The Hindu Business Line : IT rules for compounding of technical offences eased

It has also now been clarified that the CCIT/DGIT shall not reject an application for compounding of a technical offence, if all conditions prescribed in the guidelines are satisfied.

Kolkata , Jan 2

THE income tax department has taken up a new role as an assessee-friendly facilitator.

Under the new procedural amendments to the existing guidelines by the Central Board of Direct Taxes (CBDT) for compounding of offences under direct tax laws, the income tax department has now decided that all types of cases relating to technical offences can now be compounded by CCIT/DGIT, and the distinction between first offence and subsequent offence has been removed.

As per earlier norms, such offences could be compounded only if it was a first offence, and if the compounding charges did not exceed Rs 10 lakh.

Technical offences under various sections of the Income Tax Act (Section 275 A to Section 280) can be compounded either before or after the institution of prosecution proceedings by the Chief Commissioner or DG, Investigations u/s 279(2) as per the board guidelines issued from time to time. It has also now been clarified that the CCIT/DGIT shall not reject an application for compounding of a technical offence, if all conditions prescribed in the guidelines are satisfied. The amendments have now come after a thorough review of the 1994 guidelines in the light of past experience and future needs.

As per the existing guidelines, compounding of substantive/non-technical offences can be approved by the CBDT, where the amount involved exceeds Rs 1 lakh, if advised by the Law Ministry that the chances of successful prosecution are not good. Under the amended procedure, this requirement of referring the matter to Law Ministry has now been done away with.

And with a view to encourage assessees to get their offences compounded, the fee in respect of offences, like under Sec 276B (failure to deduct or pay tax) or Sec 276 CC (failure to furnish returns of income), has been substantially reduced.

Welcoming the amendments as a major step forward by the Department to create an assessee-friendly environment, Mr N.P. Jain of the WB NUJS, senior tax lawyer, told Business Line that as per Section 276C(1) of the guidelines, for wilful attempts to evade tax etc, the compounding fee was 100 per cent of the amount sought to be evaded, if less than Rs 1 lakh, and 200 per cent if amount sought to be evaded was more than Rs 1 lakh. He said this fee has now been slashed to 50 per cent of amount sought to be evaded irrespective of its size. The amendments, he clarified, shall be applicable to future as well as to cases pending at any stage. The offences already compounded, however, shall not be considered.

Mr Jain was also of the view that except for offences under 276C of I-T Act (wilful default), which was of a serious nature, prosecution and/or imprisonment should be done away with altogether for all other technical offences.

Under the said Section, any wilful attempt to evade tax, penalty or interest, or if a person has books of a/c containing false entries or statements, or wilfully omits a relevant entry, rigorous imprisonment of a maximum of 7 years plus fine is now prescribed.

Under Section 276CC, there will be no prosecution if return is filed before expiry of the assessment year or if tax payable on regular assessment after credit of TDS and advance tax does not exceed Rs 3,000.