CBDT issues Revised Guidelines on Compounding of Income Tax Offences

CBDT has issued revised Guidelines (2019) on Compounding of Offences under the Direct Tax Laws, applicable from 17 June 2019. The new guidelines prescribes certain offences which generally can’t be compounded, like money laundering, benami assets, non-disclosure of foreign assets, etc.

These guidelines broadly categorizes offences into the following three types of offences:

1. Defaults in TDS, TCS, ITR Filing, etc. (Compoundable);

2. Willful tax evasion, etc. (Non-compoundable); and

3. Money laundering, benami assets, non-disclosure of foreign assets, etc. (Normally non-compoundable).

CBDT Guidelines for Compounding of Offences under Direct Tax Laws, 2019 (dt. 14 June 2019)

1. In the light of references received from the field formation from time to time, the existing Guidelines on Compounding of Offences under the Income-tax Act, 1961 (the Act) have been reviewed. In supersession of earlier Guidelines on this subject, including the Guidelines of the Board issued vide F.No. 285/35/2013 IT (Inv.V)/108 dated 23rd December 2014, the following Guidelines are issued for compliance by all concerned.

2. These Guidelines shall come into effect from 17.06.2019 and shall be applicable to all applications for compounding received on or after the aforesaid date. The applications received before 17.06.2019 shall continue to be dealt with in accordance with the 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 Code, 1973, provides for withdrawal of such prosecution. In case the prosecution complaint filed under the provisions of both Income-tax Act, 1961 and the IPC are based on the same facts and the complaint under the Income-tax Act, 1961 is compounded, then the process of withdrawal of the complaint under the IPC may be initiated by the Competent Authority.

6. 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. (contd… please refer above attachment)