Central Board of Direct Taxes (CBDT) has issued the revised guidelines for compounding of offences under the Direct Tax Laws, 2019. The said guidelines came into effect from 17-06-2019.
The applications received before 17-06-2019 shall continue to be dealt with in accordance with the Guidelines dated 23-12-2014.
Compounding is not a matter of right
Revised guidelines make it clear that compounding of offences is “not a matter of right” and the department can extend such relief only in certain cases keeping in view factors like “conduct of the person, the nature and magnitude of the offence on the context of the facts and circumstances of each case.”
Applicability of these Guidelines to prosecutions under IPC
Offences may be compounded by the Competent Authority on the satisfaction of the eligibility conditions prescribed in these Guidelines keeping in view factors such as to conduct of the person, the nature and magnitude of the offence in the context of the facts and circumstances of each case.
Compounding Offences
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 under Section 119 of the Act read with an explanation below sub-section (3) of Section 279 of the Act.
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 Offences.
Offences normally not to be compounded
- Category ‘A’ offence on more than three occasions.
- Category ‘B’ offence other than the first offence(s) as defined in Para 8.2 for the purpose of these Guidelines.
- Offences committed by a person for which he was convicted by a court of law under Direct Taxes Laws.
- Any offence in respect of which, the compounding application has already been rejected, except in the cases where benefit of rectification is available in these Guidelines.
- The cases of a person as main accused where it is proved that he has enabled others in tax evasion such as, through entities used to launder money or generate bogus invoices of sale/purchase without actual business, or by providing accommodation entries in any other manner as prescribed in Section 277 A of the Act.
- Offences committed by a person who, as a result of an investigation conducted by any Central or State Agency and as per information available with the Pr. CCIT/CCIT/Pr. DGIT/DGIT concerned, has been found involved, in any manner, in anti-national/terrorist activity.
- 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.
- 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.
- 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. - Any offence which has bearing on an offence relating to undisclosed foreign bank account/assets in any manner.
- Any offence which has bearing on any offence under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
- Any offence which has bearing on any offence under the Benami Transactions (Prohibition) Act, 1988.
- Any other offence, which the Pr. CCIT/CCITIPr. DGIT/DGIT concerned considers not fit for compounding in view of factors such as to conduct of the person, nature and magnitude of the offence.
The other pointers to be noted under the notification are:
- Authority Competent to Compound an Offence
- Compounding Procedure
- Compounding Charges
- Fees for compounding
* Link to the Notification: NOTIFICATION
[Notification dt. 14-06-2019]
Ministry of Finance