INCOME TAX
INSTRUCTION NO. 5205/1994
Dated: September 30, 1994
Section(s) Referred: 279(2)
Statute: Income - Tax Act, 1961
The existing guidelines for compounding of offences under the Direct Tax Laws issued vide Board's F.No. 285/239/79-IT(Inv.) dated 11-03-80 have been reviewed in the light of past experience and future needs. The revised guidelines are enclosed.
2. The revised guidelines aim at ensuring fairness and objectivity in compounding of offences, reducing pendency of prosecutions before the courts and removal of unintended hardship to assessees in deserving cases.
3. These revised guidelines are a major departure from the guidelines dated 11-03-80 in certain vital aspects. The new guidelines have revived the concept of technical and substantive (or non-technical) offences for the purpose of compounding of offences and a more liberal treatment has been given to the compounding of technical offences. Another point of distinction is that the restriction on compounding of offences, committed by monopoly or large industrial houses or a Director belonging to such house has been removed. In order to expedite the disposal of compounding petitions, the powers to compound offences have been substantially delegated to the CCsIT/DGsIT, subject to certain restrictions.
4. While the guidelines have been made as simple and unambiguous as possible, it would be worthwhile to clarify a few provisions of the guidelines:-
(a) The CCsIT/DGsIT have been empowered to compound technical offences before filing of the complaint subject to conditions prescribed in para 4.4 of the guidelines. With a view to reduce the number of existing cases pending in the courts, a one-time exception has been provided to the effect that the CCsIT/DGsIT may compound certain technical offences where complaints have already been filed before coming into effect of these revised guidelines. However the conditions as prescribed in para 4.1, 4.2, 4.3, and 4.4(i) & (ii) of the guidelines must be satisfied in those cases also. The cases involving substantive or non-technical offences and cases involving technical offences not covered by para 4.4 have to be referred to the Board for approval.
(b) As per para 4.4(ii), the CCIT can compound a technical offence without seeking Board's approval if the compounding charges (compounding fee plus establishment expenses) do not exceed Rs. 10 lakhs. For the limited purpose of deciding the question of reference to the Board, the compounding charges shall be calculated on the basis of assessment order or other order which is the basis of the complaint/offence. However, if that assessment order or the other order has been rectified / revised in appeal, revision etc. and such revised order has become final, compounding charges shall be calculated on the basis of such revised order. For example, in a case where the offence is u/s 276B (prior to 1-4-89) and the assessee is in appeal regarding the quantum and period of default of TDS, for the limited purpose of making reference to the Board, compounding charges shall be calculated on the basis of the order u/s 201 or the amount and period of default mentioned in the complaint. If the quantum or period of default has been reduced in appeal / revision etc. and such appellate order is under appeal, the compounding charges shall be calculated on the basis of original order / complaint.
(c) For the purpose of these guidelines "amount in default" or "the amount involved in the offence" shall be as under:-
For offences under:-
|
(1) |
Section 276B |
Amount of tax deducted at source in default. |
|
(2) |
Section 276BB |
amount of tax collected at source in default. |
|
(3) |
Section 276C(1) |
substituted with the words
" amount of tax |
|
(4) |
Section 276C(2) |
amount of tax, penalty or interest payment of which has been attempted to be evaded. |
|
(5) |
Section 276CC |
as explained in para 9.7. and 9.7.2 of these guidelines. |
|
(6) |
Section 277 |
amount of tax sought to have been evaded. |
|
(7) |
Section 278 |
amount of tax, interest, penalty sought to have been evaded. |
5. The revised guidelines shall be applicable to all pending applications. The cases rejected earlier under the guidelines issued on 11-3-80 can also be considered under the new guidelines. However, the cases in which orders compounding the offence have already been passed shall not be reviewed for reduction of compounding fee or for any other purpose.
6. In order to make best use of the liberalised compounding guidelines and restrict prosecution only to really hard-core cases, while issuing a show cause notice/intimation for launching of prosecution, assessees may be given an offer of compounding. It may however be clarified in the show cause notice that the petition for compounding shall be decided on merits and in the absolute discretion of the CCIT/DGIT.
7. The cases where the CCIT/DGIT is not inclined to accede to the assessee's request despite the conditions prescribed in paragraphs 4 & 5 of the guidelines being satisfied, may be referred to the Board before rejection of the compounding petitions.
8. Adequate publicity may be given to these guidelines so that a large number of cases covered by the guidelines is compounded, resulting in reduction in the number of cases pending in courts. All the applications for compounding of offences must be disposed of or referred to the Board, as the case may be, within 6 months. The statistical information regarding compounding petitions disposed of should be sent regularly. For this purpose a new part, i.e., part C-IV has been included in the 'Proforma for Monthly Statement of Prosecution'. The reports for the month of Oct. 94 onwards may be sent to the Board in the revised proforma.
9. These guidelines may be brought to the notice of all concerned. In cases of any doubt regarding any provision of the guidelines reference may be made to the Member-(Inv.) CBDT.
10. The receipt of the letter may be acknowledged. The guidelines shall be implemented with immediate effect.
F.No. 285/161/90-IT(Inv.)