Introduction: This paper aims at bringing out the intricacies of
prosecution of offences contained in theIncome Tax Act, 1961 and their compounding. This paper further minutia the
various guidelines issued by the CBDT in this regard. The readers are cautioned
to take proper care and consultation before acting on the material contained in
this article.
Index:
1.General
meaning of compounding of offences.
2.General
meaning of Prosecution.
3.
Meaning of Cognizable and Non-cognizable offences
4.
Technical and Non technical offences as per Income Tax Act, 1961
5.
Offences under the Income Tax Act.
6.
Compounding of offences under the Income Tax Act
7. CBDT circulars on Compounding of offences
i.
Letter: F. No. 4/7/69-IT (INV.), dated 21-3-1969.
ii.
CBDT Instruction: Extracts from CBDT Instruction No. 1317 of 1980, [reported in
M.P. Tewari v. Y.P. Chawla, ITO [1991] 187 ITR 506 (Delhi), at pp. 510-511].
iii.
F.No. 285/161/90-IT(Inv.) dated 30th September, 1994
iv. F.No. 285/26/2002-IT(Inv.) Dated 29th
July, 20038. Application for compounding of offences.
1. General
meaning of compounding of offences
Compoundable
offences are those which can be conciliated by the parties under dispute. The
permission of the court is not required in such cases. When an offence is
compounded, the party, who has been distressed by the offence, is compensated
for his grievance.
For
e.g.: Suppose
o
Somebody’s car
inadvertently strikes a person on the road and the person gets wounded. Though
the car driver may be guilty of rash and negligent driving, but still he can
settle the matter by paying adequate compensation to the victim.
o
One person, let’s say,
is constructing his house and accidentally one of the newly constructed walls
fall down and a passerby gets wounded in the process. In this situation the
aggrieved person has the option of compounding the offence as the owner was
guilty of negligence.
However,
it must be noted here that only the aggrieved party or the victim has the right
to compound an offence and nobody else, not even the public prosecutor has the power
to compound an offence.
2. General
meaning of Prosecution :
Definition:
The institution and carrying on of a suit in a court of law or equity, to
obtain some right, or to redress and punish some wrong; the carrying on of a
judicial proceeding in behalf of a complaining party, as distinguished from
defense.
Definition: The institution, or commencement,
and continuance of a criminal suit; the process of exhibiting formal charges
against an offender before a legal tribunal, and pursuing them to final judgment
on behalf of the state or government, as by indictment or information.
3. Meaning of
Cognizable and -Non-Cognizable offenses under the Act
o
A cognizable offence
in the
criminal justice system of India is one in which the police is empowered to register an FIR, investigate and arrest an accused
involved in cognizable crime without a court warrant.
o
As defined in Cr.PC, a
non-cognizable offence is one in which police can neither register a
First Information Report (FIR) nor can investigate or effect arrest without the
express permission ordirections from the court.
As
per section 279A the following offences shall be deemed to be non-cognizable
offences notwithstanding anything contained in the code of Criminal Procedures
1973.
|
276B
|
Failure to pay tax to the credit of the
central Govt. under chapter XIID orXVII-B
|
|
276C(1)
|
Wilful attempt to evade tax.
|
|
276C(2)
|
Wilful attempt to evade payment of tax
|
|
276CC
|
Failure to furnish the return of income.
|
|
277
|
False
statement in verification,
etc.
|
|
278
|
Abatement of false returns etc.
|
4. Technical
Vs. Non Technical offences under Income tax Act, 1961
As
per the guidelines of the CBDT F.No. 285/161/90-IT (Inv.) dated 30th September,
1994 and F.No. 285/26/2002-IT(Inv.) Dated 29th July, 2003 distinction between technical
and non-technical offences is detailed as under:
1.
Offences u/ss. 276B (relating to TDS), 276BB (relating to TCS), and 276E
(omitted w.e.f. 1-4-1989 which related to section 269T) are regarded as
technical. All other offences are regarded as non-technical.
2.
The technical offences can be compounded even before filing complaint.
3.
A technical offence may be compounded by Chief Commissioner of Income Tax or
Director General of Income Tax if the following conditions are satisfied
cumulatively.(now deleted by th29 July 2003 ) guidelines
i.
The offence is the first one by the assessee.
ii.
The compounding charges do not exceed Rs. 10 lakhs. iii. The complaint should
not have been filed.
iii.
In all other cases, the offence can be compounded only with the previous
approval of the Board. ( these conditions deleted by CBDT guidelines F.No.
285/26/2002-IT(Inv.)
Now,
In this regard, it has now been prescribed by CBDT guidelines F.No.
285/26/2002-IT(Inv.)that :
a.
All types of cases relating to technical offences are to be compounded by
CCIT/DGIT.
b.
Distinction between first offence and subsequent offence is removed and
c.
CCIT/DGIT shall not reject an application for compounding of a technical offence, if all
conditions prescribed in the guidelines are satisfied.
4.
A non-technical offence can be compounded with the approval of the Board
subject to satisfaction of the following conditions mentioned as under:
The
following conditions should be satisfied for compounding an offence.
i.
There should be a written request from the assessee.
ii.
The amount of undisputed tax, interest and penalties relating to the default
should have been paid.
iii.
The assessee should express his willingness to pay both the prescribed
compounding fees as well as establishment expenses.
Additional
conditions:
i.
The offence is the first one by the assessee.
ii.
The Board’s prior approval is obtained. However, if the amount involved exceeds
Rs. 1 lakh, approval can be granted only after seeking advice from Ministry of
Law. This requirement of referring the matter to Ministry of Law has not been
done away with vide amendment dated – 7-292003 referred above.
5. Offences
under the Income Tax Act,1961 Sections 275A to 280 provides for various types of offences
under which the Income Tax Department can prosecute an assessee in the Court of
Law. The prosecution can be launched only at the instance of the Commissioner
of Income Tax or Commissioner of Income Tax (Appeals) or the Appropriate
Authority.The sections under which prosecution can be launched against an
assessee are
|
Section
|
Offence
|
Particulars
|
Initiation of
proceedings and penalty
|
|
275A
|
Contravention of order u/s. 132(3)
|
Order for non removal of moneybullion etc. under Search and seizure
|
Fine and 2 yearsbut approval of CIT or
CIT(A) or Appropriate Authority (as defines u/s 269UA(c) needed for
initiation of proceedings)-279(1)
|
|
275B
|
Contravention of order u/s. 132(1)(ii)
|
Failure to allow inspection of books of
accounts and other documents to authorized officer
|
Fine and 2 yearsbut approval of CIT or
CIT(A) or Appropriate Authority (as defines u/s 269UA(c) needed for
initiation of proceedings)-279(1)
|
|
276
|
Removal, concealment, transfer or delivery
of property to thwart recovery of taxes.
|
|
Fine and 2 yearsbut approval of CIT or
CIT(A) or Appropriate Authority (as defines u/s 269UA(c) needed for
initiation of proceedings)-279(1)
|
|
276A
|
Failure to comply with provisions of
sections 178(1) and 178(3).
|
Notice by liquidator of a company within 30
days of his appointment to the A.O. 178(1)Non removal of assets of the
company by liquidator without permission of the CCIT or CIT 178(3)
|
6 months to 2 years but approval of CIT or
CIT(A) or Appropriate Authority (as defines u/s 269UA(c) needed for
initiation of proceedings)-279(1)
|
|
276AB
|
Failure to comply with provisions of section
269 UC, UE, UL.
|
269UC: restrictions on transfer of immovable
property, where value of such property exceeds Rs. 5 lac 269UE:Vesting of property in Central Government269UL:
Restrictions onregistration etc of documents in respect of transfer of immovable property.
|
Fine and 6 months to 2 years
|
|
276B
|
Failure to pay tax to the credit of the
central Govt. under chapter XIID or XVII-B
|
Failure to pay the tax deducted at source
under Chapter XVII-B or pay tax as per 115O(2) or second proviso to
section194B
|
Fine and 3 months to 7 yearsbut approval of
CIT or CIT(A) or Appropriate Authority as defines u/s 269UA(c) needed for
initiation of proceedings-279(1)
|
|
276BB
|
Failure to pay the tax collected at source.
|
|
Fine and 3 months to 7 yearsbut approval of
CIT or CIT(A) or Appropriate Authority( as defines u/s 269UA(c) needed for
initiation of proceedings)-279(1)
|
|
276C(1)
|
Wilful attempt to evade tax.
|
1. If the tax sought to be evaded exceeds
Rs. 100000.002. In any other case
|
Fine and 6 months to 7 yearsFine and 3
months to 3 years
|
|
276C(2)
|
Wilful attempt to evade payment of tax
|
|
Fine and 3 months to 3 yearsbut approval of
CIT or CIT(A) or Appropriate Authority (as defines u/s 269UA(c) needed for
initiation of proceedings)-279(1)
|
|
276CC
|
Failure to furnish the return of income.
|
1. If the tax sought to be evaded exceeds
Rs. 100000.002. In any other case
|
Fine and 6 months to 7 yearsFine and 3
months to 3 years
but
approval of CIT or CIT(A) or Appropriate Authority (as defines u/s 269UA(c)
needed for initiation of proceedings)-279(1)
|
|
276CCC
|
Failure to furnish the return of income in
search cases. u/s 158BC(a)
|
|
Fine and 3 months to 3 years
|
|
276D
|
Failure to produce account books and
documents.
|
Non compliance under section 142(1)-for
production of books and 142(2A)- special audit
|
Upto 1 year or fine @ Rs. 4-10 per day
during which default continues or both but approval of CIT or CIT(A) or
Appropriate Authority as defines u/s 269UA(c) needed for initiation of
proceedings-279(1)
|
|
277
|
False statement in verification, etc.
|
1. If the tax sought to be evaded exceeds
Rs. 100000.002. In any other case
|
Fine and 6 months to 7 yearsFine and 3
months to 3 yearsbut approval of CIT or CIT(A) or Appropriate Authority as
defines u/s 269UA(c) needed for initiation of proceedings-279(1)
|
|
277A
|
Falsification of books ofaccount or
documents,etc..
|
If a person (1st person) falsifies books of
another person (2nd person) then the 1st person is guilty and he is subject
to imprisonment. The 1st person will be prosecuted whether or not the 2nd
person has evaded any tax or not.
|
Fine and 3 months to 3 yearsbut approval of
CIT or CIT(A) or Appropriate Authority as defines u/s 269UA(c) needed for
initiation of proceedings-279(1)
|
|
278
|
Abatement of falsereturns etc.
|
If a person (1st person) induces any other
person (2nd person) to make and deliver any false account or statement or
declaration in relation to any income chargeable to tax then the 1st person
is guilty and he is subject to imprisonment.1. If the tax sought to be evaded
exceeds Rs. 100000.002. In any other case
|
Fine and 6 months to 7 yearsFine and 3
months to 3 years
but
approval of CIT or CIT(A) or Appropriate Authority as defines u/s 269UA(c)
needed for initiation of proceedings-279(1)
|
6. Compounding
of offences under the Income Tax Act, 1961
The
Act provides relief from prosecution u/s 278AA and 279. A list of compoundable
offences is provided hereunder:
|
Section
|
Offence
|
Compounding possible by CCIT or DGIT as per
section 279(2)
|
Rate of
compounding as
per guidelines of
CBDT F.No.
285/26/2002-
IT(Inv.)
Dated 29th July, 2003 and other guidelines.
|
|
275A
|
Contravention of order u/s. 132(3)
|
Yes, with prior approval of the CBDT
|
Not prescribed-on case to case basis + 10%of
composition fees as establishment expenses (max Rs. 50,000.00)
|
|
275B
|
Contravention of order u/s. 132(1)(ii)
|
Yes with prior approval of the CBDT
|
Not prescribed-on case to case basis + 10%
of composition fees as establishment expenses (max Rs. 50,000.00)
|
|
276
|
Removal, concealment, transfer or delivery
of property to thwart recovery of taxes.
|
Yes with prior approval of the CBDT
|
Not prescribed-on case to case basis + 10%of
composition fees as establishment expenses (max Rs. 50,000.00)
|
|
276A
|
Failure to comply with provisions of
sections 178(1) and 178(3).
|
U/s 278AA, if there is reasonable cause then
no penalty proceedings can be initiated.Otherwise composition with the prior
approval of the CBDT
|
2% per month or part of a month of amount in
default irrespective of amount in default
|
|
276AB
|
Failure to comply with provisions of section
269UC, UE, UL.
|
U/s 278AA, if there is reasonable cause then
no penalty proceedings can be initiated.Otherwise composition with the prior
approval of the CBDT
|
2% per month or part of a month of amount in
default irrespective of amount in default
|
|
276B
|
Failure to pay the tax deducted at
source.
|
U/s 278AA, if there is reasonable cause then
no penalty proceedings can be initiated.Otherwise composition by CCIT or DGIT
|
2% per month or part of a month of amount in
default irrespective ofamount in default
|
|
276BB
|
Failure to pay the tax collected at source.
|
Composition by CCIT or DGIT
|
2% per month or part of a month of amount in
default irrespective of amount in default
|
|
276C
|
276(1) Wilful attempt toevade tax.
276(2)
Wilful attempt to evade payment of tax
|
Under section 279(1A)it is provided that
prosecution for offences u/ss. 276C and 277 cannot be initiated if the
penalty imposed or imposable for concealment of income has been reduced or
waived by the Commissioner u/s. 273A.In other cases with prior approval of
the CBDT
-do-
|
50% of amount sought to be evaded
irrespective of the amount sought to be evaded.2% per month or part of a
month of amount in default irrespective of amount in default
|
|
276CC
|
Failure to furnish the return of income.
|
Yes with prior approval of the CBDT
|
2% per month of the assessed tax.
|
|
276CCC
|
Failure to furnish the return of income in
search cases.
|
Yes with prior approval of the CBDT
|
Not prescribed-on case to case basis +
10%ofcomposition fees as establishment expenses (maxRs. 50,000.00)
|
|
276D
|
Failure to produce account books and
documents.
|
Yes with prior approval of the CBDT
|
Not prescribed-on case to case basis + 10%
of composition fees as establishment expenses (max Rs. 50,000.00)
|
|
277
|
False statement in verification, etc.
|
Under section 279(1A) it is provided that
prosecution for offences u/ss. 276C and 277 cannot be initiated if the
penalty imposed or imposable for concealment of income has been reduced or
waived by the Commissioner u/s. 273A. with prior approval of the CBDT
|
100% of the tax amount sought to be evaded
where the tax sought to be evaded is less than Rs.1 lakh and 200% in other
cases.
|
|
277A
|
Falsification of books of account or
documents, etc.
|
Yeswith prior approval of the CBDT
|
Not prescribed-on case to case basis +
10%composition fees as establishment expenses
|
|
278
|
Abatement of false returns etc.
|
Yeswith prior approval of the CBDT
|
Not prescribed-on case to case basis + 10%
of composition fees as establishment expenses (max Rs. 50,000.00)
|
|
|
|
|
|
No composition fee is
prescribed for other offences. However, it has been provided that the Board can
consider the same on a case to case basis. The compounding charges shall also
include prosecution establishment expenses which will be charged @ 10%
of the composition fee subject to a maximum of Rs. 50,000/
Once
a case is filed in the Court of Law, the authority filing the case has no power
to withdraw the same except as specifically provided in the Act. There are
certain circumstances under which the prosecution can get abated.
Note:
1. It has also been prescribed that all the existing guidelines as well as the
amendments shall be applicable only to future as well as pending cases. In
other words, the offences already compounded shall not be reconsidered.
Note
2: Thus, compounding of an offence could only be made if a written request by
way of an application is made by an assessee bringing out in the application
following points.
i.
The nature of offence for which prosecution is launched or proposed to be
launched;
ii.
The reasons and circumstances under which the offence was committed;
iii.
The applicant’s willingness to pay the compounding fees including the part of
litigation expenses incurred by the Department till the date of compounding of
the offence;
iv.
Whether the applicant satisfies the requisite conditions or not.
v.
Lastly there should be a prayer to compound the offence by accepting the
compounding fees on getting the approval about the compounding fees by the
compounding authority.
7. CBDT
Guidelines
SECTION 279
PROSECUTION TO BE AT INSTANCE OF COMMISSIONER
Apart
from the above, sub-section (2) of section 279 gives powers to the Chief
Commissioner/Director General to compound offences under Chapter XXII of the
Income Tax Act, 1961. Such compounding can be done either before or after the
institution of prosecution proceedings.
1306. Power of Chief Commissioner to compound
offence – Points to be considered before deciding to compound offence
1. It was emphasized that a prosecution
should not ordinarily be compounded if the prospects of success were good. The Board desires that in such case, the
request of the assessee for having the offence compounded should not ordinarily
be recommended to the Board.
2. The provisions of section 279(2) give
discretion to the Commissioner to compound any offence under the Income-tax Act
and this discretion is an unfettered one. Even so it has to be exercised in a judicial
manner. Although it is neither
possible to precisely lay down all the circumstances in which an offence may be
compounded nor it is intended to fetter the Commissioner’s discretion in this
matter, it is nevertheless necessary to have a uniform policy for exercising
the discretion in a judicial manner.
3. Some of the points which have to be considered
before deciding to compound an offence are indicated below:
-
Compounding of an offence may be considered only in those cases in which the
assessee comes forward with a written request for compounding offence.
-
Cases in which the prospects of a successful prosecution are good should not
ordinarily be compounded.
-
Bearing in mind the deterrent effect of a prosecution, it should be considered
whether the purpose will be more effectively served by making the assessee pay
a deterrent composition fee or by obtaining a conviction.
-
In case, where subsequent to the launching of prosecution fresh evidence
becomes available which may show that the case for the prosecution is weak and
the assessee is agreeable to have the offence compounded, it may be advisable
to compound the offence and not to proceed with the prosecution.
4.
Ultimately the answer to the question whether the prosecution should be
compounded or not will depend on the facts of each case. The above aspects are
only intended to provide broad guidelines. The previous approval of the Board
should always be obtained before deciding to compound an offence. No assurance
of any kind should be given to the assessee before obtaining the Board’s
approval.
——————————————————–
Letter : F. No.
4/7/69-IT(INV.), dated 21-3-1969.
1307. Guidelines for compounding offence
Clause
(B) of the circular enumerates certain cases which should not be compounded :—
(1)
No compounding will be done if the assessee belongs to a monopoly or large
industrial house or is a director of a company belonging to or controlled by
such house;
(2)
Cases in which the prospects of a successful prosecution are good should not
ordinarily be compounded;
(3)
Compounding will not be done in cases of second and subsequent offences. Clause
(C) of the instructions enumerates cases which may be compounded:
(1)
Except in cases falling within categories (1) and (3) of (B) above, compounding
of an offence can be done with the consent of the Board, if the amount involved
in the offence/default is less than Rs. 1 lakh.
(2)
Except in cases falling under categories (1) and (3) of (B) above and category
of (1) of (C), compounding may be done with the approval of the Minister if, in
view of the developments taking place subsequent to the launching of the
prosecution, it is found, after consultation with the Ministry of Law, that
chances of conviction are not good.
Clause
(D) of these instructions lays down that notwithstanding anything stated in
(b), the Board may approve compounding in deserving and suitable cases involving
hardship, with the approval of the Minister.
Section
6 of the these instructions reads as under:
“While
the above are only intended to provide broad guidelines to be followed before
sending a proposal for compounding, the previous approval of the Board should
always be obtained before deciding about the compounding of an offence. No
assurance of any kind should be given to the assessee before obtaining the
Board’s approval.”
CBDT Instruction: Extracts from
CBDT Instruction No. 1317 of 1980, [reported in M.P. Tewari v.Y.P. Chawla, ITO [1991] 187
ITR 506 (Delhi), at pp. -510-511].
JUDICIAL
ANALYSIS
EXPLAINED IN - In M.P. Tewari v. Y.P. Chawla, ITO [1991] 187 ITR 506 (Delhi), the above
instruction was explained with the following observations :
“The above provisions of the instructions prima
facie, if not completely,
partially take away the powers of the Commissioner of Income-tax to use the
discretion vested in him under section 279(2) of the Act to compound the
offence, if any application is made before him for this purpose. Under the
impugned instruction, he is required to obtain “the previous approval of the
Board before deciding to compound an offence”. Once the Legislature has vested
in the Commissioner discretion to compound a particular offence, the same
cannot be set at naught or curtailed substantially and/or materially by issuing
the offending instructions which we hold are in direct contravention of the
statutory provisions conferring the powers to compound offences on the
Commissioner.” (p. 511)
“…
We have already reproduced some of the clauses of the instructions which, on
the face of it, run counter to the provisions of the Act. This circular, in our
opinion, has substantially curtailed the powers of the Commissioner of
Income-tax which are vested in him under section 279 of the Act. In fact, the
decision of the Commissioner has ceased to be his decision and has become the
decision of the Board and/or that of the Minister, in view of the instructions
that “the previous approval of the Board should always be obtained before
deciding to compound an offence”. “… No assurance of any kind should be given
to the assessee before obtaining the Board’s approval”.
This
was not the intention of the Legislature when section 279 of the Act was
incorporated.
In
the result, we allow the petition and quash that part of the instructions
referred to above being clauses (B), (C) and (D) and section 6 which
arbitrarily take away the powers of the commissioner to compound offences… (p.
514).
Note : In Y.P. Chawla v. CBDT [1992] 195 ITR 607, the Supreme Court reversed
the above Delhi High Court decision.
1308. Liberalized guidelines for compounding of
offences
The
Central Board of Direct Taxes has liberalised its guidelines for compounding of
offences under the Direct Tax Laws. The guidelines have liberalised the
conditions for compounding of technical offences such as delay in depositing
the tax deducted at source of the tax collected at source. The Chief
Commissioners of Income-tax are now empowered to compound the first technical
offence in any case if the compounding charges do not exceed Rs. 10 lakhs.
Taxpayers whose cases were rejected earlier may also seek reconsideration of
their applications under the new guidelines. However, cases in which the
compounding orders have already been passed shall not be reviewed.
The
revised guidelines have been issued with the objective of ensuring fairness and
objectivity in compounding of offences, reducing the pendency of prosecutions
before the courts and removal of unintended hardship to the taxpayers. It is
expected that the liberalised guidelines will attract a large number of
assessees to come forward with requests for compounding of offences for which
they have been charged.
[Source : PIB Press
release dated 11-10-1994].
Instruction No: 5206
Section(s)
Referred: 279(2)
Statute: Income – Tax Act, 1961
Date of Issue: 30/9/1994
The
existing instructions regarding compounding of offences under the laws relating
to Direct Taxes have been reviewed by the Board. After careful consideration of
the matter, these revised guidelines are hereby issued.
2.1
The distinction between technical and non-technical offences for the purpose of
compounding of offences was removed in Board’s Instruction No. 1317 dated
11-03-1980. It has now been decided to reintroduce the concept of technical and
non-technical offences for the limited purpose of compounding of the offences.
2.2
Offences punishable under the following sections showed be treated as technical
offences:-
Sections
(i) 275 (prior to 1.4.75 – failure to make payment or deliver returns or
statements or allow inspection)
(ii)
276B (prior to 1.4.89 – failure to deduct or pay tax)
(iii)
276B (w.e.f. 1.4.89 – failure to pay tax deducted at source)
(iv)
276BB (failure to pay the tax collected at source)
(v)
276DD (failure to comply with the provisions of section 269SS)
(vi)
276E (failure to comply with the provisions of section 269I)
2.3
Offences punishable under the following sections shall be treated as
non-technical or substantive offences:-
Sections
i) 275A (contravention of order made u/s 132(3))
ii)
276 (w.e.f. 1.4.89 – removal, concealment, transfer or delivery of property to
thwart tax recovery)
iii)
276A (failure to comply with the provisions of sections 178(1) and 178(3))
iv)
276AA (prior to 1-10-86 – failure to comply with provisions of section 269AB or
section 269I)
v)
276AB (failure to comply with the provisions of section 269UC, 269UE and 269UL)
vi)
276D (wilful attempt to evade tax etc.)
vii)
276DD (wilful failure to furnish returns of Income)
viii)
276D (failure to produce accounts and documents)
ix)
277 (false statement in verification etc.)
x)
278 (abetment of false return etc.)
3.Offences
under Indian Penal Code cannot be compounded. They can, however, be withdrawn.
Offences under Direct Tax Laws may be compounded subject to the conditions
prescribed in paragraph 4 and 5. It must be borne in mind that an assessee
cannot claim, as of right, that his offence should be compounded. Factors such
as conduct of the assessee, nature and magnitude of the offence and facts and
circumstance of each offence will be considered while dealing with such a
request.
4.Conditions
for compounding technical offences:-
The
following conditions should be satisfied before compounding a technical offence:-
4.1
The assessee should make a written request for compounding of the offence.
4.2
The case should be considered for compounding only when the assessee has paid
the amount of undisputed tax as well as interest and penalties relating to the
default. 4.3 The assessee should state that he is willing to pay the
compounding fee prescribed in Para 9 below, and the prosecution establishment
expenses prescribed in Para 10 below. The order compounding an offence should
be passed only when the compounding charges comprising of the composition fee
and establishment expenses are paid by the assessee/defaulter.
4.4
Technical offences may be compounded by CCIT or DGIT (as the case may be) if
the following conditions are satisfied cumulatively:-
(i)
It is the first offence by an assessee.
(ii)
The compounding charges do not exceed Rs. 10 lakhs.
(iii)
The offence is compounded only before the filing of complaint.
In
the case of offences punishable u/s 276 (prior to 1.4.76), 276B (prior to
1.4.89), 276DD & 276E, complaints in respect of which have been filed
before coming into force of these Revised guidelines, the CCIT/DGIT may
compound the offence without seeking Board’s approval if the other conditions
prescribed above are satisfied.
In
all other cases, the offence shall not be compounded except with the previous
approval of the Board.
4.5
The second and subsequent offences may be compounded with the approval of the
Board in the following circumstances:-
(i)
The default does not involve mens rea i.e. it is not deliberate or intended to
conceal any information from the department or to defraud the revenue directly
or indirectly.
(ii)
Necessary steps for compliance of relevant provisions of Direct Tax Laws have
been taken by the assessee prior to the detection of the default by the
department. (For example in case of default in respect of tax deducted at
source/tax collected at source, the tax should have been deposited by the
assessee voluntarily and prior to detection of the default by the department).
4.6
In case of second and subsequent offence, the compounding fee shall be enhanced
by 100% each time. Thus for second offence it will be 200% of the normal fee
and so on. 4.7 For the limited purpose of determining authority granting
approval for compounding, the compounding charges at the time of passing order
u/s 279(2) shall be considered. However if the computation of compounding
charges is dependent upon the income or tax etc. determined in the assessment
order or any other order which is subject matter of appeal, revision, reference
etc., the compounding charges shall be calculated on the basis of the
assessment order or such other order. It may be clarified that compounding
charges payable
5.
Compounding of substantive/non-technical offences:-
Following
conditions must be cumulatively satisfied before compounding a substantive
offence.
(i)
the conditions prescribed in Para 4.1, 4.2, 4.3, are satisfied,
(ii)
It is first substantive offence.
(iii)
The prior approval of the Board is obtained. If the amount involved in the
offence Exceeds Rs. 1 lakh, the Board shall grant approval if MOL advises that
the chances of successful prosecution are not good.
6.
Notwithstanding anything contained in paragraph 4 & 5 above, the F.M. may
grant approval for compounding the offence in a suitable and deserving case.
7.
While seeking the Board’s approval CCIT/DGIT shall clearly report whether all
the prescribed conditions for compounding have been met.
8.
For the purpose of these guidelines the “first offence” will mean the
following:-
a)
Offences under any of the Direct Tax Laws committed prior to the date of issue
of any prosecution show-cause notice or any other mode of intimation by the
department to the person concerned or prior to launching of prosecution, whichever
is earlier. Any offence, even though committed prior to the issue of such show
cause notice or intimation or filing of complaint but discovered or disclosed
after the first compounding order shall not be considered as “first offence”.
(b)
Offences not detected by the department but voluntarily disclosed by a person
prior to the first compounding of offence in his case under any Direct Taxes
Acts. For this purpose offence is relevant if it is committed by the same
taxable entity.
9.
Fees for compounding:-
The
composition fee for compounding of various offences in addition to any interest
/ penalty leviable) will be as follows:-
9.1
Section 276:- Failure to make payment or deliver return or (prior to 1.4.76)
statement or allow inspection. The composition fee would be an amount of Rs.
2/- for every day during which the default continues.
9.2
Section 276B:- Failure to deduct or pay tax (prior to 1.4.89). 10% per month or
part of a month of the amount in default where the said amount exceeds one lac
and 5% per month or part of a month of the amount in default in other cases.
9.3
Section 276B:- Failure to pay the tax deducted at source (w.e.f. 1.4.89) 5% per
month or part of a month of the amount of tax in default.
9.4
Section 276DD. Failure to pay the tax collected at source. The same guidelines
as in respect of Section 276B in Para 9.3 above shall be applicable for an
offence under this section also.
9.5
Section 276D (1):- Wilful attempt to evade tax etc.
(a)
If the amount sought to evaded is less than Rs. one lac the compounding fee
shall be 100% of amount sought to be evaded.
(b)
If the amount sought to be evaded is more than Rs. one lac the compounding fee
shall be 200% of the amount sought to be evaded.
For
the removal of doubts, it is clarified that the composition fee as per the
scale given above shall be charged even if no penalty was actually levied or
the amount of penalty was reduced or cancelled in appeal. It is also clarified
that where the same set of facts and circumstances attract prosecution u/s 276C
(1), 277 and 278, the compounding fee shall be charged by treating all these
offences as one offence.
9.6
Section 276C(2):- Wilful attempt to evade payment of any tax etc. 5% per month
or part of a month of the amount, the payment of which is sought to be evaded,
for the period of default.
9.7.1
Section 276CC:- Failure to furnish returns of income 5% per month or part of a
month of the tax determined on regular assessment as reduced by the tax
deducted at source and advance tax, if any, paid during the financial year
immediately preceding the assessment year reckoned from the date immediately
following the date on which the return of income was due to be furnished, to
the date of furnishing of the return or where no return was furnished, the date
of completion of the assessment.
9.7.2
Where before the date of furnishing of the return or when no return was
furnished, the date of completion of assessment any tax is paid by the assessee
u/s 143A or otherwise:
(i)
Compounding fee shall be calculated in the manner prescribed in Para 9.7.1
above, Upto the date on which the tax is so paid and
(ii)thereafter
the fee shall be calculated at the aforesaid rate on the amount of tax
determined on regular assessment as reduced by the TDS, advance tax and tax
paid u/s 140A or otherwise before filing the return of income or where no
return was furnished, the date of completion of assessment.
9.8
Section 276DD:- Failure to comply with the provisions of section 269SS) (prior
to 02-04-89)
A
sum equal to 50% of the amount of any loan or deposit accepted in contravention
of the provisions of section 269SS.
9.9
Section 276E:- Failure to comply with the provisions of section 269I (prior to
01-04- 89). A sum equal to 50% of the amount of deposit repaid in contravention
of the provisions of section 269I.
9.10
Section 277:- False statement in verification etc.
Section
278:- Abetment of false return etc.
For
both these offences the same guidelines will be applicable as for the offences
u/s 276D(1).
9.11
No composition fee has been prescribed for offences u/s 275A, 276(w.e.f.
1.4.89), 276A (w.e.f. 1.4.65), 276AA, 276AB and 276D as these provisions should
be strictly enforced. However if there are any mitigating circumstances in any
given case, the Board may consider the same on a case to case basis.
9.12
The prescribed compounding charges shall be chargeable while compounding
offence. However, in extreme and exceptional case of genuine financial hardship
the compounding charges may be suitably reduced with the approval of F.M.
10.
In addition to the composition fee, the compounding charges shall include
prosecution establishment expenses. A consolidated fee for prosecution
establishment expenses will be charged which would cover the litigation
expenses also. Accordingly, prosecution establishment expenses will be charged
at the 10% of the composition fee subject to a maximum amount of Rs. 50,000/-.
This limit will apply even where a number of offences are compounded under a
single order.
11.
The revised guidelines outlined above are in supersession of all earlier
instructions / clarifications on the subject and apply to future as well as
pending cases. However the offences already compounded under the old guidelines
shall not be reconsidered. 12. In a case where prosecution has not been filed,
no order for compounding of offence need be passed, if as per guidelines issued
vide F.No. 285/160/90-IT(Inv.) dated 7.2. 1991, the smallness of the default
does not call for launching of prosecution. However in such cases levy of
interest and penalties prescribed under the Direct Taxes Acts must be
considered on merits.
13.
These guidelines shall apply mutatis mutandis to offences under the other
Direct tax Laws also.
These
guidelines may be brought to the notice of all concerned. [Board's F.No.
285/161/90-IT (INV>), dt. 30.9.'94]
————————————————————————
F.No. 285/26/2002IT(Inv.)
Government of India
Ministry of Finance
Department of Revenue
Central Board of
Direct xesTa
New Delhi, the 29th July, 2003
To
All Chief Commissioners of Income Tax,
All Directors General of Income Tax (Inv.).
Subject: Guidelines for compounding of
offences under Direct Tax Laws –Amendments – regarding.
Sir,
The
existing Guidelines for compounding of offences under the Direct Tax Laws
issued vide Board’s F.No. 285/161/90-IT(Inv.) dated 30th September, 1994 have
been reviewed in the light of past experience and future needs. Following
amendments are hereby made to these Guidelines with immediate effect:
(A)
PROCEDURAL -AMENDMENTS:
(I)
Under the existing Guidelines, Technical Offences (enlisted in para 2.2 of the
said Guidelines) are to be compounded, by the Chief Commissioner of Income Tax
or Director General of Income Tax(Inv.) (as the case may be), if following
conditions are collectively satisfied:
(i)
It is the first offence by the assessee.
(ii)
The compounding charges do not exceed Rs. 10 lakh.
(iii)
The offence is compounded only before the filing of complaint.
In
all other cases, the technical offences as per existing Guidelines are to be
compounded with the approval of the Board.
In
this regard, it has now been decided that:
(a)
all types of cases relating to technical offences are to be compounded by
CCIT/DGIT;
(b)
distinction between first offence and subsequent offence is removed; and (c)
CCIT/DGIT shall not reject an application for compounding of a technical
offence, if all conditions prescribed in the Guidelines are satisfied.
(II)
Para 5(iii) of the existing Guidelines provides that for compounding of
substantive/non-technical offences, in which the amount involved in the offence
exceeds Rs. 1 lakh, the Board shall grant approval if Ministry of Law advises
that the chances of successful prosecution are not good. This requirement of
referring the matter to the Ministry of Law has now been done away with.
(B)
REDUCTION OF COMPOUNDING FEE
With
a view to encourage the assessees to get their offences compounded, compounding
fee in respect of the following offences has been substantially reduced as
under: (I) Section 276B (prior to 1.4. 1989) – Failure to deduct or pay tax –
Under
the existing guidelines, compounding fee is 10% per month or part of a month,
of the amount in default where the said amount exceeds Rs. one lakh and 5% per
month or part of a month of the amount in default in other cases. It has now
been reduced to 2% per month or part of a month of amount in default
irrespective of amount in default.
(II)
Section 276DD (prior to 2.4. 1989) – Failure to comply with the provisions of
Section 269SS – Under the existing Guidelines, compounding fee is 50% of
the amount of any loan or deposit accepted in contravention of the provisions
of Section 269SS. It has now been reduced to 20% of the amount of any loan or
deposit accepted in contravention of the provision of Section 269SS
(III)
Section 276E (prior to 1.4.1989) – Failure to comply with the provisions of
Section 269T -Under the existing Guidelines, compounding fee is 50% of the
amount of deposit repaid in contravention of the provisions of Section 269T. It
has now been reduced to 20% of the amount of deposit repaid in contravention of
the provisions of Section 269T.
(IV)
Section 276CC – Failure to furnish returns of income – Under the existing
Guidelines, compounding fee is as under “9.7.1 – 5% per month or part of a
month of the tax determined on regular assessment as reduced by the tax
deducted at source and advance tax, if any, paid during the financial year
immediately preceding the assessment year reckoned from the date immediately
following the date on which the return of income was due to be furnished, to
the date of furnishing of t he return or where no return was furnished, the
date of completion of the assessment. 9.7.2 – Where before the date of
furnishing of the return or where no returns was furnished, the date of
completion of assessment of any tax is paid by the assessee u/s 140A or
otherwise:
(ii)
Compounding fee shall be calculated in the manner prescribed in para 9.7.1
above, up to the date on which the tax is so paid and
(iii)
Thereafter the fee shall be calculated at the aforesaid rate on the amount of
tax determined on regular assessment as reduced by the TDS, advance tax and tax
paid u/s 140A or otherwise before filing the return of income or where no
return was furnished the date of completion of assessment.”
It
has now been reduced to 2% per month or part of a month of the tax to be
calculated as above.
(V)
Section 276C(1) willful attempt to evade tax, etc. –
Under
the existing Guidelines, the fee is:
(a)
If the amount sought to be evaded is less than Rs. one lakh, the compounding
fee shall be 100% of amount sought to be evaded.
(b)
If the amount sought to be evaded is more than Rs. one lakh, the compounding
fee shall be 200% of the amount sought to be evaded.
It
has now been reduced to 50% of amount sought to be evaded irrespective of the
amount sought to be evaded.
2.
All other provisions of the existing Guidelines and clarifications issued
subsequently from time to time shall continue to be applicable.
3.
Above amendments shall be applicable to future as well as to cases pending at
any stage. However, the offences already compounded shall not be reconsidered.
4.
These amendments shall apply mutatis mutandis to offences under the other
Direct Tax Laws also.
5.
These amendments may be brought to all concerned and be given wide publicity.
Yours faithfully,
Sd/-
(
SHARAT CHANDRA )
Director
(Inv. II & III) & OSD (Legal)
Copy
to:
1.
PS to Finance Minister/Secretary (R)/Chairman & Members (CBDT)
2.
All Joint Secretaries/Directors/Dy. Secretaries/Under Secretaries in CBDT.
Sd/-
(
SHARAT CHANDRA )
Director
(Inv. II & III) & OSD (Legal)
Salient features of
CBDT Circulars/Guidelines
CBDT
Instructions: The Central Board of Direct Taxes has been issuing instructions
and guidelines to its officers, to be followed before compounding any offence.
However, there was a lot of debate over the Board’s powers to fetter the
discretion of the tax authorities by issuing instructions or directions,
particularly in the wake of Delhi High
Court’s judgment in the case of M.P. Tiwari
vs. Y. P. Chawla ITO 187 ITR 506 (M.P.),
wherein it was held that instructions issued
are invalid and ultra vires. This led to a retrospective insertion of
explanation to section 279 consequent to which the Hon’ble Supreme Court
reversed the Delhi High Court’s decision. The Supreme Court’s decision is
reported in 195 ITR 607 (SC).Subsequently, in September 1994, the Central Board of Direct
Taxes, after reviewing the earlier guidelines, has issued revised guidelines.
These guidelines have also been amended vide CBDT’s F No.265/26/2002 IT(INV)
dated 29-7-2003 [263 ITR(St.)3] The salient features of these guidelines are as
under:
1.
The guidelines have reintroduced the concept of distinction between technical
and non-technical offences. Offences u/ss. 276B, 276BB, and 276E are regarded
as technical. All other offences are regarded non-technical.
2.
The technical offences can be compounded even before filing complaint.
3.
The restriction on compounding of offences by large and monopoly industrial
houses has been removed.
4.
The powers of compounding have been delegated to the Chief Commissioners of
Income-tax and the requirement of CBDT’s consent has been reduced to the
minimum.
5.
The revised guidelines have been made applicable to all pending applications
and even the cases rejected under the old guidelines can be considered.
6.
The following conditions should be satisfied for compounding an offence.
i.
There should be a written request from the assessee.
ii.
The amount of undisputed tax, interest and penalties relating to the default
should have been paid.
iii.
The assessee should express his willingness to pay both the prescribed
compounding fees as well as establishment expenses.
7.
A technical offence may be compounded by Chief Commissioner of Income Tax or
Director General of Income Tax if the following conditions are satisfied
cumulatively.
i.
The offence is the first one by the assessee.
ii.
The compounding charges do not exceed Rs. 10 lakhs.
iii.
The complaint should not have been filed.
In
all other cases, the offence can be compounded only with the previous approval
of the Board. In this regard, it has now been prescribed that
a.
All types of cases relating to technical offences are to be compounded by
CCIT/DGIT.
b.
Distinction between first offence and subsequent offence is removed and
c.
CCIT/DGIT shall not reject an application for compounding of a technical
offence, if all conditions prescribed in the guidelines are satisfied.
8.
A non-technical offence can be compounded with the approval of the Board
subject to satisfaction of the following conditions cumulatively in addition to
conditions mentioned in Para 6 above.
i.
The offence is the first one by the assessee.
ii.
The Board’s prior approval is obtained. However, if the amount involved exceeds
Rs. 1 lakh, approval can be granted only after seeking advice from Ministry of
Law. This requirement of referring the matter to Ministry of Law has not been
done away with vide amendment dated 29-7-2003 referred above.
9.
The guidelines also provide that in suitable and deserving case, the offence
may be compounded after seeking approval from F.M.
10.
The composition fees for compounding of various offences are as under: Sec 276B
2% per month of the amount of tax in default.Sec 276BB
2% per month of the amount of tax in default.
Sec
276C(1) 50% of the tax amount sought to be evaded
Sec
276C(2) 2% per month of the amount of tax the
payment of which is sought to be evaded.
Sec
276CC 2% per month of the assessed tax.
Sec
277 100% of the tax amount sought to be evaded where
the tax sought to be evaded is less than Rs.1 lakh and 200% in other cases.
No
composition fee is prescribed for other offences. However, it has been provided
that the Board can consider the same on a case to case basis. The compounding
charges shall also include prosecution establishment expenses which will be
charged @ 10% of the composition fee subject to a maximum of Rs. 50,000/-.
11.
It has also been prescribed that all the existing guidelines as well as the
amendments shall be applicable only to future as well as pending cases. In
other words, the offences already compounded shall not be reconsidered.
12.
Thus, compounding of an offence could only be made if a written request by way
of an application is made by an assessee bringing out in the application
following points.
i.
The nature of offence for which prosecution is launched or proposed to be
launched;
ii.
The reasons and circumstances under which the offence was committed;
iii.
The applicant’s willingness to pay the compounding fees including the part of
litigation expenses incurred by the Department till the date of compounding of
the offence;
iv.
Whether the applicant satisfies the requisite conditions or not.
v.
Lastly there should be a prayer to compound the offence by accepting the
compounding fees on getting the approval about the compounding fees by the
compounding authority.
13. Draft Applications
13.1 In case of
section 276B
Name
Address
Date
The Chief Commissioner of Income Tax,
Mumbai,
Sir,
Sub : Application for
compounding of prosecution u/s. 276-B in the case of ……………….. for A.Y. ………………….
Regarding.
1. The applicant is assessed to income-tax with
the I.T.O., … ……/A.C.I.T.,…. ……../Dy. C.I.T., …………./Jt. C.I.T………… Range ………..,
Mumbai.
2. The applicant is being prosecuted for
non-payment of following taxes deducted at source from the salary of the
employees within the time stipulated under section 200 read with Rule 30 of the
I.T. Rules, 1962 for the Assessment Year written hereunder:
A.Y. Amount of tax Due
Actual deducted date of date of at source payment payment
3. The applicant states that the following
factors have contributed for the alleged failure in payment of the tax deducted
at source within the stipulated time under the Acts and Rules.
1.
The appellant is doing
business of ………………………… for last ………… years. In the initial stages, it was
having a monopoly in this business. However, due to passage of time competition
increased and in the accounting years relevant to the Assessment Years referred
to above the applicant found it extremely difficult to face the stiff
competition. As a result of this stiff competition, the sales has shown regular
downward trend and has gone down from …………………………. in the year ……………. to Rs………………..
in the year ………………………….
2.
The applicant had also
experienced labour problems from …………….. to …………….. There was a strike for a
period of ………………. days by the workers of …………………… The workers after calling off
the strike, after the period of …………….. days had adopted ‘go slow’ tactics with
the result that the applicant suffered heavy financial losses and disruption of
office work.
3.
The applicant is
regular in payment of tax deducted at source and filing the returns thereof up
to the A.Y. ………………… i.e., immediate previous A.Y. relevant to the A.Y. for
which the proceeding u/s. 276B are initiated for the first time and a complaint
is lodged in the Presidency Magistrate Court, Bombay.
4.
In the accounting year
relevant to the years for which prosecution proceedings are commenced, due to
strike as explained above, the office work was completely disturbed/disrupted.
The applicant was, therefore, not in a position to comply with the requirement
of the I.T. Law in the absence of the books of account.
5.
Due to fire in the
factory premises in the month of ………………. 199… the applicant had lost almost all
the record for the period up to ……………………. date and therefore had to reconstruct
the record. The reconstruction of record was delayed as the factory and the
office premises were totally closed for a period ………………. years.
6.
The applicant for the
above Assessment Years has suffered losses and these losses are accepted by the
Department.
7.
Considering the above
facts as reasonable cause and as nominal penalties as detailed below were
levied u/s. 201 for the alleged default in non-compliance with the provisions
of section 200 as detailed below, were cancelled by the CIT(A).
A.Y. Amount of Penalty
4. The applicant is prepared to pay the
Compounding Fees as prescribed. The applicant understands that as per the
present norms, the Compounding Fees, payable may work out Rs. …………………….. which
the applicant is prepared to pay.
5. The amount of tax involved is small and the
applicant has discharged all its obligation under the Act. There are no taxes outstanding
as far as the Assessment Years referred to above are concerned.
6. The applicant in the above circumstances,
requests the Hon’ble Chief Commissioner to kindly consider the applicant’s case
for compounding the above offence in terms of section 279(2) of the I.T. Act,
1961 and the prosecution may kindly be waived/the case filed in the Court of
the Presidency Magistrate may kindly be withdrawn.
Thanking
you,
Yours
faithfully,
13.2 General
Application
Name
Address
Date
The Chief Commissioner of Income Tax,
Mumbai
Sir,
Sub: Application for
compounding of prosecution u/ss. 276/C & 277 in the case of …………….. for
A.Y. ………………… Regarding.
1. The applicant is assessed to income-tax with
the I.T.O., … ……/A.C.I.T.,… …../Dy. C.I.T., …/Jt. C.I.T…………. Range ………, Mumbai.
2. The applicant is being prosecuted u/ss. 276C,
277 and 278 for alleged concealment of income of Rs. ………………. for the A.Y.
……………. Briefly the facts of the case are as under.
1.
A.The applicant had
filed a return of income showing total income of Rs………………. on ………………………… for
the A.Y. ……………………… The business of the applicant is that of dealer in …………….
The applicant in the course of carrying on business had taken certain loans on
hundies amounting to Rs………………. as per details hereunder.
Date of Name of Amount Remarks Loan the Banker of Loan
Besides this, the
applicant had also effected purchases from following parties amounting to
Rs………………… as under:
Name Date Amount Whether register of the or unregistered seller
dealer under sales tax
o
The A.O. in the course
of the assessment proceedings had called upon the applicant to produce the
evidence in support of the loans taken as well as the purchases effected by the
applicant as detailed above.
o
The applicant had
filed the confirmation of loans from all the above parties. However, as the
A.O. was not satisfied about genuineness of the above loans since these loans
were either in cash from these parties, who were assessed to income tax or were
from the parties who were not assessed to Income-tax. The A.O. was therefore,
of the view that the loans amounting to Rs……………… as detailed above were not
genuine. The A.O. further observed that if the applicant was readily agreeable
for certain addition on account of non-genuineness of loans and purchases, no
penalty proceeding u/s. 271(1)(c) would be initiated if the assessee files a
revised return disclosing additional income.
The applicant in the circumstances and in order to avoid protracted litigation
in the matter readily agreed for an addition of Rs…………….. as against the total
loan of Rs……………. referred to above on the condition that no proceedings u/s.
271(1)(c) or the prosecution for alleged concealment of income was initiated.
Hereto annexed is a copy of letter dated …………….. of the applicant narrating the
above facts and conditions under which the return was revised for your ready
reference and record.
o
As regards the alleged
non genuineness purchases, it was submitted to the A.O. that the assessee is
carrying on business in which at times it is difficult to obtain proper bills
of purchase. The assessee filed with the A.O. details of purchase and sales to
show that the purchases were genuine as the same were matched by corresponding
sales. The A.O. did not doubt the sales as the quantity account matching the
purchases and sales was also filed. It was in these circumstances submitted
that simply because certain purchases were in cash and because the parties
concerned had moved from their last known addresses, no adverse inference could
be drawn against the applicant regarding the genuineness the purchases referred
to above. The applicant had also filed sales tax order in support of the above
fact. The applicant had, therefore, submitted that simply because the purchases
were from unregistered dealers who were not available now at the addresses
available with the applicant, no addition on account of alleged purchases could
be made. The A.O. completed the assessment by making an addition of Rs………………..
as non genuine purchases. The A.O. did not accept the conditions referred to
above, viz. that no penalty or prosecution proceedings could be initiated. The
A.O. levied a penalty of Rs……………. u/s. 271(1)(c).
o
The applicant, as a
matter of compromise, accepted the Assessment Order but has filed appeal
against the said penalty order u/s. 271(1)(c) levying penalty of Rs…………………. The
CIT(A) confirmed the penalty order. The applicant has now filed an appeal to
the Income Tax Tribunal which is pending.
o
In the meantime, the
Department initiated proceeding u/s. 276C for wilful attempt to evade tax and
also initiated proceedings u/s. 277 for false verification in the return of
income.
B. The applicant, in the above circumstances,
submit that the case of the applicant is fit for compounding the prosecution
u/ss. 276C and 277 for following reasons.
1.
The applicant had
voluntarily and readily agreed for addition of Rs…………….. to the total income of
the applicant. The Assessment Order would not show that the A.O. has given any
finding that the loans of Rs…………….. were proved to be non genuine and
represented the applicant’s income. The A.O. simply accepted the revised return
disclosing additional income of Rs…………….. which was disclosed without
specifying the exact amount of loans creditorwise considered as non genuine.
Thus there is no finding in the Assessment Order that the applicant concealed
income by showing specific non genuine loans.
2.
Further as against the
amount of Rs………………….. as per details in para A(i) only Rs…………. a part of the
same is offered for taxation in the hands of the applicant. This fact would
clearly show that the loans referred to above were not considered as non
genuine but were only suspected to be non genuine and thus there was no
detection of any concealed income by the Department.
3.
As regards the URD
purchases the sales tax order would clearly establish that the purchases were
effected by the applicant. The quantity account details and the sales were
accepted by the Department which would clearly show that the applicant had
effectively and genuinely made the purchases. However, because of the peculiar
nature of the business, the applicant was not in a position to produce the
parties. Inability to produce should not be construed to mean that the
purchases were not genuine. The applicant in order to avoid protracted
litigation had agreed to the addition. There is no finding in the Assessment
Order that the applicant did not genuinely made the purchase. Hence the charge
of concealment of income cannot be substantiated.
4.
The applicant had
cooperated with the Department in completing the assessment and has also paid
all taxes for these years.
5.
The applicant is
prepared to pay the prescribed compounding fees which the applicant understand
works out to Rs………………….
C. The applicant in the above circumstances, requests the Hon’ble
Chief Commissioner to kindly consider the applicant’s case for compounding the
above offence in terms of section 279(2) of the I.T. Act, 1961 and the
prosecution may kindly be waived/the case filed in the Court of the Presidency
Magistrate may kindly be withdrawn.
