COMPOUNDING: TDS

TEAM CIT TDS 1 DELHI

INTRODUCTION

• SECTION 279(2) OF THE INCOME-TAX ACT,1961 (‘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
• COMPOUNDING IS NOT A MATTER OF RIGHT – OFFENCES CAN BE COMPOUNDED BY COMPETENT AUTHORITY ON SATISFACTION OF THE ELIGIBILITY CONDITIONS AS PER GUIDELINES IN VIEW OF CONDUCT OF THE PERSON, NATURE AND MAGNITUDE OF OFFENCE.
• IN CONFORMITY WITH THE GOVERNMENT'S POLICY OF FACILITATING EASE OF DOING BUSINESS AND DECRIMINALIZATION OF OFFENCES, CBDT HAS ISSUED REVISED GUIDELINES FOR COMPOUNDING OF OFFENCES DATED 16.09.2022.
• IT IS ISSUED IN SUPPRESSION OF ALL EARLIER GUIDELINES.
• APPLICABILITY – APPLICABLE TO ALL APPLICATIONS FOR COMPOUNDING RECEIVED ON OR AFTER THE ISSUE DATE OF THESE GUIDELINES – W.E.F 17.09.2022.

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TYPES OF OFFENCES

CATEGORY A

• CATEGORY A OFFENCES - OFFENCES ARE OF TECHNICAL IN NATURE CAUSED BY AN ACT OF OMISSION.
• OFFENCES RELATED TO SECTION 276B, 276BB, 276CC, 276CCC, 276DD, 276E, 277,278

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CATEGORY B

• CATEGORY B OFFENCES – OFFENCES ARE NON-TECHNICAL IN NATURE ATTRIBUTED TO AN ACT OF COMMISSION
• OFFENCES RELATED TO SECTION – 276 ,276A, 276AA, 276AB, 276C(1), 276C(2), 276D, 277, 277A AND 278

Eligibility Conditions – Filing of Application

• AN APPLICATION 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-I ) IN THE FORM OF AN AFFIDAVIT ON A STAMP PAPER OF RS. 100/-.
• SEPARATE APPLICATION FOR THE ENTITY AND CO-ACCUSED(S)– APPLICATION FOR ANY PERIOD FOR A PARTICULAR TAN SHOULD COVER ALL DEFAULTS RELATED TO OFFENCE U/S 276B/276BB FOR SUCH PERIOD.
• CAN BE FILED SUO MOTU –IRRESPECTIVE OF THE FACT WHETHER THE OFFENCE COMES TO THE NOTICE OF THE DEPARTMENT OR NOT.

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Eligibility Conditions – Filing of Application

• CASES WHERE PROSECUTION COMPLAINT IS ALREADY FILED:-
• APPLICATION SHOULD BE FILED NOT LATER THAN 12 MONTHS FROM THE END OF MONTH OF FILING OF COMPLAINT
• APPLICATION CAN ALSO BE FILED AFTER THE END OF 12 MONTHS OF FILING OF COMPLAINT BUT WITHIN 24 MONTHS – COMPOUNDING FEE INCREASED @1.25 TIMES OF NORMAL COMPOUNDING FEE (NEW!!- REQUIREMENT OF APPROVAL FROM COMMITTEE DISPENSED WITH)
• APPLICATION CAN BE FILED BEYOND 24 MONTHS BUT BEFORE 36 MONTHS OF FILING OF COMPLAINT IN DESERVING CASES – WITH APPROVAL OF PR. CCIT - COMPOUNDING FEE INCREASED @1.5 TIMES OF NORMAL COMPOUNDING FEE (NEW!!)

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Eligibility Conditions – Filing of application

• ALL THE OUTSTANDING DEMAND (TAX, INTEREST, PENALTY AND ANY OTHER SUM) RELATED TO OFFENCE FOR WHICH THE COMPOUNDING HAS BEEN SOUGHT SHOULD BE PAID BEFORE MAKING THE APPLICATION.
• IF ANY OTHER DEMAND IS FOUND OUTSTANDING ON VERIFICATION BY THE DEPARTMENT – SHOULD BE WITHIN 30 DAYS OF INTIMATION

Eligibility Conditions - Undertaking

• TO PAY THE COMPOUNDING CHARGES DETERMINED IN ACCORDANCE WITH GUIDELINES BY THE COMPETENT AUTHORITY
• TO WITHDRAW APPEALS OR GROUNDS OF APPEAL(IN CASE OF MIXED GROUNDS) FILED, IF ANY, RELATED TO THE OFFENCES SOUGHT TO BE COMPOUNDED.

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Offences Normally Not To Be Compounded (Para 8.1)

• CATEGORY A - GENERALLY NOT TO BE COMPOUNDED ON MORE THAN THREE OCCASIONS. EXCEPTION – MORE THAN THREE OCCASION CAN BE CONSIDERED ONLY ON THE APPROVAL OF THE PR. CCIT
• CATEGORY B - GENERALLY NOT TO BE COMPOUNDED OTHER THAN THE FIRST OFFENCE (S)

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Offences Normally Not To Be Compounded - Occasion

• OCCASION – IF IN ONE INSTANCE, THE ASSESSEE FILES MULTIPLE APPLICATIONS FOR ONE OR MORE THAN ONE ASSESSMENT YEAR(AYS), ALL THESE APPLICATIONS SHALL BE TREATED AS ONE ‘ OCCASION’

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Offences Normally Not To Be Compounded – �First Offence

• FIRST OFFENCE MEANS –

(A) OFFENCES COMMITTED PRIOR TO ANY OF THE FOLLOWING:-

1. THE DATE OF ISSUE OF ANY LETTER/NOTICE IN RELATION TO THE PROSECUTION OR

II. ANY INTIMATION RELATING TO FILING OF PROSECUTION COMPLAINT SENT BY THE DEPARTMENT TO THE PERSON CONCERNED, OR

111. LAUNCHING OF THE PROSECUTION, WHICHEVER IS EARLIER, OR

(B) OFFENCE(S) NOT DETECTED BY THE DEPARTMENT BUT VOLUNTARILY DISCLOSED BY A PERSON WITH THE FILING OF APPLICATION FOR COMPOUNDING OF OFFENCE(S) IN THE CASE UNDER THE ACT FOR ONE ASSESSMENT YEAR OR MORE.

• FIRST OFFENCE IS TO BE DETERMINED SEPARATELY FOR EACH OF THE CATEGORY B OFFENCES.

Offences Normally Not To Be Compounded – (Para 8.1)

• ANY OFFENCE UNDER DIRECT TAXES LAWS - FOR WHICH A PERSON WAS CONVICTED EARLIER WITH IMPRISONMENT FOR TWO YEARS OR MORE WITH OR WITHOUT FINE BY A COURT OF LAW
• OFFENCES OTHER THAN DIRECT TAXES LAWS - FOR WHICH A PERSON WAS CONVICTED EARLIER FOR WHICH THE PRESCRIBED PUNISHMENT WAS IMPRISONMENT FOR TWO YEARS OR MORE, WITH OR WITHOUT FINE - AND WHICH IS DIRECTLY RELATED TO THE OFFENCE SOUGHT TO BE COMPOUNDED.

Offences Normally Not To Be Compounded – (Para 8.1)

• ANY OFFENCE IN RESPECT OF WHICH, THE COMPOUNDING APPLICATION HAS ALREADY BEEN REJECTED, EXCEPT IN 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 Normally Not To Be Compounded – (Para 8.1)

• OFFENCES COMMITTED BY A PERSON WHO, AS A RESULT OF 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 WHICH, AS PER INFORMATION AVAILABLE WITH THE PR.CCIT/ CCIT / PR.DGIT / DGIT CONCERNED, DIRECTLY RELATED TO THE CASE UNDER INVESTIGATION (AT ANY STAGE INCLUDING ENQUIRY, FILING OF FLR 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 DIRECTLY RELATED TO OFFENCE SOUGHT TO BE COMPOUNDED.

Offences Normally Not To Be Compounded – (Para 8.1)

• ANY OFFENCE WHICH IS DIRECTLY RELATED TO AN OFFENCE RELATING TO (A) UNDISCLOSED FOREIGN BANK ACCOUNT ASSETS IN ANY MANNER; OR (B) THE BLACK MONEY (UNDISCLOSED FOREIGN INCOME AND ASSETS) AND IMPOSITION OF TAX ACT, 2015; OR (C) PROHIBITION OF BENAMI PROPERTY TRANSACTIONS ACT, 1988.
• ANY OFFENCE U/S 276, WHERE THE OUTSTANDING AMOUNT IN RECOVERY HAS NOT BEEN DEPOSITED BEFORE FILING THE COMPOUNDING APPLICATION.
• ANY OTHER OFFENCE, WHICH THE PR.CCIT/ CCIT/ PR.DIT/ DGIT CONCERNED CONSIDERS NOT FIT FOR COMPOUNDING IN VIEW OF OFFENCE BY HABITUAL/REPEAT OFFENDER.

Power Of Relaxation Of Restrictions at Para 8.1

• THE POWER TO RELAX THE RESTRICTIONS FOR COMPOUNDING IN A DESERVING CASE LIES WITH THE BOARD.

Compounding Procedure

• REPORT FROM ASSESSING OFFICER – CALLED FOR THROUGH PROPER CHANNEL
• IF THE COMPOUNDING APPLICATION IS NOT FOUND TO BE ACCEPTABLE – REJECTED THROUGH A SPEAKING ORDER
• IF THE COMPOUNDING APPLICATION IS FOUND TO BE ACCEPTABLE – COMPOUNDING FEE PAYABLE INTIMATED – TO BE PAID WITHIN ONE MONTH FROM THE END OF THE MONTH OF RECEIPT OF SUCH INTIMATION

Compounding Procedure

• ON EXCEPTIONAL CIRCUMSTANCES – FURTHER EXTENSION UP TO 6 MONTHS BY PR.CCIT/CCIT/DGIT/PR.DGIT
• EXTENSION BEYOND 6 MONTHS AND UP TO 12 MONTHS – WITH PREVIOUS APPROVAL OF PR.CCIT

EXTENSION BEYOND 12 MONTHS – WITH PREVIOUS APPROVAL OF MEMBER (INV.)

Compounding Procedure

• DURING EXTENDED PERIOD OF PAYMENT AS APPROVED BY THE COMPETENT AUTHORITY - INTEREST @1% PER MONTH OR PART OF THE MONTH ON THE UNPAID COMPOUNDING CHARGES UP TO 3 MONTHS – BEYOND 3 MONTHS AT THE RATE OF 2%
• IF THE COMPOUNDING FEE IS PAID – COMPOUNDING ORDER IS PASSED . IF THE COMPOUNDING FEE IS NOT PAID WITHIN THE TIME GIVEN – APPLICATION IS REJECTED AFTER BEING GIVEN AN OPPORTUNITY OF BEING HEARD.

Benefit Of Rectification to Rejection Order

• IF ANY COMPOUNDING APPLICATION HAS BEEN REJECTED SOLELY ON ACCOUNT OF LATE PAYMENT OF COMPOUNDING CHARGES OR SHORTFALL IN PAYMENT OF COMPOUNDING CHARGES AND IF SUCH SHORTFALL IS FOR SOME BONAFIDE MISTAKES OR ON SOME OTHER TECHNICAL GROUNDS, SUCH COMPOUNDING ORDER CAN BE RECTIFIED AT THE WRITTEN REQUEST OF THE APPLICANT PROVIDED THE PAYMENT OF COMPOUNDING CHARGES WAS MADE BEFORE REJECTION OR TIME ALLOWED BY THE COMPETENT AUTHORITY WHICHEVER IS APPLICABLE.
• APPLICABLE INTEREST SHOULD HAVE BEEN PAID BY THE APPLICANT.

Calculation of Compounding Fee

• THE COMPOUNDING FEE SHALL BE CALCULATED AS UNDER :-

(I) 2% PER MONTH OR PART OF A MONTH OF THE AMOUNT OF TAX IN DEFAULT - WHERE NO PROSECUTION PROCEEDINGS HAVE BEEN INITIATED, AND THE APPLICANT HAS SUO-MOTO FILED COMPOUNDING APPLICATION WITHOUT ANY NOTICE FROM THE DEPARTMENT.

(II) 3% PER MONTH OR PART OF A MONTH OF THE AMOUNT OF TAX IN DEFAULT - FOR FIRST 'OCCASION' IN CASES WHEREIN COMPOUNDING APPLICATION HAS BEEN FILED IN RESPONSE TO INTIMATION OF PROSECUTION PROCEEDINGS BY THE DEPARTMENT.

(III) 5% PER MONTH OR PART OF A MONTH OF THE AMOUNT OF TAX IN DEFAULT – FOR ANY SUBSEQUENT OCCASION

Calculation of Compounding Fee

• PROSECUTION ESTABLISHMENT EXPENSES - TO BE CHARGED @ 10% OF THE COMPOUNDING FEE SUBJECT TO A MINIMUM OF RS.25,000/-
• LITIGATION EXPENSES, INCLUDING COUNSEL'S FEE - PAID/PAYABLE BY THE DEPARTMENT IN CONNECTION WITH OFFENCE(S) COMPOUNDED
• THE PERIOD OF DEFAULT FOR CALCULATING COMPOUNDING FEE - FROM THE DATE OF DEDUCTION TO THE DATE OF DEPOSIT OF TAX DEDUCTED AT SOURCE.
• THE COMPOUNDING FEE SHALL NOT EXCEED THE TDS AMOUNT DEFAULT.

Compounding Fee for co-accused

• COMPOUNDING FEE AT THE RATE OF 10% OF THE 'COMPOUNDING FEE FOR THE MAIN OFFENCE' SHALL BE CHARGED FROM EACH OF THE PERSON CHARGED UNDER SECTIONS 278B OR 278C AS CO-ACCUSED.
• UNLESS THE MAIN ACCUSED I.E. COMPANY OR HUF COMES FORWARD FOR COMPOUNDING, THE OFFENCE OF THE CO-ACCUSED CANNOT BE COMPOUNDED SEPARATELY.
• IF ONE OR MORE CO-ACCUSED HAS NOT FILED THE COMPOUNDING APPLICATION OR IS NOT AGREEABLE TO THE PAYMENT OF COMPOUNDING CHARGES, UNLESS MAIN ACCUSED, ON AN UNDERTAKING OBTAINED AND FURNISHED FROM SUCH CO-ACCUSED, UNEQUIVOCALLY UNDERTAKES TO PAY THE COMPOUNDING CHARGES ON HIS OWN BEHALF AND ON BEHALF OF ALL SUCH CO-ACCUSED AS WELL, THE COMPOUNDING OF THE OFFENCE OF THE MAIN ACCUSED CANNOT BE ACCEPTED.

EXCEPTIONAL CASE

• THE PRESCRIBED COMPOUNDING CHARGES SHALL BE APPLICABLE WHILE COMPOUNDING ANY OFFENCE.

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• HOWEVER, IN EXTREME AND EXCEPTIONAL CASES OF GENUINE FINANCIAL HARDSHIP, THE COMPOUNDING CHARGES MAY BE SUITABLY REDUCED WITH THE APPROVAL OF THE FINANCE MINISTER.

THANK YOU !!