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TMI BlogGuidelines for Compounding of Offences under the Income-Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise of powers conferred u/s 119 read with explanation to section 279 of the Act, following Guidelines are hereby issued. 3. Scope of the Guidelines to prosecutions under Income Tax Act, 1961 3.1 These Guidelines shall come into effect from the date of issuance. They shall apply mutatis mutandis to all applications which are either filed after the date of issuance of these guidelines or were already filed earlier but had not been disposed. For applications, pending on the date of issuance of these Guidelines, if compounding charges have already been determined and intimated but not fully paid, the compounding charges shall be re-determined, provided they are lower as per these Guidelines. However, no refund or adjustment against other dues shall be made if the higher compounding charges, determined as per the previous Guidelines, have already been paid. 3.2 Applications may also be filed again, in case applications under earlier guidelines were rejected only on account of curable defects such as non-payment of outstanding tax, interest, penalty, or any other sum related to the offence, filing of application in incorrect proforma, mention of incorrect assessment year/financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of applications which were filed before the date of issuance of these guidelines but have been rejected and that are proposed to be revived in terms of these guidelines. 4.2.4 The Compounding Application Fee shall not be payable in respect of applications pending as on date of issuance of the guidelines and filed in terms of earlier guidelines. 4.3 Payment of all taxes, interest other sums relating to offence for which compounding sought: 4.3.1 All outstanding tax, interest (including interest u/s 220 of the Act), penalty and any other sum due, relating to the offence(s) for all relevant year(s) and/or quarter(s) for which compounding has been sought shall be paid before making the Compounding Application or the Consolidated Compounding Application, as the case may be. 4.3.2 However, if on verification by the Department, any related demand is found outstanding or is considered payable, the same; on being intimated to the applicant, shall be paid (including interest u/s 220 of the Act) within 30 days of the intimation by the Department or such period (not exceeding three months) allowed by the Competent Authority. The compounding application or the consolidated compounding ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following cases, may compound only with the approval of Chairman, CBDT. (a) In case of an offence for which the applicant has been convicted with imprisonment for two years or more, with or without fine, by a court of law; (b) In case of an offence which is related to another offence under any other law for which he has been convicted with imprisonment for two years or more, with or without fine, by a court of law; (c) If the applicant, as per information available on the basis of an investigation conducted by any Central or State Agency, has been found to be involved, in any manner, in anti-national or terrorist activity. In such cases, the Competent Authority shall consult with relevant Agency and seek inputs regarding the said activity and its implications, for the purpose of deciding it as a deserving case and incorporate them while seeking approval; (d) In the case of an applicant, being a person other than the main accused, where it is proved that the applicant facilitated tax evasion through mechanisms such as use of entities for laundering of money, generation of bogus invoices of sale/purchase without actual business, by providing accommodation entries or in any other mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days of receipt of such reference. 8.3 In case an applicant files Compounding application for offences committed u/s 276B/276BB of the Act, in respect of two or more TANs falling in two or more jurisdictions, the jurisdictional authority where the quantum of TDS default is higher shall be the Competent Authority. All other applications shall be transferred to such Competent Authority. Further, in case of any dispute in deciding Competent Authority, the Pr. CCIT having PAN jurisdiction will decide Competent Authority, within 30 days of receipt of such reference. 9. Compounding Procedure 9.1 On receipt of the Compounding application, the Competent Authority shall obtain a report from the Assessing Officer/Assistant or Deputy Director concerned who shall submit it promptly along-with duly filled in check-list (Annexure-2), to the Competent Authority, through proper channel. 9.2 In cases where, the compounding application is not found to be acceptable, then the Competent Authority shall dispose of such application through a speaking order in the suggested format (Annexure-3 - Part-Il). Such order may be passed within two months from the end of the month of receipt of the application as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on e-FiIing portal e-Pay Tax New Payment Income Tax Minor Head Other Receipts (500) compounding charges . 9.10 Where the payment of compounding charges is made within time allowed/extended, the Competent Authority shall pass the compounding order in the suggested format (Annexure-3 - Part-I) within one month from the end of the month of payment of total compounding charges. 9.11 Taxpayers, particularly NRIs, avoid opting for compounding due to a misconception that it constitutes an admission of offences, which could affect their reporting obligations at various statutory and international forums. To address this misconception and encourage taxpayers to seek compounding, it is directed that the Competent Authority shall include the following paragraph in the compounding order issued under section 279(2) of the Act: This compounding order is intended to resolve the offence under section 279(2) of the Act and should not be construed as an admission of the offence(s) by the applicant. 9.12 The timelines for processing the compounding applications by the Competent Authority prescribed in these Guidelines, are administrative and do not prescribe a limitation period for disposal of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly by the main accused i.e., Company, or HUF and/or any of the person(s) deemed to be guilty of the offence under section 278B or 278C of the Act, to be referred as Co-accused for the purpose of compounding under these guidelines. The Competent Authority may decide the application accordingly subject to the payment of compounding charges as per these guidelines. 11.2 It is again clarified that in cases of offences by a company or HUF, the main accused or co-accused may apply separately or conjointly. On payment of compounding charges for the offence as determined under these guidelines, by any one of them separately or jointly, the Competent Authority shall compound the offences of the main accused as well as all the co-accused, vide an order u/s 279(2) of the Act. 11.3 For the purpose of depositing compounding charges, co-accused under Section 278B or 278C of the Act may deposit the charges under his PAN for the relevant financial year of the offence for which compounding is sought. 11.4 In case liability of a company for an offence committed prior to the commencement of the corporate insolvency resolution process ceases due to the provisions of section 32A of the Insolvency Bankr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onvicted with an imprisonment for a period two years or more by a court of law under any other law direct tax laws which is related to the offence sought to be compounded. 20. 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. 21. Whether it is an offence which is directly related to any offence under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. 22. Whether it is an offence which is directly related to any offence under The Prohibition of Benami Property Transactions Act, 1988. 23. Whether it is an offence u/s 275A, 275B. 24. Whether Compounding Application Fee has been paid as per para 4.2 VE RI F I CAT I ON I . ... .... . . .. . .. . ... ................ son/da u g ht e r o f ............................................... in the capa c i t y o f .... .. .. ............................. cert if y and so l e m nly affirm th at the information i n th e above col u mns i s tru e a nd correc t to the b es t of m y kn ow l e d ge and b e l ie f. Pl ac e : D ate: Signature D es i g n at i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period two years or more by a court of law under direct tax laws for the offence sought to be compounded. Yes/No If yes, give details in brief. Add annexure if required. On Page no.... l l . Whether the applicant was convicted with an imprisonment for a period two years or more by a court of law under any other law direct tax laws which is related to the offence sought to be compounded. Yes/No If yes, give details in brief. Add annexure if required. On Page no.... 12. 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. Yes/No If yes, give details in brief. Add annexure if required. On Page no.... 13. Whether it is a case of a person who is main accused and where it is proved that he has enabled others in tax evasion such as, through shell companies or by providing accommodation entries in any Other manner as mandated in section 277A of the Act. Yes/No If yes, give details in brief. Add annexure if required. On Page no... 14. Whether it is an offence directly related to an offence relating to a) Black Money (Undisclosed Foreign I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1961 for the A.Y.(s) / Date/ period. committed by/s./Shri/Ms............. . This compounding order is intended to resolve the offence under section 279(2) of the Act and should not be construed as an admission of the offence(s) by the applicant. The Statement of the facts of the case are enclosed as Annexure - 'A' Place: Date: Seal: Signature Principal Chief Commissioner/Chief Commissioner of Income-tax / Principal Director General/Director General of Income-tax Copy to for information and necessary action: The Pr. Commissioner of Income Tax/ Pr. 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. Signature ACIT/ ITO (Hq.) O/o the Pr. CCIT/CCIT/ Pr. DGIT/DGIT Ann ex ure 3 (Suggested Format) Part-II Order u/s 279(2) of the Income-tax Act, 1961 for rejecting the Compounding of an Offence as mentioned in Para 9.2 of the Guidelines issued by the CBDT vide F. No. 285/08/2014-IT(lnv.V)/ ....dated.. .. 2024 on Compounding of Offences Order u/s 279(2) of Income-tax Act, 1961 Name of the person : Status : Offences u/s : AYs / Quarters/Date/ period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earliest. Annexure 4 Se ction Description/Heading of section Compounding Charges 276A (Prior to 01.04.2023) Failure to comply with the provision of sections 178 ( 1) and 178(3) The Competent Authority may determine compounding charge having regard to the nature and magnitude of the offence, loss of revenue directly or indirectly attributable to such offence, subject to levy of a minimum compounding charge of Rs. 10,000/- (Rupees one thousand) for each such offence. 2 76AA (Prior to 01.10. 1986)- Failure to comply with the provisions of section 269AB or section 269I 276AB (Prior to 01.04.2022) Failure to comply with the provisions of sections 269UC, 269UE and 269UL 2 76DD ( Prior to 1.04.1989) - Failure t o comply wit h th e provi s ion s of sectio n 269SS 10 % of the amount of any loan o r depo s i t accepted in co ntr avent i on of the prov i sio n s of Sec t ion 269SS. 2 76E ( Pr ior t o 1.04.1989) - Failure to compl y wit h th e pr o v i s i on s o f s ection 269T 10% of the amount o f depo s i t r epaid in cont r aven ti on o f the provi s i o n s of Sectio n 269T. 2 75 A Contra v en t ion of orde r made under s ub- s ec tio n (3 ) of s ection 1 3 2) i . e . , contrave nti o n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Authority , th e Appellat e Tribunal or Court s hall be excluded. The compounding charge sha ll not exceed tax, interest and penalt y, the payment of which was so ught to be evaded. I t is clarifi ed that in case compounding proceedings relate to sec tion s 276C(1) and 276C(2) for the offence involving same i ssue and year , the compounding charges a s per 276C(1) only sha ll be applicable. 2 76C C C Failure to furnish return of in come in search case as per 158BC Same a s above for offence u/s 276CC, relating to non- filing of return pursuant to search action. 276D Fai l ure t o produce accounts and documents 10% of returned income or assessed incom e of the assessment year pertaining to the offence, whichever is higher , subject to a minimum of Rs. 5 , 00,000 / - (Rupees fi ve lakh ). 277 False statement In verificatio n etc. For an offence committed u / s 277 of the Act , 50% of the amount of tax, which wou l d hav e been evaded due to the offence committed u / s 277. For abetment of an offence comm itted u / s 278 of the Act , 50% of the amount of tax , which would have been evaded or which is w illfull y attempted to be evaded , due to the offence committed u / s 278. Where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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