GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

(CENTRAL BOARD OF DIRECT TAXES)

 

F. No. 285/08/2014-IT(Inv.V)/163

New Delhi: 17.10.2024

 

To,

All Pr.CCsIT// Pr.DGsIT

All CCsIT/ DGsIT

 

Subject: Guidelines for Compounding of Offences under the Income-Tax Act, 1961 – reg.

 

1. Section 279(2), read with section 2 (15A) and 2 (21) of the Income Tax Act, 1961 (‘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. The Central Board of Direct Taxes (‘CBDT’) had earlier issued following guidelines for compounding of offences under section 279 (2) of the Act:

 

i. Guidelines issued vide letter dated 16.05.2008,

ii. Guidelines issued vide letter dated 23.12.2014,

iii. Guidelines issued vide letter dated 14.06.2019, and

iv. Guidelines issued vide letter dated 16.09.2022.

 

2. The above Guidelines have been reviewed and in supersession thereof, and in exercise of powers conferred u/s 119 read with explanation to section 279 of the Act, following Guidelines are hereby issued.

 

3. Scope of the Guidelines to prosecutions under Income Tax Act, 1961

 

3.1 These Guidelines shall come into effect from the date of issuance. They shall apply mutatis mutandis to all applications which are either filed after the date of issuance of these guidelines or were already filed earlier but had not been disposed. For applications, pending on the date of issuance of these Guidelines, if compounding charges have already been determined and intimated but not fully paid, the compounding charges shall be re-determined, provided they are lower as per these Guidelines. However, no refund or adjustment against other dues shall be made if the higher compounding charges, determined as per the previous Guidelines, have already been paid.

 

3.2 Applications may also be filed again, in case applications under earlier guidelines were rejected only on account of curable defects such as non-payment of outstanding tax, interest, penalty, or any other sum related to the offence, filing of application in incorrect proforma, mention of incorrect assessment year/financial year or section under which offence has been committed, non-payment or short payment of compounding charges, non-submission of undertaking regarding withdrawal of appeals, etc. Credit for the payment already made shall be given against the compounding charges to be paid under these Guidelines. Further, it is clarified that those applications rejected in the past on merits by the Competent Authority shall not be reconsidered, under this provision.

 

4. Conditions for consideration of Compounding Application

Offences may be considered for compounding if all the following conditions are satisfied:

 

4.1 Compounding Application:

 

4.1.1 An application for compounding is made to the Pr. CCIT/ CCIT/ Pr. DGIT/ DGIT, having jurisdiction over the case, for compounding of the offence(s) in the prescribed format (Annexure-1), in the form of an affidavit on a stamp paper of Rs. 100/-.

 

4.1.2 The compounding application may be filed for offence(s) pertaining to one financial year (in case of taxpayers) or quarter (in case of tax deductors) or for multiple years/quarters. The Compounding Application, filed for multiple years/quarters. shall be called ‘Consolidated Compounding Application’. Similarly, if there are more than one rejected application under the previous Guidelines, one Consolidated Compounding Application may be filed for all such previous applications.

 

4.1.3 The compounding application or ‘Consolidated 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. The Compounding Application or the Consolidated Compounding Application may also be filed after the launch of prosecution proceedings.

 

4.2 Compounding Application Fee

 

4.2.1 For Compounding Applications or the Consolidated Compounding Applications, filed on or after the date of issuance of these guidelines, irrespective of the year of offence, the applicant shall deposit non-refundable Compounding Application Fee as following:

 

o      Single Compounding application – Rs. 25.000/- (per application).

o      Consolidated Compounding application – Rs. 50,000/- (per such application).

 

4.2.2 The said fee is a non-refundable fee, but adjustable against applicable total compounding charges decided by the Competent Authority, if any.

 

4.2.3 The Compounding Application Fee, at above rates, shall also be payable in respect of applications which were tiled before the date of issuance of these guidelines but have been rejected and that are proposed to be revived in terms of these guidelines.

 

4.2.4 The Compounding Application Fee shall not be payable in respect of applications pending as on date of issuance of the guidelines and filed in terms of earlier guidelines.

 

4.3 Payment of all taxes, interest & other sums relating to offence for which compounding sought:

 

4.3.1 All outstanding tax, interest (including interest u/s 220 of the Act), penalty and any other sum due, relating to the offence(s) for all relevant year(s) and/or quarter(s) for which compounding has been sought shall be paid before making the Compounding Application or the Consolidated Compounding Application, as the case may be.

 

4.3.2 However, if on verification by the Department, any related demand is found outstanding or is considered payable, the same, on being intimated to the applicant, shall be paid (including interest u/s 220 of the Act) within 30 days of the intimation by the Department or such period (not exceeding three months) allowed by the Competent Authority. The compounding application or the consolidated compounding application, as the case may be. shall be considered valid only consequent to the payment of all the demand pertaining to the offence(s) for respective years/quarters.

 

4.4 Undertaking by the applicant: The applicant shall undertake to pay the Compounding charges, determined in accordance with these guidelines by the Pr. CCIT/CCIT/Pr. DGIT/DGIT concerned, within the stipulated timeframe.

 

4.5 Withdrawal of appeals: The person/applicant shall undertake 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.

 

4.6 Consolidation of offences: Any application for compounding of offence u/s 276B/276BB of the Act by an applicant for any period for a particular TAN should cover all defaults constituting offence u/s 276B / 276BB in respect of that TAN for such period. For the purposes of considering the quantum of TDS defaults, the total default on account of non-payment of TDS/TCS for a quarter shall be considered by combining the defaults in all the statements filed by the TDS deductor, in respect of the relevant quarter.

 

5. Revival of a defective application:

Applications which do not fulfil any of the specified conditions (4.1 to 4.6 above) or are not acceptable due to curable defects such as

 

o      Non-payment of outstanding tax, interest, penalty, or any other sum related to the offence;

o      Application not filed in correct proforma;

o      Applications filed for incorrect financial year or assessment year, or under incorrect section, etc.;

 

shall be treated as ‘defective’ under these guidelines and shall not be proceeded with. However, such applications can be revived without additional payment of Compounding Application Fee, provided the defects are cured within a period of one month from the date of intimation of the defect(s). In case, the defect is not cured within time allowed, defective application will be returned back to the applicant. Any further application filed for the same purpose, will be considered as subsequent compounding application and charges will be applicable as per para 10 of these guidelines.

 

6. Offences compoundable with the approval of higher authority

 

6.1 The Competent Authority, in the following cases, may compound only with the approval of Chairman, CBDT.

 

(a) In case of an offence for which the applicant has been convicted with imprisonment for two years or more, with or without fine, by a court of law;

 

(b) In case of an offence which is related to another offence under any other law for which he has been convicted with imprisonment for two years or more, with or without fine, by a court of law;

 

(c) If the applicant, as per information available on the basis of an investigation conducted by any Central or State Agency, has been found to be involved, in any manner, in anti-national or terrorist activity. In such cases, the Competent Authority shall consult with relevant Agency and seek inputs regarding the said activity and its implications, for the purpose of deciding it as a deserving case and incorporate them while seeking approval;

 

(d) In the case of an applicant, being a person other than the main accused, w here it is proved that the applicant 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 providing accommodation entries or in any other manner, as prescribed in section 277A of the Act;

 

(e) If the offence is directly related to an offence under the following Acts:

 

i. the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015; or

ii. Prohibition of Benami Property Transactions Act, 1988;

 

(f) In case of an offence under section 275A and/or 275B of the Act.

 

7. Other terms of compounding:

7.1 Applications for compounding shall normally be accepted if the conditions mentioned in these guidelines are satisfied.

 

7.2 However, compounding is not a matter of right and applications may be rejected by the Competent Authority in exceptional cases, on recording in writing, reasons such as if the applicant is a habitual offender or the gravity of the offence considering the facts and circumstances of the offence, etc.

 

7.3 Prosecution instituted under Indian Penal Code (IPC) (or now Bhartiya Nyay Sanhita 2023), if any, cannot be compounded, under these Guidelines. In case the prosecution complaint filed under the provisions of the Act as well as under the Indian Penal Code (IPC) (or now Bhartiya Nyay Sanhita 2023), is based on the same facts and the offence(s) under the Act have been compounded, then the complaint relating to the offences under IPC (or BNS, 2023) shall be withdrawn by the Competent Authority, in terms of section 321 of Criminal Procedure Code, 1973, and/or section 360 of Bharatiya Nagarik Suraksha Sanhita, 2023.

 

8. Authority Competent to Compound an Offence:

8.1 The jurisdictional Pr. CCIT / CCIT / Pr. DGIT / DGIT is the Competent Authority for compounding of offences.

 

8.2 If a person has committed an offence u/s 276B / 276BB of the Act for non-payment of TDS/TCS in respect of both resident and non-resident payees/ collectees then the jurisdiction over such person normally lies with more than one jurisdictional charge. In such case, the Pr. CCIT/ CCIT/ Pr. DGIT/ DGIT in whose jurisdiction compounding application has been filed will be the Competent Authority. However, in case the applicant files applications in more than one jurisdictional charge, the Competent Authority will be the jurisdictional authority where the quantum of TDS default is higher. All other applications shall be transferred to such Competent Authority. Further, in case of any dispute in deciding Competent Authority, the Pr. CCIT having PAN jurisdiction will decide Competent Authority, within 30 days of receipt of such reference.

 

8.3 In case an applicant files Compounding application for offences committed u/s 276B/276BB of the Act. in respect of two or more TANs falling in two or more jurisdictions, the jurisdictional authority where the quantum of TDS default is higher shall be the Competent Authority. All other applications shall be transferred to such Competent Authority. Further, in case of any dispute in deciding Competent Authority, the Pr. CCIT having PAN jurisdiction will decide Competent Authority, within 30 days of receipt of such reference.

 

9. Compounding Procedure

9.1 On receipt of the Compounding application, the Competent Authority shall obtain a report from the Assessing Officer/Assistant or Deputy Director concerned who shall submit it promptly along-with duly filled in check-list (Annexure-2), to the Competent Authority, through proper channel.

 

9.2 In cases where, the compounding application is not found to be acceptable, then the Competent Authority shall dispose of such application through a speaking order in the suggested format (Annexure-3 - Part-II). Such order may be passed within two months from the end of the month of receipt of the application as far as possible.

 

9.3 In cases where, the compounding application is found to be acceptable, then the Competent Authority shall intimate the applicant accordingly, along with the compounding charges payable and other pending liabilities, if any. Such intimation may be issued within two months from the end of the month of receipt of the application as far as possible.

 

9.4 The Competent Authority shall, while intimating the amount of compounding charges to the applicant, require him to pay the same within one month from the end of the month of receipt of such intimation. On written request of the applicant for further extension of time period for payment of compounding charges, the Competent Authority, under exceptional circumstances, may extend this period up to six months. Extension beyond 6 months and upto 12 months shall not be permissible except with the prior approval in writing of the Pr. Chief Commissioner of Income Tax of the Region concerned. Extension beyond 12 months and upto 24 months from the end of month shall not be permissible except with the prior approval of Chairman. CBDT or a Member, CBDT authorized by the Chairman, CBDT on a proposal of the Competent Authority concerned. No extension shall be allowed after 24 months from the end of the month of receipt of such intimation of compounding charges.

 

9.5 Where compounding charge is not paid within the time allowed/extended, the application will be rejected and prosecution proceedings shall be initiated, if not already done so.

 

9.6 The complainant shall serve a copy of the prosecution complaint to each accused within 15 days of filing complaint to allow prompt filing of compounding application.

 

9.7 The order of acceptance/rejection of application of compounding shall be brought to the notice of the Court, where the said prosecution proceedings are pending before the Court, immediately through prosecution counsel in all cases where prosecution proceedings have been instituted.

 

9.8 In case proceedings to impose penalty related to the offence sought to be compounded are pending at the time of filing of the compounding application, such proceedings should be concluded expeditiously and the demand related to penalty, if any, recovered before issuing the compounding order.

 

9.9 For the purpose of payment of compounding charges, the following path on e-Filing website of the department is relevant:

 

“Login on e-Filing portal —> e-Pay Tax —> New Payment —> Income Tax —> Minor Head —> Other Receipts (500) —> compounding charges”.

 

9.10 Where the payment of compounding charges is made within time allowed/extended. the Competent Authority shall pass the compounding order in the suggested format (Annexure-3 - Part-I) within one month from the end of the month of payment of total compounding charges.

 

9.11 Taxpayers, particularly NRIs, avoid opting for compounding due to a misconception that it constitutes an admission of offences, which could affect their reporting obligations at various statutory and international forums. To address this misconception and encourage taxpayers to seek compounding, it is directed that the Competent Authority shall include the following paragraph in the compounding order issued under section 279(2) of the Act:

 

“This compounding order is intended to resolve the offence under section 279(2) of the Act and should not be construed as an admission of the offence(s) by the applicant.”

 

9.12 The timelines for processing the compounding applications by the Competent Authority prescribed in these Guidelines, are administrative and do not prescribe a limitation period for disposal of the compounding application.

 

9.13 All the functions relating to processing of any compounding application is recommended to be undertaken through in ITBA/TRACES to the extent possible.

 

10. Compounding Charges

10.1 For the purpose of computation of the compounding charges, the word “tax” means tax including surcharge and any cess, by whatever name called, as applicable. However, interest shall not be included in ‘tax’ to be considered for computation of Compounding Charge.

 

10.2 The compounding charges for the ‘first’ compounding application or consolidated compounding application by a person shall be computed, for each offence disclosed in the application, as given in the Annexure-4 to these Guidelines.

 

10.3 Further, any application filed subsequent to the first application, shall be counted as second, third and fourth compounding application or consolidated compounding application and so on.

 

10.4 Furthermore, if a person applied for compounding of an offence(s). the type of which was applied for earlier, then compounding charges for subsequent offence(s) shall be 1.2 times. 1.4 times. 1.6 times, and so on of the compounding charges given in the Annexure-4 to these Guidelines, for the second, third, fourth, etc. time of such offence.

 

10.5 It is also clarified that if a subsequent application(s) includes any offence(s). the type of which had not been disclosed in any of the earlier applications, the compounding charges for the said offence(s) shall be computed only as per the charges given in the Annexure-4 to these Guidelines.

 

10.6 Where the compounding application(s) had been filed in accordance with prior guidelines and are either pending or were rejected or have been compounded, all such applications, filed prior to issuance of these guidelines, shall together be considered as ‘first’ compounding application.

 

10.7 If the application is made beyond 12 months from the end of the month in which the prosecution complaint is filed, the compounding charges shall be increased by 50% of the amount calculated as per paras 10.2 to 10.5 above.

 

11. Co-accused and Abettor- Section 278B (Offences by companies) and Section 278C (Offences by Hindu undivided families)

 

11.1 Where an offence under this Act has been committed by a Company or HUF as defined in section 278B or 278C of the Act. an application for compounding may be filed separately or conjointly by the main accused i.e., Company, or HUF and/or any of the person(s) deemed to be guilty of the offence under section 278B or 278C of the Act. to be referred as “Co-accused” for the purpose of compounding under these guidelines. The Competent Authority may decide the application accordingly subject to the payment of compounding charges as per these guidelines.

 

11.2 It is again clarified that in cases of offences by a company or HUF, the main accused or co-accused may apply separately or conjointly. On payment of compounding charges for the offence as determined under these guidelines, by any one of them separately or jointly, the Competent Authority shall compound the offences of the main accused as well as all the co-accused. vide an order u/s 279(2) of the Act.

 

11.3 For the purpose of depositing compounding charges, co-accused under Section 278B or 278C of the Act may deposit the charges under his PAN for the relevant financial year of the offence for which compounding is sought.

 

11.4 In case liability of a company for an offence committed prior to the commencement of the corporate insolvency resolution process ceases due to the provisions of section 32A of the Insolvency Bankruptcy Code (IBC), it is clarified that prosecution proceedings against the co-accused can still continue. In such a case, the compounding application and payment of compounding charges can be made by the co-accused and/or the main accused company.

 

12. It is requested to circulate the above revised Guidelines among all the officers for compliance and give wide publicity to the same.

 

Encl: As above

 

Jagdish

Deputy Secretary (Inv. V),

CBDT, New Delhi

 

Annexure 1

 

Format of application in the form of Affidavit for Compounding of Offences under Income-tax Act, 1961 to be submitted by each applicant separately

 

 

VERIFICATION

 

I ................................. son/daughter of ................................ in the capacity of...........................certify and solemnly affirm that the information in the above columns is true and correct to the best of my knowledge and belief.

 

Place:	Signature
Date:	Designation ---
	Current address --

 

* All offences for which compounding is sought

 

Annexure 2

 

Suggested Check List for Compounding as per the Guidelines issued by the CBDT vide F.No.285/08/2014-IT (Inv. V)/......dated...........2024 on Compounding of Offences

 

(To be submitted by AO/ADIT/DDIT to the authority competent to compound through proper channel)

 

Name of the applicant	: -
Status and PAN/TAN	: -
Offences u/s	: -
AYs/ Quarters/Date/ period involved in offence	: -
Whether the applicant is a co-accused as per para 11:	: -
Date of filing of complaint, if any	: -
Status of case (i.e. whether Contemplated/ Pending in Court/ Convicted/ Acquitted)	: -

 

 

 

Signature:

Name:

Designation:

Date:

 

Recommended by:

1. Jt.CIT/ Addl. CIT/Jt.DIT/Addl. DIT.........Signature/Name/Designation/Date

2. PCIT/PDIT/CIT/D1T.........................Signature/Name/Designation/Date

 

Note: The details in this annexure may be given on the basis or information furnished by the applicant in his application for compounding or information already available or inputs sought from any other agency.

 

Annexure 3

(Suggested Format)

Part-1

 

Order u/s 279(2) of the Income-tax Act, 1961 for Compounding of an Offence as mentioned in Para 9.10 of the Guidelines issued by the CBDT vide F.No.285/08/2014-IT (Inv. V)/ ........ dated ...........2024 on Compounding of Offences.

 

Order u/s 279(2) of Income-tax Act, 1961

 

Name of the person	: -
Status	: -
Offences u/s	: -
AYs / Quarters/Date/ period involved in offence	: -
Date of filing of complaint, if any	: -
Status of case (i.e. whether contemplated/	: -
Pending in Court/ Convicted/ Acquitted)/	: -
Date of hearing, if any	: -
Date of order	: -

 

Order u/s 279(2) of the Income-tax Act, 1961

 

I, the Principal Chief Commissioner/Chief Commissioner of Income-tax /Principal Director General/Director General of Income-tax, in exercise of powers vested in me by virtue of the provisions of sub-section 2 of section 279 of the Income-tax Act, 1961 hereby compound the offence(s) u/s.......of the Income -tax Act, 1961 for the A.Y.(s) / Date/ period.............., committed by/s./Shri/Ms.................

 

“This compounding order is intended to resolve the offence under section 279(2) of the Act and should not be construed as an admission of the offence(s) by the applicant.”

 

The Statement of the facts of the case are enclosed as Annexure - ‘A’

 

 

Copy to for information and necessary action:

The Pr. Commissioner of Income Tax/ Pr. Director of Income Tax –

The Assessing Officer/ ADIT/DDIT –

The ADIT/DDIT (Prosecution) --

The Prosecution Counsel (if the case is pending in the Court)

The applicant (By name)–

Guard file.

 

Signature

ACIT/ ITO (Hq.)

O/o the Pr. CCIT/CCIT/ Pr. DGIT/DGIT

 

Annexure 3

(Suggested Format)

Part-II

 

Order u/s 279(2) of the Income-tax Act, 1961 for rejecting the Compounding of an Offence as mentioned in Para 9.2 of the Guidelines issued by the CBDT vide F. No. 285/08/2014-lT(Inv. V)/........ dated ............2024 on Compounding of Offences

 

Order u/s 279(2) of Income-tax Act, 1961

 

Name of the person	:-
Status	:-
Offences u/s	:-
AYs / Quarters/Date/ period involved in offence	:-
Date of filing of complaint, if any	: -
Status of case (i.e. whether contemplated/	: -
Pending in Court/ Convicted/ Acquitted)/	: -
Date of hearing, if any	: -
Date of order	: -

 

Order u/s 279(2) of the Income-tax Act, 1961

 

I, the Principal Chief Commissioner/Chief Commissioner of Income-tax/Principal Director General/Director General of Income-tax, in exercise of powers vested in me by virtue of the provisions of sub-section 2 of section 279 of the Income-tax Act, 1961 hereby decline the prayer to compound the offence(s), u/s.......of the Income-tax Act, 1961 for the A.Y.(s) / Date/ period........ committed by M/s./Shri /Ms...............

 

The case was not found to be a fit case for compounding as “................(mention reasons) .............

..................................................................................................................”

 

The Statement of the facts of the case are enclosed as Annexure - ‘A’

 

Place:

Date:

Seal

Signature

Principal Chief Commissioner/Chief Commissioner of Income-tax / Principal Director General/Director General of Income-tax

 

Copy to:

The Pr. Commissioner of Income Tax/ Pr. Director of Income Tax

The Assessing Officer/ ADIT/DDIT -

The ADIT/DDIT(Prosecution) ---

The Prosecution Counsel (if the case is pending in the Court)

The applicant (By name)---

Guard file

 

Sd/-

ACIT/ ITO (Hq.)

O/o the Pr. CCIT/CCIT/ Pr. DGIT/DGIT

 

Annexure -A

 

Statement of facts

 

The statement of facts should, inter alia, contain the following:

 

1. Details of application filed

 

An application for Compounding of Offences committed u/s..................of the Income tax Act, 1961 was filed in prescribed format by M/s./Mr. /Ms.................. on.............

 

2. Brief facts

 

3. Whether complaint has been filed

 

A complaint was filed in the Court of...................................... on................... and the case is still pending in the court/the Court has convicted the person who has filed an appeal against the conviction order that is pending in the Court/ the Court has acquitted the person & the department has filed an appeal against the acquittal order that is pending in the Court or an appeal against the acquittal order is contemplated.

 

OR

 

The complaint is yet to be filed in the Court.

 

4. In case of order accepting compounding, details of payment of compounding charges by the person.

 

5. Direction to the AO/ Standing Counsel to take necessary action to implement the orders at the earliest.

 

Annexure 4