Revised guidelines for the aggravation and decriminalization of tax offenses – A step in the right direction

Taxpayers are now witnessing a new era where economic crimes are no longer caught with a laissez-faire attitude. Even where a person assessed has failed to file his tax return on time and to pay the tax due before the due date for filing the tax return, prosecution under Articles 276 CC and 276C (1) of the income tax law were initiated and the High Court also refused to grant relief. The Court ruled that Section 278E gives a presumption of prosecution for failing to file the return within the time limit and suppressing the income in the filed return, with dishonest intent to evade prosecution. ‘tax.

As field officers bring cases to court more frequently, the CBDT has found the balm at the right time, issuing revised guidelines for the compounding of offenses under the Income Tax Act under F. No. 285/08/2014 -IT (Inv.V)/196 of September 16, 2022. The composition of an offense is a process by which the person/entity who commits a breach will file an application with the authority of composition accepting that she committed a crime, so it should be tolerated.

The offenses have been categorized into categories A and B. Category A offenses are those where the offenses are of a technical nature caused by an act of omission. While Category B offenses are non-technical offenses attributed to an act of commission.

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Some of the major changes include making the offense punishable under Section 276 of the Act as compoundable but moved from Category A to Category B. Section 276 talks about the removal, concealment, transfer or delivery of property to frustrate the collection of tax. As always, there is also a negative list that would not be dialed. The offenses punishable under Articles 275A and 275B shall in no case be aggravated. The combination of category A offenses more than three times and category B offenses other than the first offense will not be permitted, except in exceptional circumstances. In addition, any offense which affects an offense under the Black Money (Undisclosed Foreign Income and Assets) and Taxation Act 2015, the Benami Transactions Act 1988 ( prohibition); or investigations by ED/CBI/Lokpal/Lokayukta/any other central or step agency shall not be allowed to be aggravated.

The directive also comes with a caveat that the composition of offenses is not a question of law; offenses may be aggravated by the competent authority if the eligibility requirements prescribed in these guidelines are met, taking into account factors such as the conduct of the person, the nature and extent of the offense in the context of the facts and circumstances of each case. In addition, the person requesting the composition must have paid the unpaid tax, interest (including interest u/s 220 of the law), penalty and any other amount due, relating to the offense for which the composition was requested before making the request.

In addition, the plaintiff must agree to withdraw appeals filed by him, if any, related to the offense or offenses he seeks to aggravate. In addition, any claim for aggravation of breach u/s 276B/276BB of the Act by a claimant for any period for a particular TAN shall cover all defects constituting breach u/s 276B/276BB with respect to of this TAN for this period.

In addition, the scope of eligibility for case composition has been relaxed, so that the case of an applicant who has been sentenced to a term of imprisonment of less than 2 years and who was previously not likely to be composed, is henceforth rendered capable of being composed. The discretionary power available to the competent authority has also been appropriately restricted. The time limit for accepting requests for composition has been relaxed from the previous limit of 24 months to 36 months now, from the date of filing of the complaint.

The compounding fee will be 1.25 times the normal compounding fee in the event that the compounding request is filed after the end of 12 months, but within 24 months, from the end of the month in which the complaint lawsuit, if any, has been filed in the Court of Justice. Additional capitalized charges in the form of penalty interest at the rate of 2% per month up to 3 months and 3% per month beyond 3 months have been reduced to 1% and 2%, respectively.

The request can be made in appendix 1; A suggested checklist for composition has been made available to field workers in Annex 2; U/s Order 279(2) has been made available in Appendix 3. Specific upper limits have been introduced for compound charges covering deficiencies in several provisions of the statute. While there may be many other relaxations that taxpayers have come to expect, it is important that an effort has been made by these guidelines to begin the process of decriminalizing tax laws.

(By Vivek Jalan, Partner, Tax Connect Advisory Services, multidisciplinary tax advisory firm)

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