CBDT publishes new I-T compounding norms; no relief in black money cases

Indulgence in serious criminal cases of money laundering, terror financing, corruption, possession of benami properties and undisclosed foreign assets will virtually shut a person's chances of getting relief in an income tax evasion offence beginning Monday, a latest directive issued by the CBDT said.

The policy-making body for the tax department has issued a revised 32-page guideline for 'compounding of offences under direct tax laws, 2019' which will be executed under the I-T Act, 1961.

The new directives make it clear that compounding of offences is "not a matter of right" and the department can extend such a relief only in certain cases keeping in view factors like "conduct of the person, the nature and magnitude of the offence on the context of the facts and circumstances of each case."

Compounding in I-T parlance means that the taxman does not file a prosecution case against the offender or tax evader in the court in lieu of payment of due taxes and surcharges and it is dealt under section 279(2).

The fresh guidelines state certain offences will "generally not be compounded" if the person has been found involved "in any manner, in an anti-national or terrorist activity" or is being investigated by the Enforcement Directorate (for offences under the Prevention of Money Laundering Act, CBI (IPC and Prevention of Corruption Act), Lokpal, Lokayukta or any other central or state agency like the local police.

Offences committed by a person for which he/she was convicted by a court of law under direct taxes laws, cases of a person as main accused where it was proved that he has enabled others in tax evasion 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 will largely be not compounded, the new guidelines said.

Similarly, any offence which has bearing on an offence relating to un-dislcosed foreign bank account or assets in any manner, any offence under the anti-black money law of 2015, the anti-Benami Act of 1988 will also fall under the no compounding category, it said.

A senior department official said the new guidelines are aimed to streamline the action against serious cases of black money and criminal tax evasion.

Also, offences booked under sections 275A and 275B of the I-T Act (deals with failure to comply with search and seizure action) and 276 (removal, concealment, transfer or delivery of property to thwart tax recovery) "will not be compounded" including under sections 276C (wilful attempt to evade tax), 277A (falsification of books of account or documents among others).

Any other offence, which the competent authority considers not fit for compounding "in view of factors such as conduct of the person, nature and magnitude of the offence" will also not be compounded, it said.

Also, cases in which the person seeking compounding of an offence under the I-T Act was convicted by a court for two years or more will fall under the no compounding category, it said.

It adds that the Union Finance Minister will be sole authority to relax these guidelines in a "deserving case" after obtaining a report from the Central Board of Direct Taxes (CBDT).

The exhaustive guidelines inform the I-T officials in detail about the relaxation of time, competent authority for compounding offences, procedure and charges among other processes for compounding.