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 dated 16.05.2008.
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.
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