19 September 2022

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Direct Taxation

CBDT issues revised guidelines for compounding of offences under the Income-tax Act, 1961


In conformity with the Government's policy of facilitating Ease of Doing Business and decriminalisation of offences, Central Board of Direct Taxes (CBDT) has taken steps and issued revised Guidelines for Compounding of offences under the Income-tax Act, 1961 (IT Act) with reference to various offences covered under the provisions of the Act. The decision would simplify and facilitate compounding of offences. These Guidelines are issued in exercise of power conferred under Section 119 of the IT Act.

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 under the 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. Some of the major changes made for the benefit of taxpayers include making offence punishable under Section 276 of the IT Act as compoundable. Further, the scope of eligibility for compounding of cases has been relaxed whereby case of an applicant who has been convicted with imprisonment for less than 2 years being previously non-compoundable, has now been made compoundable. The discretion available with the competent authority has also been suitably restricted.

The time limit for acceptance of compounding applications has been relaxed from the earlier limit of 24 months to 36 months now, from the date of filing of complaint. Procedural complexities have also been reduced/simplified. Specific upper limits have been introduced for the compounding fee covering defaults across several provisions of the Act. Additional compounding charges in the nature of penal interest @ 2% per month up to 3 months and 3% per month beyond 3 months have been reduced to 1% and 2% respectively.

Tags : Compounding Offences Guidelines Revision

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