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TMI BlogFrequently Asked Questions (FAQs) on Guidelines for Compounding of Offences under the Income-Tax Act, 1961 dated 17.10.2024X X X X Extracts X X X X X X X X Extracts X X X X ..... mit for filing application viz 36 months from the date of filing of complaint, etc. 3. For better awareness and understanding among the stakeholders with respect to the revised guidelines dated 17.10.2024, clarifications are provided by issue of a Circular in the form of answers to the frequently asked questions (FAQs) as follows: A. Compounding of offence Q. 1 What is compounding of offence? Ans: Compounding of an offence is a mechanism whereby the defaulter is reprieved of major legal consequences by affording him an opportunity to pay certain sum of money to escape prosecution. The specified offences can be compounded by the competent authority either before or after the initiation of proceedings. Q.2 Whether compounding of an offence constitute as an admission of an offence by the applicant? Ans: No, compounding is intended to resolve the offence(s) and it is not to be construed as an admission of such offence(s) by the applicant. (Ref: para 9.11 of the guidelines) Q.3 Are there any offence(s) under Income Tax Act which are not compoundable? Ans: No, all offence under Income Tax Act have been made compoundable in revised guidelines dated 17.10.2024. B. Competent author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble against compounding charge payable? Ans: Yes, compounding fee is adjustable but only against compounding charges payable for the offence(s) sought to be compounded in the particular application. Cross application adjustment is not allowed. However, if compounding application is rejected for any reasons, the application fees shall neither be refundable nor adjustable against any subsequent application. (Ref: para 4.2.2 of the guidelines) Q.11 Whether compounding is allowed if the application for such an offence was previously rejected? If so, whether separate applications need to be filed for more than one applications rejected under the previous guidelines? How will the compounding application fees be charged? Ans: Yes, an applicant may apply for compounding of offence(s) through a single consolidated application, if one or more applications had been rejected under previous guidelines. However, the fresh application can only be filed if such rejection(s) were on account of curable defects (illustrative examples in para 3.2 of the revised guidelines) and no application is allowed to be filed for any of the rejection(s), made by the Competent Authority, on merits with those pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back due to defect(s)? Ans: Yes, defective application can be revived by removing defects within a period of one month from date of intimation of defects(s). If defects are not cured within such time, the application will be returned back to the applicant and shall be deemed to be rejected. In such case, applicant may apply again which shall be treated as a subsequent compounding application for the purpose of determination of compounding charges. (Ref: para 5 and 10 of the guidelines) Q.18 In terms of Para 10.7, what will be the date of applications in case of carried forwarded applications - original date of application or date of issue of new Guidelines? Ans: The application pending as on 17.10.2024 shall be governed under new guidelines. However, date of such pending application shall be the original date of application for any purpose. Q.19 Whether the applicant whose application was rejected on account of not being filed in time as provided for in the earlier guidelines, i.e. within expiry of 12/24/36 months from the end of the month of filing of complaint, is eligible to file fresh compounding application? Ans: The limitation of 12/24/36 months has been eliminated in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) of the revised guidelines. (Ref: para 6.1(c) of the guidelines) Q.24 If the main accused has more than one director/partner and one of these directors/partners file an application for compounding of offence(s), where it is found that the other director(s)/partner(s), who have not filed the compounding application, comes under the conditions as mentioned in Para 6.1 (d) (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 accommodation entries or in any other manner) of these guidelines, whether approval of Higher Authority is required for deciding the compounding application? Ans: If a case involves multiple offences and one of those offences requires approval from a higher authority under paragraph 6.1 of the guidelines, the compounding application will be processed based on the offence for which the application has been filed, as explained below: i. If the application has been filed by the main accused or one or more of the co-accused, for an offence that does not require approval from higher authority, such offence will be examined for compounding without the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation is withdrawn can be adjusted against total compounding charges towards consolidated application? Ans: No. Partial compounding charges paid for the year for which application is withdrawn can be adjusted in new consolidated application only towards the offence and particular year for which payment was made. (Ref: para 3.2 of the guidelines) Q.29 An applicant has filed compounding applications under earlier guidelines, two of which were rejected on account of curable defects, two were compounded and three are pending as on issuance of this guideline. How should the applicant file a compounding application after issuance of these guidelines and how shall the new application be treated? Ans: No action is pending for the applications which have been compounded. A consolidated application may be filed for all applications which were rejected (on account of curable defects) and no fresh application is required to be filed for pending applications. All pending applications, whether for single or multiple years/quarters, shall be treated as first compounding application and compounding charge shall be re-computed for each offence disclosed in the application as given in Annexure-4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time) # 1.4 times o normal rate 276C (1) (2019-20) Yes, in application dated 17/10/2022 (2nd time) 1.2 times o normal rate 275A (2023-24) No, first time applied for (1st time) Normal rate * It is noted that the applicant has opted for compounding for this offence for the third time in third application and accordingly compounding charges at 1.4 times of normal rate should apply. However, since both applications were filed under previous guidelines, all such applications will be cumulatively considered as 'first' application, in terms of Para 10.6 of the revised guidelines. Thus, offence under these applications will be considered as clubbed together for calculation of compounding charges. # It is noted that the applicant has opted for compounding for this offence for the fourth time in fourth application and accordingly compounding charges at 1.6 times of normal rate should apply. However, since first two applications were filed under previous guidelines, both these applications will be cumulatively considered as 'first' application, in terms of Para 10.6 of the revised guidelines, 01.11.2024 application will be considered as 'second&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt being not carried out? Ans: In such cases, compounding charges shall be the minimum compounding charge applicable for compounding of offence u/s 276CC as per Annexure-4 of the guideline. (Ref: Annexure 4 of the guidelines) Q.34 Whether compounding charges include Prosecution Establishment Expenses and Litigation Expenses? Ans: No. Such expense have been removed in revised guidelines. Q.35 Is there any specific path for payment of compounding charge? Ans: Yes, there is a path on e-filing website of the department and payment may be made by login through PAN or TAN. The path of the same is as under: "Login on e-Filing portal → e-Pay Tax →New Payment → Income Tax →Minor Head → Other Receipts (500) → compounding charges". (Ref: para 9.9 of the guidelines) Q.36 Whether the compounding charge can be made under PAN in case the applicant being a deductor? Ans: The compounding charge shall be made under TAN of the deductor. However, if the applicant is the co-accused then compounding fees may be made under PAN of co-accused as the co-accused may not have access to the TAN of main accused. "Login on e-Filing portal through TAN →e-Pay Tax &r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng application under revised guideline? Ans: Yes, co-accused may apply for compounding of offence separately or conjointly. (Ref: para 11 of the guidelines) Q.42 Where the compounding application of the co-accused was rejected earlier on the ground that the main accused has not filed for compounding, whether such applicants will be eligible for filing again? If yes, whether such application shall be a subsequent application? Ans: Yes, other than the case where application was rejected in past on merit, any of the co-accused applicant is eligible to file compounding application again separately or conjointly. Such application shall be treated as a subsequent application for the purpose of determination of compounding charges. (Ref: para 3.2, 11 and 10 of the guidelines) Q.43 Similarly, where the compounding application of the main accused was rejected earlier on the ground that the co- accused has not filed for compounding or given undertaking, whether such applicants will be eligible for filing again? If yes, whether such application shall be a subsequent application? Ans: Yes, other than the case where application was rejected in past on merit, the main accused applicant is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered as 'deemed to be guilty' u/s 278B(1), can file an application as co-accused. (Ref: para 11 of the guidelines) Q.48 If any person filed a compounding application as a co-accused in the scenario given at Q. No. 46, whether there is any requirement to identify other co-accused? Ans: In such cases there will be no requirement to identify other co-accused for the purpose of the compounding of the offence. However, if such compounding application is rejected for any reason, all co-accused shall need to be identified as per Section 278B of the Income Tax Act to file prosecution complaint before the concerned Court. (Ref: para 11 and 10 of the guidelines) Q.49 Can co-accused furnish an undertaking for withdrawal of appeals as required in para 4.5 of the guidelines, on behalf of the main accused? Ans: No, co-accused cannot furnish undertaking for withdrawal of appeal on behalf of the main accused. Such undertaking shall be furnished by the main accused only which must be attached with the application if application has been filed by the co-accused, since offences of both main accused and co-accused are being compounded, under para 11.2 of the revised guidelines. (R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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