The Central Board of Direct Taxes (CBDT) has issued the guidelines applicable for the compounding of offences under the Income Tax Act, 1961.
Compounding of offences, in general, is not a matter of right. However, offences may be compounded by the Competent Authority on satisfaction of the eligibility conditions prescribed in these Guidelines keeping in view factors such as conduct of the person, the nature and magnitude of the offence in the context of the facts and circumstances of each case.
A prosecution instituted under Indian Penal Code (IPC), if any, cannot be compounded. However, section 321 of Criminal Procedure Code, 1973 , provides for withdrawal of such prosecution. In case the prosecution complaint filed under the provisions of both the Act and the IPC are based on the same facts and, the complaint under the Income Tax Act, 1961 is compounded, then the process of withdrawal of the complaint under the IPC may be initiated by the Competent Authority.
The offences under Chapter-XXII of the Income Tax Act, 1961 are classified into two parts (Category ‘A’ and Category ‘B’) for the limited purpose of Compounding of Offences. The Category A offences are the ones where the offences are of technical nature caused by an act of omission. Whereas the Category B offences are non-technical offences attributed to an act of commission.
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