Tax notices + litigation · Settlement
Compounding of offences: settling prosecution before trial
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Facts
Compounding is the process of settling a criminal prosecution by payment of a compounding fee, avoiding trial and criminal conviction. Available for most technical offences under the IT Act (276C (now Sec 478), 276CC (now Sec 479), 276B, 277) but not for serious fraud.
Provisions and law
- IT Act, Sec 279(2) | CBDT Compounding Guidelines
Analysis
Compounding fee: Varies by offence, typically 25%-150% of the evaded tax + prosecution expenses. Must apply before charge-sheeting. After charge-sheet, compounding is at the court's discretion and is harder to obtain. Process: Apply to PCCIT (Principal Chief Commissioner) with full disclosure, payment of undisclosed income tax + interest, and payment of compounding fee.
Conclusion
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