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TMI BlogGuidelines for Compounding of Offences under Direct Tax Laws, 2019X X X X Extracts X X X X X X X X Extracts X X X X ..... e Guidelines dated 23.12.2014. 3. Compounding Provision Section 279(2) of 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 Pr. CCIT/CCIT/Pr. DGIT/DGIT. As per section 2(15A) and 2(21) of the Act, Chief Commissioner of Income Tax includes Principal Chief Commissioner of Income Tax, and Director General of Income Tax includes Principal Director General of Income Tax. These Guidelines are issued in exercise of power u/s 119 of the Act read with explanation below sub-section (3) of section 279 of the Act. 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 satisfaction of the eligibility conditions prescribed in these Guidelines keeping in view factors such as conduct of the person, the nature and magnitude of the offence in the context of the facts and circumstances of each case. 5. Applicability of these Guidelines to prosecutions under IPC Prosecution instituted under Indian Penal Code(`IPC'), if any, cannot be compounded. However, section 321 of Criminal Procedure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion etc. with reference to Category B' offences viii 277A Falsification of books of account or documents, etc. ix. 278 Abetment of false return, etc. with reference to Category 'B' offences 6.3 Offences under sections 275A, 275B and 276 of the Act will not be compounded. 7. Eligibility Conditions for Compounding All the following conditions should be satisfied for considering compounding of an offence: i. An application is made to the Pr. CCIT/CCIT/Pr. DGIT/DGIT having jurisdiction over the case for compounding of the offence(s) in the prescribed format (Annexure-1) in the form of an affidavit on a stamp paper of ₹ 100/-. ii. The compounding application may be filed suo-moto at any time after the offence(s) is committed irrespective of whether it comes to the notice of the Department or not. However, no application of compounding can be filed after the end of 12 months from the end of the month in which prosecution complaint, if any, has been filed in the court of law in respect of the offence for which compounding is sought. iii. The person has paid the outstanding tax, interest (including interest u/s. 220 of the Act), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n available with the Pr. CCIT/CCIT/Pr. DGIT/DGIT concerned, has been found involved, in any manner, in anti-national/terrorist activity. vii. Offences committed by a person who was convicted by a court of law for an offence under any law, other than the Direct Taxes Laws, for which the prescribed punishment was imprisonment for two years or more, with or without fine and which has a bearing on the offence sought to be compounded. viii. Offences committed by a person which, as per information available with the Pr. CCIT/CCIT/Pr. DGIT/DGIT concerned, have a bearing on a case under investigation (at any stage including enquiry, filing of FIR complaint) by Enforcement Directorate, CBI, Lokpal, Lokayukta or any other Central or State Agency. ix. Offences committed by a person whose application for 'plea-bargaining' under Chapter XXI-A of 'Code of Criminal Procedure' in respect of any offence is pending in a Court or where a Court has recorded that a 'mutually satisfactory disposition of such an application is not worked out' and such offence has bearing on offence sought to be compounded. x. Any offence which has bearing on an offence relating to undisclosed foreign bank account/ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trol, because furnishing an undertaking to withdraw the appeal(s) having bearing on the offence is a prerequisite as per clause 7(v) above. 9.2 However, in all such cases where relaxation has been provided in this Para, the compounding charges would be 1.25 times the normal compounding charges as applicable to the offence on the date of filing of the original compounding application. 10. Authority Competent to Compound an Offence 10.1 The Pr. CCIT/CCIT/Pr. DGIT/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 case of an application for compounding of an offence, involving compounding charges (as explained in Para 12 below) in excess of ₹ 10,00,000/- (Rupees Ten Lakhs) shall be passed by the Pr. CCIT/CCIT/Pr. DG1T/DGIT concerned only on the prior approval of a Committee comprising of three officers of the Region concerned, namely Pr. CCIT/CCIT/Pr. DGIT/DGIT having jurisdiction over the case and two other Officers of the rank of Pr. CCIT/CCIT/Pr. DGIT/DGIT constituted by the Pr.CCIT of the Region. In case such officers are not available w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the time for payment of the compounding charges) as far as possible. iii. Where compounding application is found to be acceptable, the Competent Authority shall intimate the amount of compounding charges to the applicant, requiring him to pay the same within one month from the end of the month of receipt of such intimation. On written request of applicant for further extension of time under exceptional circumstances, the Pr. CCIT/CCIT/Pr. DGIT/DGIT may extend this period by three months. Extension beyond three months shall not be permissible except with the previous approval in writing of the Committee defined in Para 10 of these Guidelines. However, no extension beyond twelve months from the end of month in which intimation of compounding charges was given to the applicant shall be given except with the previous approval of Member (Inv.), CBDT on a proposal of the competent authority concerned. iv. Whenever the compounding charges are paid beyond one month from the end of month in which it was intimated to the applicant, if extended by the Competent Authority, he shall have to pay additional compounding charge at the rate of 2% per month or part of the month on the unpaid a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputed in accordance with Para 13 of these Guidelines for various offences. Prosecution establishment expenses will be charged at the rate 10% of the compounding fees subject to a minimum of ₹ 25,000/- in addition to litigation expenses including Counsel's fees paid/payable by the Department in connection with offence(s) compounded by a single order. In a case where the litigation expenses are not readily ascertainable, the competent authority may arrive at litigation expenses, inter alia, on the basis of rates prescribed by the Government and on the basis of existing records with the Government and the counsels. 12.2 In all cases where relaxation of time as provided in Para 9 of the Guidelines is allowed, the compounding charges shall be 1.25 time of the normal compounding charges. 12.3 Wherever, extension of time allowed to make compounding charges is allowed beyond one month from the end of intimation of compounding charges in accordance with Compounding Guidelines, the applicant shall have to pay additional compounding charges @ 2% per month or part of month on the unpaid amount of the compounding charges upto three months and 3% for period beyond three months. 12.4 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to be evaded. ii. In any other case, 125% of the tax sought to be evaded. (b) In cases involving attempt to evade only the penalty, 100% of penalty sought to be evaded. For example, penalties which are not directly related to tax evasion, such as penalty u/s 271DA etc. 13.3. Section 276C(2)-Willful attempt to evade payment of any tax, interest and penalty 3% per month or part of the month of the amount of tax, interest and penalty, the payment of which was sought to be evaded, for the period of default. The period of default for calculating the compounding fees shall be as under: i) Where tax, interest or penalty as per notice of demand under section 156 of the Act is not paid, from the date immediately following the due date of payment till the date of actual payment. ii) Where the self-assessment tax was not paid as specified in section 140A of the Act, from the due date of filing of return of income u/s 139(1) of the Act to the date of actual payment. For computing the period of default, any period of stay of demand granted by any Income Tax Authority, the Appellate Tribunal or Court shall be excluded. 13.4 Section 276CC- Failure to furnish returns of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per day in other cases from the due date u/s 139(1) to the date specified in the notice u/s 148 will also be (d) In case of offence of non-compliance of notice us 153A/153C of the Act, the compounding fees shall be charged at the rate of ₹ 5,000/- per day where tax on returned income as reduced by tax deducted at source and advance tax, if any exceeds ₹ 25 lakhs and ₹ 3,000/- per day in other cases, from the date specified in such notice till filing of return or assessment whichever is earlier. In case, there was also default of not filing return of income within due date prescribed u/s 139(1), then for the period between due date u/s 139(1) to the date specified in the notice u/s 153A/153C, compounding fees at the rate of ₹ 4000/- per day where the tax on returned income as reduced by tax deducted at source and advance tax, if any exceeds ₹ 25 lakhs and ₹ 2,000/- per day in other cases from the due date u/s 139(1) to the date specified in the notice u/s 153A/153C will also be charged. (e) In case where return of income filed is not only late but Self Assessment Tax is not paid: i. These constitute two separate offences which are to be handle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d/or 278, normally, a compounding fee at the rate of 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 or abettor, may enhance or reduce or waive the amount of compounding fee to be charged from any or all the co-accused or abettor. The compounding fees chargeable from the co-accused or abettor shall be in addition to the compounding fees which may be chargeable from the main accused. It is further clarified that: (a) In the case of prosecution proceedings under sections 278B or 278C of the Act unless the main accused i.e. Company/HUF comes for compounding, the offence of the co-accused cannot be compounded separately. (b) If one or more co-accused has not filed the compounding application or is not agreeable to the payment of compounding charges as the case may be, then unless the main accused, on an undertaking obtained and furnished from such co-accused, unequivocally undertakes to pay the compounding charges on his own behalf and on behalf of all such co-accused as well, the Compoundin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Whether the offence(s) committed by the applicant is one for which complaint(s) was filed with the competent court 12 months prior to the filing of the application for compounding 8. Particulars of offences along-with justification for compounding (separate sheet) 9. Whether tine applicant has paid the amount of tax, interest, penalty and any other sum due relating to the offence 10. Whether the applicant undertakes to pay further tax, interest, penalty and any other amount as is found to be payable on verification of the record. 11. Whether the applicant undertakes to pay the compounding charges as shall be intimated by the department. 12. Whether similar offences in the case of the applicant have been compounded earlier. If yes, how many times. Give detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . . . . . . . Current address . . . . . . . . . . . * All offences for which compounding is sought Annexure 2 Suggested Check List for Compounding as per the Guidelines issued by the CBDT vide F.No.285/08/2014-IT(Inv.V) dated 14.06.2019 on Compounding of Offences (To be submitted by AO/ADIT/DDIT to the authority competent to compound through proper channel) (A case can be compounded only if the answers to S. No. 1 to 22 match with the answers given below in remarks column.) Name of the applicant :- Status :- Offences u/s & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 If yes, give details in brief. Add annexure if required. On Page no.... 9. 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, CB1, Lokpal, Lokayukta or any other Central or State agency* No If yes, give details in brief. Add annexure if required. On Page no.... 10. Whether the offence has been committed by the applicant who was convicted by a court of law for an offence under any law, other than the Direct Taxes Laws, for which the prescribed pnnishment was imprisonment for two years or more, with or without fine* No If yes, give details in brief. Add annexure if required. On Page no.... 11. Whether the application for 'plea-bargaining' under Chapter XXI-A of' Code of Criminal Procedure' is pending in a Court or a Court has record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cases of Co-accused are being considered as per Para 13.8 Yes/Not Applicable If yes, give details in brief. Add annexure if required. On Page no.... 22. Any other fact relating to the person/case relevant for consideration of the Competent Authority No If yes, give details in brief. Add annexure if required. On Page no.... Signature: Name: Designation: Date: Recommended by: 1. Addl. CIT/Jt. CIT/Addl. DIT/Jt. D1T ............Signature/'Name/Designation/Date 2. PCIT/PDIT/CIT/DIT ............................Signature/Name/Designation/Date *Note: This may be given on the basis of information furnished by the applicant in his application for compounding or information already available with the Competent Authority for compounding Annexure 3 (Suggested Format) Part-I Format for Order u/s 279(2) of the Income-tax Act, 1961 for Compounding of an Offence as mentioned in Para 11 (ii) of the Guidelines issued by the CBDT vide F.No. 285/08/2014-IT(Inv.V) dated 14.06.2019 on Compounding of Offences Order u/s 279(2) of Income-tax Act, 1961 Name of the person :- Status :- Offences u/s & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any :- Date of order : :- Order u/s 279(2) of the Income-tax Act 1961 I, the Principal Chief Commissioner/Chief Commissioner of Income-tax/Principal Director General/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 decline the prayer to compound the offence(s), u/s.......... of the Income-tax Act, 1961 for the A.Y.(s)/Date/ period ................, committed by M/s./Shri/Ms ............. The case was not found to be a fit case for compounding as " ...........(mention reasons) " 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: 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 Sd/- ACIT/ LTO (Hq.) O/o the Pr. CCIT/CCIT/ Pr. DGIT/DGIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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