The Central Board of Direct Taxes (CBDT) has issued the guidelines for compounding of offences under the Income-Tax (I-T) Act, 1961, according to a recent circular by the I-T India.
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.
Compounding of offence is a process whereby the person/entity committing default will file an application to the compounding authority accepting that it has committed a crime, so that same should be condoned.
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 code, 1973, provides for withdrawal of such prosecution. In case the prosecution complaint filed under the provisions of both the Act and the IPC are based on the same facts and, the complaint under the Act is compounded, then the process of withdrawal of the complaint under the IPC may be initiated by the Competent Authority.
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. The category A offences are the ones where the offences are of technical nature caused by an act of omission. Whereas the category B offences are non-technical offences attributed to an act of commission.
Eligibility conditions for compounding
- All the following conditions should be satisfied for considering compounding of an offence:
- An application is made to the Pr.CCIT/ CCIT/ Pr.DGlT/ DGlT having jurisdiction over the case for compounding of the offence(s) in the prescribed format (Annexure-I ) in the form of an affidavit on a stamp paper of Rs 100.
- 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, in a case in which prosecution complaint has already been filed in a court of law it should be filed not later than 12 months from the end of month of filing of complaint in court. Further, application of compounding 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, but within 24 months, will be subject to increased compounding charges at the rate of 1.25 times of the normal compounding charges as applicable to the offence.
- The person has paid the outstanding tax, interest (including interest u/s 220 of the Act), penalty and any other sum due, relating to the offence for which compounding has been sought before making the application. However, if any related demand is found outstanding on verification by the department, the same should be intimated to the applicant and if such demand including interest u/s 220 is paid within 30 days of the intimation by the department, then the compounding application would be deemed to be valid.
- The person undertakes to pay the compounding charges determined in accordance with these guidelines by the Pr.CCIT/CCIT/Pr.DGIT/DGIT concerned.
- The person undertakes to withdraw appeals filed by him, if any, related to the offence(s) sought to be compounded. In case such an appeal has mixed grounds, one or more of which may not be related to the offence(s) under consideration, an undertaking shall be given for withdrawal of such grounds as are related to the offence to be compounded.
- Any application for compounding of offence u/s 2768/27688 of the Act by an applicant for any period for a particular TAN should cover all defaults constituting offence u/s2768 /27688 in respect of that TAN for such period.