CBDT issues Circular on FAQs related to Revised Guidelines for Compounding of Offences under Income Tax Act of 1961

The Central Board of Direct Taxes (CBDT) has issued a Circular on FAQs relating to Revised Guidelines for Compounding of Offences under Income Tax Act of 1961.

The Circular Read as Follows:

CBDT issued revised guidelines for Compounding of offences (guidelines’) under the Income-tax Act, 1961(the ‘Act’) on 17.10.2024. The revised guidelines superseded all existing guidelines on the subject and are applicable to pending as well as new applications, from the date of their issuance.

The revised guidelines have been simplified from previous guidelines, inter-alia, by eliminating categorization of offences, removing the limit on number of occasions for filing applications, allowing fresh application upon curing of defects, which was not permissible under earlier guidelines, allowing compounding of offences under section 275A and 276B of the Act, removing the existing time limit for filing application viz 36 months from the date of filing of complaint, etc.

Following the issuance of the guidelines, queries were received from stakeholders seeking clarifications on various provisions. Based on these queries and to provide clarifications, the CBDT has issued this Circular in the form of answers to frequently asked questions (FAQs). These FAQs provide the necessary clarifications on the scope of the guidelines, eligibility for filing applications, the mode of filing compounding applications and payment of fees, terms for compounding, compounding charges and procedures for payment, time limits, and other related aspects.

A. Compounding of offence

Q.1 What is compounding of offence?

Ans: Compounding of an offence is a mechanism whereby the defaulter is reprieved of major legal consequences by affording him an opportunity to pay certain sum of money to escape prosecution. The specified offences can be compounded by the competent authority either before or after the initiation of proceedings.

Q.2 Whether compounding of an offence constitute as an admission of an offence by the appli cant?

Ans: N0, compounding is intended to resolve the offence(s) and it is not to be construed as an admission of such offence(s) by the applicant. (Ref: panl 9.11 of the guidelines)

Q.3 Are there any offence(s) under Income Tax Act which are not compoundable?

Ans: No, all offence wlder Income Tax Act have been made compoWldable in revised guidelines dated 17.10.2024.

B. Competent authority/Jurisdiction

Q.4 Where can the compounding application be filed by the applicant?

Ans: The compounding application can be filed before the jurisdictional Pr. CCIT / CCIT / Pr. DGIT / DGIT, being the Competent Authority for compounding of offences. (Ref: para 8.1 of the guidelines)

Q.5 Who will be the competent authority where jurisdiction of the applicant lies with more than one jurisdiction charge for TDS related offences?

Ans: 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. (Ref: para 8.2 of the guidelines)

Q.6 Who will be the competent authority where the applicant has more than one TAN and jurisdiction over these TANs lies with more than one jurisdiction charge?

Ans: In such case, the jurisdictional authority where the quantum of TDS default is higher, shall be the Competent Authority. (Ref: para 8.3 of the guidelines).

C. Compounding application and fee

Q.7 Whether any format and fees has been prescribed for an application for compounding?

Ans: The application for compounding must be fi led in the format prescribed in Annexure-l to the revised guidelines. The application may include one or more offence(s) under different sections pertaining to one or multiple years/quarters. The application should be filed in the form of an affidavit on stamp paper of Rs. 100, along with application fees as per Para 4.2.1 of the revised guidelines dated 17.10.2024. (Ref: para 4.1.1 and 4.2.1 of the guidelines)

Q.8 Is there any time limit for filing of an application for compounding?

Ans: No, an application for compoundi ng can be filed at any time after committing the offence, regardless of whether the same has come to the notice of the department or prosecution proceedings have been launched. (Ref: para 4.1.3 ofthe guidelines)

Q.9 Whether an applicant whose application was pending before issuance of revised guidelines required to deposit application fee as per para 4.2.1 ?

Ans: No application fees are payable for applications filed under earlier guidelines and pending on 17. 10.2024. (Ref: para 4.2.4 of the guidelines)

Q.10 Whether compounding appli cation fee is adjustable against compounding charge payable?

Ans: Yes, compounding fee is adjustable but only against compounding charges payable for the offence(s) sought to be compounded in the particular application. Cross application adjustment is not allowed. However, if compounding application is rejected for any reasons, the application fees shall neither be refundable nor adjustable against any subsequent application. (Ref: para 4.2.2 of the guidelines)

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