NEW DELHI: The Central Board of Direct Taxes on Saturday unveiled revised guidelines for compounding of offences under the Income Tax Act, aimed at facilitating ease of doing business and decriminalisation of violations.
Some of the major changes made for the benefit of taxpayers include making offence punishable under Section 276 of the Act as compoundable. This would mean that the taxpayer will have the option of avoiding prosecution or jail term by paying a fine subject to fulfilling certain conditions.
The scope of eligibility for compounding of cases has been relaxed whereby the case of an applicant who has been convicted with imprisonment for less than two years, which was earlier non-compoundable, has now been made compoundable.
Offence under Sec 276 made compoundable
The scope of eligibility for compounding of I-T cases has been relaxed whereby the case of an applicant who has been convicted with imprisonment for less than two years, which was previously non-compoundable, has now been made compoundable. The discretion available with the authority has also been “suitably” restricted, according to a finance ministry statement.
Under the I-T Act, there are provisions for initiating prosecution proceedings against taxpayers for various offences, apart from imposing penalty for defaults. There has been demand for decriminalising some of the provisions.
The Centre has taken several steps to decriminalise minor offences under various Acts and has also removed or made redundant several provisions and laws to promote ease of doing business and reduce the compliance burden. The reforms undertaken by the government to ease the compliance burden had helped India to improve its rank to 63 from 142 in the World Bank’s Ease of Doing Business ranking.
Section 276 deals with removal, concealment, transfer or delivery of property to thwart tax recovery. According to the tax department, if a person fails to discharge his tax liability, then the tax authority can recover the dues from him by attaching his movable and immovable properties. If the taxpayer fraudulently removes, conceals, transfers or delivers to any person, any property or any interest therein, intending thereby to prevent that property or interest therein from being attached for recovery of tax, then prosecution proceedings can be initiated under Section 276.
The department says that under Section 276, a taxpayer shall be punished with rigorous imprisonment for a term, which may extend to two years and shall also be liable for fine. Now, this offence has been made compoundable.
The time limit for acceptance of compounding applications has been relaxed from 24 months to 36 months now, from the date of filing of the complaint. Procedural complexities have also been reduced and simplified.
The statement said that specific upper limits have been introduced for the compounding fee, covering defaults across several provisions of the Act. Additional compounding charges in the nature of penal interest at the rate of 2% per month up to three months and 3% per month beyond three months have been reduced to 1% and 2%, respectively.