For defaults made in compliance of provisions, the Income-tax Act, 1961 specifies for legal actions and statutory complications for the taxpayer. The Income-tax Act guides in detail the procedures for handling the punishable – non-punishable, cognizable – non-cognizable, compoundable – non-compoundable offenses and for the imposition of penalties liable therein.
This post will guide you all about identified legal penalties and the quantum of reliefs provided by the tax department for complying with provisions related to the compoundable offenses under the Income-tax law.
Offenses under Income tax
The Sections 275A to 280 of the Income-tax Act defines for all chargeable offenses against a defaulting assessee by the Income-tax department. These can either be prosecuted against an assessee in the court of law or within the judicial powers of the assessing officer or competent authorities (“CA”) depending on the case situation.
While the Act also states for prosecution against the taxpayer to happen only if it is appealed by the Commissioner of Income-tax or Commissioner of Income-tax appeals or by any approved authority. The Sections guides for the following list of offenses against which prosecution be held against a taxpayer :
| Section | Offenses |
| 275A | Contravention of order u/s. 132(3) |
| 275B | Contravention of order u/s. 132(1)(ii)
|
| 276 | Removal, concealment, transfer or delivery of property to thwart recovery of taxes.
|
| 276A | Failed to comply with provisions of 178(1) & 178(3) |
| 276AB | Failed to comply with provisions of 269, 269UE, 269UL, 269UC |
| 276B | Failed to pay tax to the credit of the central Govt. under chapter XIID or XVII-B
|
| 276BB | Failed to pay TCS |
| 276C(1) | Attempted to evade tax |
| 276C(2) | Attempted to evade payment of tax |
| 276CC | Failed to furnish return |
| 276CCC | Failed to furnish return in search cases ( u/s 158BC(a)) |
| 276D | Failed to furnish or produce account books or documents |
| 277 | False statement in verification etc |
| 277A | False information sufficed in books of accounts etc |
| 278 | Abatement of false return etc. |
For any of the above defaults made, the tax department prescribes for three modes of the charge against the taxpayer:
- Charge of interest.
- A penalty by way of fine, charges, etc.
- Legal prosecution, confinement, etc.
Compounding of offenses in Income Tax Law
Compoundable offenses include all those offenses which are discretionary at the level of parties under dispute. For redressal or application of penalties no permission of the court is required and are appealed & conciliated within the final decision of the designated authorities. In short, it is a way of adjustment of compliance forbidding through a legal settlement.
The Income-tax Act provides relief of prosecution from the following offenses:
| Section | Compoundable by Chief Commissioner (CCIT) or Director General of Income-tax (DGIT) as per section 279(2) |
| 275A | Compoundable with prior approval of CBDT |
| 275B | Compoundable with prior approval of CBDT |
| 276 | Compoundable with prior approval of CBDT |
| 276A | If a reasonable cause specified u/s 278AA else, Compoundable with prior approval of CBDT |
| 276AB | If a reasonable cause specified u/s 278AA else, Compoundable with prior approval of CBDT |
| 276B | If a reasonable cause specified u/s 278AA else, Compoundable by CCIT or DGIT. |
| 276BB | Compoundable by CCIT or DGIT. |
| 276C(1) | No prosecution shall be held if imposition of penalty has been reduced or waived off by Commissioner u/s 279(1A), else compoundable with prior approval of CBDT |
| 276C(2) | No prosecution shall be held if imposition of penalty has been reduced or waived off by Commissioner u/s 279(1A), else compoundable with prior approval of CBDT |
| 276CC | Compoundable with prior approval of CBDT |
| 276CCC | Compoundable with prior approval of CBDT |
| 276D | Compoundable with prior approval of CBDT |
| 277 | No prosecution shall be held if imposition of penalty has been reduced or waived off by Commissioner u/s 279(1A), else compoundable with prior approval of CBDT |
| 277A | Compoundable with prior approval of CBDT |
| 278 | Compoundable with prior approval of CBDT |
Procedure for Compounding
- Compounding of the offense shall be initiated only if a written request is made by the assessee to the authority then ;
- On receipt of an application, the same shall be processed by the Assessing Officer / Deputy director and will be submitted to the compounding competent authority (DGIT or CCIT) through proper channel
- The authority then shall undertake proceedings of the case within the prescribed time period specified by board timely. (usually 180 days )
- The penal charges as applicable shall be notified to the assessee to be paid to the authority within specified time period. The authority then shall pass the compounding order for the case . If the case gets rejected by authority it shall be taken for prosecution and be bought to the notice of the court.
Provisions applicable for Compounding as per New Guidelines 2019
- As specified ‘Compounding is not a matter of right‘. Compounding by the competent authority shall be done on the satisfaction of eligibility conditions prescribed in the guidelines issued by the Department for compounding timely and the facts/circumstance of the case other than seeking it as a legal obligation.
- Prosecution of the case registered under both the laws the Income-tax Act and IPC (Indian Penal Code) is based on the same facts shall be withdrawn by the competent authority if the complaint is compounded under any of the act.
- No compounding of offenses shall be allowed in cases which have been already rejected under the compounding rules; In cases where the person has involved others in tax evasion; related to undisclosed foreign bank accounts/assets; related to black money or Benami transactions.
- The application for compounding of the offense shall have to be made only on a legal stamp paper of Rs 100 in the prescribed format (Annexure 1 )
- No application filed after 12 months of application of prosecution application shall be accepted for compounding.
Received tax notice?
File an appropriate response to the department to avoid legal prosecution by emailing us at info@taxreturnwala.com
Also Read: Taxability of Gifts to NRIs from Resident Indians