Slide 1
PROSECUTION AND COMPOUNDING OF OFFENCES
By Subash Agarwal, Advocate
Q.What is Prosecution ??
Prosecution means taking of legal proceedings against a person
for a crime.
What is Compounding of offence ??
(a)Permission of the court is not required for
compounding.(b)Through compounding, the distressed party is
compensated for his grievance.
Compounding of Offence means conciliation by the parties under
dispute.
Who has power to compound an offence??
The aggrieved party or the victim has a right to compound an
offence.A public prosecutor has no right of compounding.
(a)Cognizable Offence - As per sec. 2(c) of Code of Criminal
Procedure, 1973, it is an offence for which a police officer can
arrest without a warrant.
(b)Non-cognizable Offence - As per sec. 2(l) of CPC, it is an
offence for which a police officer has no authority to arrest
without warrant.
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: - Offences u/s.-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 a
complaint.
Offences under the Income Tax Act,1961
Sections 275A to 278 provides for various types of offences
under which the Income Tax Department canprosecutean assessee in
the Court of Law.
SectionOffenceParticularsPunishment275AContravention of order
u/s. 132(3)Order for non removal of money bullion etc. under Search
and seizureFine and 2 years rigorous imprisonment.275BContravention
of order u/s. 132(1)(iib)Failure to allow inspection of books of
accounts and other documents to authorized officerFine and 2 years
R.I.276Removal, concealment, transfer or delivery of property to
thwart recovery of taxes.Fine and 2 years R.I.276AFailure to comply
with provisions of sections 178(1) and 178(3).Section 178(1):
Notice by liquidator of a company within 30 days of his appointment
to the A.O. Section 178(3): Non removal of assets of the company by
liquidator without permission of the CCIT or CIT6 months to 2 years
R.I.
SectionOffenceParticularsPunishment276BFailure to pay tax to the
credit of the central Govt. under chapter XIID or XVII-BFailure to
pay the tax deducted at source under Chapter XVII-B or pay tax as
per 115O(2) or proviso to section194BFine and 3 months to 7 years
R.I.276BBFailure to pay the tax collected at source.Fine and 3
months to 7 years R.I.276C(1)Wilful attempt to evade tax.1. If the
tax sought to be evaded exceeds Rs. 25 lacs2. In any other case1.
Fine and 6 months to 7 years R.I.2. Fine and 3 months to 2 years
R.I.276C(2)Wilful attempt to evade payment of tax, penalty or
interestFine and 3 months to 2 years R.I.
SectionOffenceParticularsPunishment276CCWilful failure to
furnish the return of income u/s 139(1), pursuant to notice u/s
142(1)/ Sec. 148/ Sec. 153A1. If the tax sought to be evaded
exceeds Rs. 25 lacs.2. In any other case.1. Fine and 6 months to 7
years R.I.2. Fine and 3 months to 2 years R.I.276DWilful failure to
produce account books and documents&Wilful failure to comply
direction u/s 142(2A).Non compliance under section 142(1)-for
production of books and Section 142(2A)- special auditR.I. upto 1
year or fine @ Rs. 4-10 per day during which default continues or
both.
SectionOffenceParticularsPunishment277False statement in
verification, etc.1. If the tax sought to be evaded exceeds Rs. 25
lacs.2. In any other case1. Fine and 6 months to 7 years R.I.2.
Fine and 3 months to 2 years R.I.277AFalsification of books of
account 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 2 years R.I.
SectionOffenceParticularsPunishment278Abatement of false returns
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. 25 lacs2. In any other case.1. Fine and 6
months to 7 years R.I.2. Fine and 3 months to 2 yearsR.I.
Non Cognizable Offences under the Income Tax Act.
As per section 279A the following offences shall be deemed to be
non-cognizable offences notwithstandinganything contained in the
Code ofCriminal Procedures1973.
1. Sec. 276BFailure to pay tax to the credit of the central
Govt. under chapter XIID or XVII-B 2. Sec. 276C(1)Wilful attempt to
evade tax. 3. Sec. 276C(2)Wilful attempt to evade payment of tax 4.
Sec. 276CCFailure to furnish the return of income. 5. Sec. 277False
statementin verification, etc. 6. Sec. 278Abatement of false
returns etc.
1. 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: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)A technical offence may be compounded by Chief
Commissioner of Income Tax or Director General of Income Tax.
(b)Non-Technical offence can be compounded only with the previous
approval of the Board. Significance of Technical &
Non-Technical Offences
Compounding Fees and Approving Authority.
This Act provides relief from prosecution u/s 278AA and 279. A
list of compoundable offences is provided hereinafter
SectionOffenceCompounding possible by CCIT or DGIT as per
section 279(2)Rate ofcompounding asper guidelines ofCBDT
F.No.285/26/2002-IT(Inv.); Dated 29th July, 2003 and other
guidelines.275AContravention of order u/s. 132(3)Yes, with prior
approval of the CBDTNot prescribed-on case to case basis + 10%of
composition fees as establishment expenses (max Rs.
50,000.00)275BContravention of order u/s. 132(1)(ii)Yes, with prior
approval of the CBDTNot prescribed-on case to case basis + 10% of
composition fees as establishment expenses (max Rs. 50,000.00)
SectionOffenceCompounding possible by CCIT or DGIT as per
section 279(2)Rate ofcompounding asper guidelines ofCBDT
F.No.285/26/2002-IT(Inv.); Dated 29th July, 2003 and other
guidelines.276Removal, concealment, transfer or delivery of
property to thwart recovery of taxes.Yes with prior approval of the
CBDTNot prescribed-on case to case basis + 10%of composition fees
as establishment expenses (max Rs. 50,000.00)
SectionOffenceCompounding possible by CCIT or DGIT as per
section 279(2)Rate ofcompounding asper guidelines ofCBDT
F.No.285/26/2002-IT(Inv.); Dated 29th July, 2003 and other
guidelines.276AFailure to comply with provisions of sections 178(1)
and 178(3).U/s 278AA, if there is reasonable cause then no
prosecution proceedings can be initiated. Otherwise composition
with the prior approval of the CBDT2% per month or part of a month
of amount in default irrespective of amount in default
SectionOffenceCompounding possible by CCIT or DGIT as per
section 279(2)Rate ofcompounding asper guidelines ofCBDT
F.No.285/26/2002-IT(Inv.); Dated 29th July, 2003 and other
guidelines.276BFailure to pay the tax deducted at source.U/s 278AA,
if there is reasonable cause then no prosecution proceedings can be
initiated. Otherwise compounding by CCIT or DGIT. CBDT approval not
needed.2% per month or part of a month of amount in default
irrespective of amount in default
SectionOffenceCompounding possible by CCIT or DGIT as per
section 279(2)Rate ofcompounding asper guidelines ofCBDT
F.No.285/26/2002-IT(Inv.); Dated 29th July, 2003 and other
guidelines.276BBFailure to pay the tax collected at
source.Compounding by CCIT or DGIT. CBDT approval not needed.2% per
month or part of a month of amount in default irrespective of
amount in default
SectionOffenceCompounding possible by CCIT or DGIT as per
section 279(2)Rate ofcompounding asper guidelines ofCBDT
F.No.285/26/2002-IT(Inv.); Dated 29th July, 2003 and other
guidelines.276C(a) 276C(1) Wilful attempt to evade tax.(b) 276(2)
Wilful attempt to evade payment of tax, penalty or interest.(a)
Under section 279(1A) it is provided that prosecution for offence
u/s 276C 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(b) -do-(a) 50% of amount of tax sought to be evaded
irrespective of the amount sought to be evaded.(b) 2% per month or
part of a month of amount in default irrespective of amount in
default
SectionOffenceCompounding possible by CCIT or DGIT as per
section 279(2)Rate ofcompounding asper guidelines ofCBDT
F.No.285/26/2002-IT(Inv.); Dated 29th July, 2003 and other
guidelines.276CCWilful failure to furnish the return of income.Yes,
with prior approval of the CBDT2% per month of the assessed
tax.
SectionOffenceCompounding possible by CCIT or DGIT as per
section 279(2)Rate ofcompounding asper guidelines ofCBDT
F.No.285/26/2002-IT(Inv.); Dated 29th July, 2003 and other
guidelines.276DFailure to produce account books and documents
&Wilful failure to comply direction u/s 142(2A)Yes, with prior
approval of the CBDTNot prescribed-on case to case basis + 10% of
composition fees as establishment expenses (max Rs. 50,000.00)
SectionOffenceCompounding possible by CCIT or DGIT as per
section 279(2)Rate ofcompounding asper guidelines ofCBDT
F.No.285/26/2002-IT(Inv.); Dated 29th July, 2003 and other
guidelines.277False statement in verification, etc.Under section
279(1A) it is provided that prosecution for offence u/s. 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 CBDT100% 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.
SectionOffenceCompounding possible by CCIT or DGIT as per
section 279(2)Rate ofcompounding asper guidelines ofCBDT
F.No.285/26/2002-IT(Inv.); Dated 29th July, 2003 and other
guidelines.277AFalsification of books of account or documents,
etc.Yes, with prior approval of the CBDTNot prescribed-on case to
case basis + 10%composition fees as establishment expenses
SectionOffenceCompounding possible by CCIT or DGIT as per
section 279(2)Rate ofcompounding asper guidelines ofCBDT
F.No.285/26/2002-IT(Inv.); Dated 29th July, 2003 and other
guidelines.278Abatement of false returns etc.Yes, with prior
approval of the CBDTNot prescribed-on case to case basis + 10% of
composition fees as establishment expenses (max Rs. 50,000.00)
As per the new instruction issued by the CBDT on 16.05.2008,
compounding fees have been enhanced from 2% to 5%.
Note:
Important points relating to compounding of offences under the
Income Tax Act
(a)As per section 279(2), power has been conferred on CCIT or DG
to compound offences either before or after the institution of
prosecution proceedings.
(b)As per section 278AA, a person shall not be punishable for
failure referred to in Section 276A ( relating to liquidators duty
u/s 178)Section 276B (relating to TDS default)If he proves that
there was a reasonable cause for such failure.
(c)As per various CBDT circulars / guidelines / instructions -It
was emphasized that aprosecution should not ordinarily be
compoundedifthe prospects of success were good.
Compounding of an offence may be considered only in those cases
in which the assessee comes forward with a written request for
compounding offence.
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.(III) 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.
In addition to the compounding fee, the compounding charges
shall include prosecution/ establishment expenses. 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.
(v) 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.
Format of Application for compounding of offence to be submitted
to CCIT/ DGITName: xxxxxxxxxxxxxxxxxxxxxxAddress:
xxxxxxxxxxxxxxxxxxDate: xxxxxxxxxxxxxxxxxxxxTo:The Honble Chief
Comissioner of Income Tax-I,Aayakar Bhawan, KolkataSir,Sub:
Application for compounding of prosecution u/s. 276-B in the case
of xxxxxxxxxxx for A.Y. 2011 - 2012 - Regarding.Sir,
The applicant is assessed to income-tax with the I.T.O., ward
xx(x), Kolkata..
2.The applicant is being prosecuted for non-payment of following
taxes deducted at source from the payment of interest other than
interest on securities within the time stipulated under section 200
read with Rule 30 of the I.T. Rules, 1962 for the Assessment Year
and amount written hereunder:
A.Y.:2011 2012
b) Amount of TDS Due:Rs.3,00,000/-c) Actual date of tax deducted
at source:30.06.2010
d) Date of payment of TDS: 30th September, 2011 (b)The aforesaid
sum together with the compensatory interest u/s 201(1A) of Rs.
80,000/- was paid on 30th September, 2011.
Copies of the relevant Form with relevant details alongwith
statement of TDS deposited u/s 200(3) are annexed hereto and
collectively marked as Annexure: A.(c)The Ld. ITO, Wd. xx(x) also
issued a letter dated xxxxxx asking for the reason for the late
deposit of TDS into the Central Government Account.The said Letter
was also duly replied to on xxxxxxx. In the said letter, the
assessee stated as under-(d)The assessee was suffering from life
threatening ailment is evidenced by the various medical reports and
prescriptions which are annexed herewith and are collectively
marked as Annexure:C.
4.The applicant states and submits that a show-cause notice u/s
279(1) dated 05/12/2012 was received from the Ld. CIT(TDS),
Kolkata. The applicant appeared before the Ld. CIT(TDS) through his
A/R and submitted a reply on xxxxxxx stating therein why
prosecution proceedings u/s 276B be dropped.Copies of the
show-cause notice and the reply are annexed hereto and marked as
Annexure: D.5. 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.1 lac
which the applicant is prepared to pay.6. 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.7. The
applicant in the above circumstances, requests the Honble Chief
Commissioner to kindly consider the applicants 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,CC: To- Honble Commissioner of Income Tax
(TDS) Thanks!!!Namaskar!!!You can contact me
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