The Central Board of Direct Taxes (CBDT), Government of India,
issued guidelines on September 4, 2015, for Compounding of Offences
under Income Tax Act, 1961 (hereinafter referred as 'IT
Act')/Wealth tax Act, 1957 in cases of persons holding
undisclosed foreign bank accounts/assets.
As per Section 279(2) of the IT Act, any offence under chapter
XXII of the Act may, either before or after the institution of
proceedings, be compounded by the CCIT/DGIT. As per section 2(15A)
and 2(21) of the IT Act, Chief Commissioner of Income Tax includes
Principal CCIT and Director General of Income tax includes
Principal DGIT. Accordingly, the CBDT issued guidelines
vide F. No.-285/35/2013-IT (Inv.V) dated 23.12.2014.
These guidelines came into effect from 01.01.2015 and are
applicable to all applications for compounding received on or after
the aforesaid date. The applications received before 01.01.2015
shall continue to be dealt with in accordance with the guidelines
Doubts have been expressed by the field formation as to whether
offences relating to undisclosed foreign bank accounts/assets could
be compounded as per the extant guidelines of the Board dated
23.12.2014. The matter has been examined in consultation with the
Special Investigation Team (SIT).
In this regard, the following clarification is issued in
continuation to the Board's guidelines for compounding of
offences dated 23.12.2014:
Offences relating to undisclosed foreign bank accounts/ assets
can be compounded only after filing the Prosecution complaint(s)
and shall not be compounded at the stage of show cause notice
and/or without filing the complaint in the court;
The cases in which the assessee has not admitted the foreign
bank account(s)/assets and/or has not cooperated with the
Department in the assessment, penalty & recovery proceedings
shall not be compounded;
The cases in which the assessee has admitted accounts/ assets
either fully (all accounts with which he is associated) or
partially (only a few account out of all accounts with which he is
associated), paid taxes and penalty and cooperated with the
Department may be considered for compounding as per the guidelines
dated 23.12.2014, only after filing the complaints;
It has been further clarified that there is no provision for
compounding of offences under the newly enacted Black Money
(Undisclosed Foreign Income and Assets) and Imposition of Tax Act,
2015. Consequently, the above clarifications will not apply to
cases coming under the purview of this Act.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Cummins Inc. is a foreign company, rendering services in respect of desktop/laptop software license and internet mail facilities to its Indian associated enterprises, i.e. CIL and CSSL which were paying IT charges provided by the taxpayer.
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