prescribed in the guidelines. Yes On Page no. .............. 3. Whether the applicant has undertaken to pay the compounding charges in terms of para 7 as computed as per para 12 & 13 of the Guidelines. Yes On Page no. .............. 4. Whether the offence is under the same section under which offences have been committed by the applicant earlier and which have been compounded three times prior to the present application. NOTE: THIS IS APPLICABLE ONLY IN CASE OF A Category 'A' OFFENCE. 5. Whether the offence is the first offence as defined in para 8(ii) of the guidelines NOTE: THIS IS APPLICABLE ONLY IN CASE OF A Category 'B' OFFENCE. No On Page no. .............. 6. Whether the offence has been committed by an applicant who, as a result of investigation conducted by any Central or State agency has been found involved, in any manner, in anti-national/terrorist activity No On Page no. .............. 7. Whether the offence committed by the applicant has a bearing on a case under investigation (at any stage including enquiry, filing of FIR/complaint) by Enforcement Directorate, CBI, L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person :- Status :- Offences u/s :- AYs / Date/ period involved in offence :- Date of filing of complaint: if any :- Status of case (i.e. whether contemplated/ Pending in Court/ Convicted/ Acquitted) :- Date of hearing, if any :- Date of order :- ORDER u/s 279(2) of the Income-Tax Act, 1961 I, the Principal Chief/Chief Commissioner of Income-tax Principal Director/Director General of Income-tax, .............. in exercise of powers vested in me by virtue of the provisions of sub-section 2 of section 279 of the Income -tax Act, 1961 hereby compound the offence(s) u/s ................. of the Income -tax Act for the A.Y.(s) / Date period .................., committed by M/s /Shri /Ms. ............................. The Statement of the facts of the case are enclosed as Annexure - 'A' Place: Date: Seal Signature Chief Commissioner of Income-tax / Director General of Income-tax Copy to:- The Commissioner of Income Tax/ Director of Income Tax -------- The Assessing Officer/ ADIT/DDIT------ The ADIT/DDIT (Prosecution) --------- The Prosecution Counsel (if the case is pending in the Court) ----------- The applicant (By name) ----------- Guard file. Signat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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