There is encouraging news for taxpayers seeking relief from tax notices or court cases, including serious situations that could lead to jail time. Recently, in March 2024, a woman from Delhi faced imprisonment for failing to submit her income tax return (ITR). To avoid such circumstances, the finance minister announced a simplification and rationalization of compounding procedures in the Budget 2024. Following this, revised guidelines were released on October 17, 2024. From this date, all offenses under the Income Tax Act, 1961 have become compoundable.

According to the new guidelines, taxpayers can submit a compounding application offline to the tax department. If the application is approved, the department will dismiss the case. This option is particularly useful for those who fear losing their case in court. However, if you are confident in your position and believe the judge will rule in your favor, you may choose to forgo the compounding process and continue your fight in court.

Circular No. 04/2025

Sub: Frequently Asked Questions (FAQs) on Guidelines for Compounding of Offences under the Income-Tax Act, 1961 dated 17.10.2024

CBDT issued rev’ised guidelines for Compounding of offences (‘guidelines’) under the Income-tax .Act. 196.1.1 the ‘Act’) on 17.10.2024. The revised guidelines superseded all existing guidelines on the subject and are applicable to pending as well as new ap llCations. from the date or their issuance.

2 The re ‘ised giiidelines have bc•en simplilled tioin previous guidelines. inter-alia. by eliminatinJu caleporization of’ offences. removing the límit on number ot occasions for filing applications. allowing fresh application upon curing of’ defects, which was not permissible under earl ier giiidelines. allos ius conapounding ot oft’ences under section 275A and 27ó B of the Act, rcinoviiig the existint time liniit for filing application viz 36 inonths from the date of iiling ot coniplaint. etc.

3 For better awareness and understanding among the stakeholders with respect to the revised guidelines dated 17.10.2024. clari Creations are pro› ided by issue of a Circular in the tomb of anse ers to the frequently asked questions (FAQs) as follow’s:

A.   Compounding of offence

• What is compounding ot otfence‘?

Ans: Compounding ot an ofténce is a mechanism w herebj the defaulter is reprieved of major legal consequences bj affording lairn an oppoiJiini¿ to pay certain stint of money to escape prosecution. The specified offences can be compounded by the competent authority either before or atier thc initiation o1 pre cecdings.

• W’hether conipounding of an oI’fence constituie as an adnaission of an offence bj the applicant‘?

Ans: No. c‹ampounding is intended to resolx’e the offence(s) and it is not to be construed as an admission of such otfence(s) by Hoc itpplicant. (Ref: para 9.11 of the guidelines)

• Are there any offence(s) under Incoine Tax Act i hich are not coinpoundable?

Ans: No. all ot’túnce under Inct mc Tax .Act hai c been made coiiiptiundable in revi sed guidelines dated 17. 10.2024.

B.   Competent authority/Jurisdiction

• there can the compounding application be fi led by the applicant‘?

Ans: The compounding application can be filed before the jurisdictional Pr. CCIT / CCIT / Pr. DGIT / DGIT, being the Competent Authority for compounding of offences. (Ref: para 8.1 of the guidelines)

• Who will be the competent authority where jurisdiction of the applicant lies with more than one jurisdiction charge for TDS related offences?

Ans: In such case, the Pr. CCIT/ CCIT/ Pr. DGIT/ DGIT in whose jurisdiction compoundln@ application has been t4led will be the Competent Authority. However, in case the applicant files applications in more than one jurisdictional charge, the Competent Authority will be the jurisdictional authority where the quantum of TDS default is higher. (Ref: para 8.2 of the guidelines)

• Who will be the competent authority there the applicant has more than one TAN and jurisdiction over these TANs lies with more than one jurisdiction charge?

Ans: In such case. the jurisdictional authority where the quantum of TDS detault is higher, shall be the Competent Authority. (Ref: para 8.3 of the guidelines)

C. Compounding application and fee

• Whether any fomiat and fees has been prescribed for an application for compounding?

Ans: The applicatitin for compounding must be filed in the format prescribed in Annexure-1 to the revised guidclines. The application may include one or more offence(s) under different sections pertaining to one or multiple 5’ears/quarters. The application should be filed in the tomb of an affidavit on stamp paper of Rs. 100, along with applicatlon fees as per Para 4.2.1 of the revised guide Iines dated 17.10.2024. (Ref: para 4.1.1 and 4.2.1 of the guidelines)

• Is there any time limit for filing o1 an application ior compounding?

Ans: No. an application for compounding can be filed at any time atier committing the offence. regardless of whether the same has come to the notice of the department or prosecution pi’oceedings have been launched. (Ref: para 4.1.3 of the guidelines)

• Whether an applicant whose application was pending before issuance of revised guidelines required to deposit application fee as per para 4.2.1‘?

Ans: No application fees are payable for applications tiled under earl ier guidelines and pending on 17.10.2024. (Ref: para 4.2.4 of the guidelines)

• Whether conapoundinj application 1’ee is adjustable against compounding charge payable?

Ans: Y es. coiiipounding fee is adjustable but only against compounding charges payable for the offence(s) sought to be compounded in the p‹irticular application. Cross application adjustment is not allow’ed. However, if compounding application is rejected for any reasons,

the application fees shall neither be refundable nor adjustable against any subsequent application. (Ref: para 4.2.2 of the guidelines)

• Whether compounding is al1ow’ed if the application 1or siich an offence was previously rejected? lf so. w’hether separate applications need to be filed for more than one applications rejected under the previous guidelines? How will the compounding application fees be charged?

Ans: Yes, an applicant may apply for compounding of offence(s) through a single consolidated application, if one or more applications had been rejected under previous guidelines. How’ever. the fresh application can only be filed if such rejection(s) were on account of curable defects (illustrative examples in para 3.2 of the revised guidelines) and no application is al1ow’ed to be filcd for any of the rejection(s). made by the Competent Authority, on merits with those particulars i.e. of‘fence and relevant tinancial year. Compounding application fees chargeable for a ’consolidated compounding application’ would bc charged in this case. (Ref: para 3.2 and 4.2.3 of the guidelines)

• Whether revised guidelines are applicable on pending compounding applications? If yes. whether applicants have to file a fresh application?

Ans: Yes. revised guidelines are applicable on the applications, pending betore issuance of these guidelines. The applicants whose applications were pending on 17.10.2024 are not required to file a lresh application or pay any fresh application fees. (Ref: para 3.1 and 4.2.4 of the guidelines)

• Whether applicant can withdraw’ a compounding application and file a new application?

Ans: The applicant can the a next single application or consolidated application after withdra ’al of earlier application(s). However, such new application shall be treated as a subsequent application and higher rate shall be applicable as per Para 10. (Ref: para 10.2 of the guidelines)

• Whether applicant is required to file compounding application for all the offences together. for which prosecution proceedings has been initiated?

Ans: No, the applicant may apply for one or multiple of’fences in an application. His application cannot be rejected on the ground that he has not applied for particular offence for u hich notice for prosecution has been issued and proceedings are under progress. (Ref: para 4.1.2 and 4.1.3 of the guidelines)

• Is there any limitation as to the number of times compounding applications can be filed by a person†

Ans: No, there is no limitation on the number of times a person can file compounding application. However, the Competent Authority may reject an application tiled by a person on the ground of him being a “habitual ofi’ender . (Ref: para 7.1 and 7.2 of the guidelines)

• Whether the applicant whose application was rejected in earlier guidelines on the ground of being cont icted is eligible to re-apply tor compounding as per revised guidelines?

Ans: Yes. in case the rejcction was solely on account of conviction, without examination of merits, as per any of the earlier guidelines, such applicant can reapply in terms of revised guidelines. (Ref: para 6.1(a) and (b) of the guidelines)

• Whether applicant can file a compounding application if his application is returned back due to defect(s)?

Ans: Yes. defective application can be revix’ed by removing defects within a period of one month from date of intimation of defects(s). If defects are not cured within such time, the application w’ill be returned back to the applicant and shall be deemed lo be rejected. In such case. applicant may apply again which shall be treated as a subsequent compounding application for the purpose of detemaination of compounding charges. (Ref: para 5 and 10 of the q•uidelines)

• In terms of“ Para 10.7, what will be the date of applications in case of carried forwarded applications – original date of application or date o1’ issue of new Guidelines?

Ans: The application pending as on 17.10.2024 shall be governed under new’ guidelines. However. date of such pending application shall be the original date of application for any purpose.

• Whether the applicant whose application was re¡ected on account of not being filed in time as provided for in the earlier guidelines. i.e. w ithin expiry of 12/24/36 months fiom the end of the month of filing ot complaint, is eligible to file fresh compounding application?

Ans. The lirnitation of 12/24/36 months has been eliminated in revised guidelines and all such applicants whose application were rejectcd earlier on limitation ground, may file fresh applications foi‘ compounding of ottences, w hich shall be treated as subsequent application for the purpose taf determination or’ compounding charges. (Ref: para 3.2 and 10 of the guidelines)

D. Terms for com pounding

• Whether an applicant is required to withdraw appeal related to ofl’ence sought to be compounded before filing a compounding application’?

Ans: No such withdrawal is required. Ho ‘ever. applicants shall undertake to withdraw appeals including \\’rit petitions. if any, related to offences being compounded or grounds of appeal related to the ot1’ence to be compounded where appeal has mixed grounds. (Ref: para 4.5 of the guidelines)

• Whether an applicant who has filed a Writ Petition for rejection of his application being not filed within stipulated period of 12/24/36 mtinlhs from filing of compliant as pcs earlier guidelines and is still to be decided by the Hon’ ble Court. can again file a compounding application and thou’ shall this application be treated’?

Ans: Yes. after submission ot’ an undertaking to withdraw the Writ Petition from the Hon’ble Court along with the application, the applicant can again file the compoiinding application,

which shall be treated as a subsequent applicatitin for the purpose of determination ot compounding charges. (Ref: para 3.2, 4.5 and 10 of the guidelinesJ

• Approx al of Higher .Authority
  • Whether offence can be compounded where applicant has been convicted for iniprisoniiient for‘ tn’o years or more?

Anx: \’es. even il applicant has been convicted with imprisonment of two years or more for any otfence undei‘ Income Tax Act or for an oft?nce under any other law’. which is related to offence under the Income Tax Act, may apply tor compounding. Such orlénce shalI. however. be conaptaundable onlj with the apprt» al ot’ Chairman. CBDT as per para 6. I of revised guidelines. (Ref: para 6.1(a and (b) of the guidelines)

• fi hether cases ink olv inyu other agencies such as ED .”CBI can be compounded?

Ans: Yes. such offence(s) may be compounded by the competent authority if applicant is not found to be inv‹alved in anti-national or terrorist activity. However, if the applicant is found to be involved in such actin ity, the offence shall be compounded only n’ith the approval of Chairman. C BD 1 . as per para 6. 1(c) ot the revised guidelines. (Ref: para 6.1(c) of the guidelines)

• If the main accused has more than one director/partner and one of these directors.*partners fiie an application for compounding ot offence(s). w’here it is fiound that the other director(s)/partner(s). who ha ‘e litit 11led the compounding application, comes under the conditions as mentioned in Para 6.1 tit) (fdcilltated tax evasion through mechanisms such as use of entities tier laundering ot money. generation oI bogus in› oices of sale/purchase w’ithout actual business bj accommodation entries or in any ‹ather manner) of these guidelines. ›v’hether approx al of II igher .Authoriy is required for deciding the compounding application?

Ans: lt a case in volves multiple offences and one of those offences requires approval front a higher authority under paragraph 6.1 Ot’ the guidelines. the compounding application will be processed based on the offence for w’liich the application has been filed, a5 explained below’:

If the application has been ti led Fy the main accused or one or more of the co-accused, for an otfence that does ntit require appro›’al from Higher authority. such offence will be examined for compounding w’ithout the need for any approval. irrespective of the fact that anj of co-accused(s) are also accused of any other otTence(s) which require appro v‹il trout higher authority (e.g., an offense under Section 277A) and thej have not filed any compounding ‹application for either of the offences.

ii.  II the application has been t“ileñ for an oi’Iénse. b\ the main accuscd or one or more of’

the co-accused. that red uircs approval morn a higher authority (c.g., an offense under Section 277A), the offense will be compounded only with the approval of the higher aut Inority. (Ref: para 6.1(d) of the guidelines}

F.   C’ompounding cbarges

Q.23 How shall the compounding charges be calculated for the application(s) rejected under earlier guidelines and tor which tresh allowable application has been filcd?

Ans: All app1icaiion(s) rejected under earlier guidelines shall be defined to be the first compoundinti application. The fresh consolidated application c’ill. accordingly, be considered as the second application and compounding charges will be calculated as per para 10 ot the revised guidelines. f’urther details ‹me discussed in question number 30. (Ref: para 10 of the guidelines)

• Ho\¥ SUCH the COITlpounding charges be calcul‹ited for applicai ions pending belore issuance of these guidelines?

Ans: The coinpr›unding charges tor pending application are subject to re-determination as per para 10 of the revised guidelines. All pending applications. whether for single or multiple years’quarters. shall be treated as first compounding application and compounding charge shall be re-computed tier each oKence disclosed in the application as given in Annexure-4 ot the guideline. (Rvf: para 3.1 and 10 of the guidelines)

• Whether credit ot payment shall be allowed ivhile re-computing compounding chari,e for pending applications’? If yes, whether the excess payment shall be refundable or adjustable?

Ans: Yes, credii tit the amount already paid for particular offence pertaining to particular year shall be allow ed ior such particular offence and j ear only. during re-computation of ctiinpoundiilti U lilrge for pc•rlding application. How ei cr. any excess payment shall not be refundable c r adjustable. (Ref: para 3.1 of the guidelines)

• If a new consolidated application includes a year for which application was filed earlier and then withdrawn, whether partial compounding charges paid lor such year tor which application is withdrawn can be adjusted against iotal compounding charges too ards consolidated application’?

Ans: No. Pariial compounding charges paid for the year for which application is w’ithdraxvn can be adjusted in new’ consolidated application only towards the otfence and particular year for which payment w as made. (Ref: para 3.2 of the guidelines)

• An applicant has filed compounding applications under earlier guidelines. two of which were rejected on account of Durable defects. tit o were compounded and three are pending as on issuance of this guideline. H‹a should the applicant File a compounding application alter issuance or‘these guidelines and how shall the new’ application be treated ?

Ans: ho action is pending for’ the applications which have been compounded. A consolidated application may be tiled for all applications which were rejected (on account of curable defects) and no fresh application is required to be liled for pending applications. All pending app1icati‹sns. vhether for singIe or iiiultiple years’quarters. shal1 bc treated as first corripounding application and compounding charge shall be re-computed for each offence disclosed in the application as given in Annexure-4 of the guideline. The fresh consolidated application for rejected applications will be considered as second application. Accordingly. the

application filed after issuance of these guidelines shall be treated as subsequent application (2″ application) and compounding charge shall be re-computed for each offence disclosed in the application, in terms of para 10 of the revised guidelines. (Ref: para 3.1, 3.2 and 10 of the guidelines)

• Hons the rate of compounding charges will be determined in subsequent application(s)‘?

Ans: The rate of compounding charge is based on sequence of application aS well as offence applied for. If u subsequent application includes an offence which has also been included in earlier application(s). it shall be liable for higher rate i.e. 1.2 times. 1.4 times, 1.6 times and so on as per para 10.4 of the guidelines; irrespective of the fact that the offence and year of the offence are same in subsequent application and earlier application was rejected or pending or even compounded.

However, it subsequent application includes offence(s) which were not included in any compounding application filed earlier (rejected or compounded or pending) and the offence has been applied for first time. the compounding charge for such offence(s) shall be computed at normal rate as given in the annexure-4. (Ref: para 10 of the guidelines)

Illustration- An applicant has filed different applications on different dates to compound dittérent offences which will be considered as below.

Scenario			Clarifications
Applicatio n Date	.Status	Offence (FY)	Sequence of Application	Offence included in Earlier Application’*	Rate
15/0 1 /202 I	Coin pounded	276B (2012- 13)	NA	NA
I 7/10,’’*0?2	Compounded	?76C ( I ) (?0 b-19)	EA	NA
T8/08/?023	Rejected	276B (20 I 3- I’t)	NA	NA
	Pending	276D (2019-20)	First (No fresh application required)	NA	Normal rate
0 I,’ I I ’?0*4 (fi led under revised guidel in es)	Sin•mle application (for earl ier Application i ejected)	27GB (2013- 14)	Second	Yes, in applications dared 15/0 1/202 I and I 8,’08/2023. (considered as 2″‘ time) *	I .2 times o normal rate
18/ l2,’2024 (filed under revised guidelines)	Consolidated application	276i3 (20 I7- 18 l	Third	Yes. in applications dated 15.’0 1/2 1, l8,’08/2023 A 0 l/l 1/2024 (3’d time)	I .4 times oi normal rate
		276C (1) (2019-?0)		Yes, in application dated I7/I0,’’20?2 (2’^ time)	I .2 times of normal rate
		?7SA (2023-24)		No, first time applied for ( I*’ time)	‘Normal rate

* It is noted that the applicant has opted for compounding for this oft’ence for the third time in third application and accordingly compounding charges at 1.4 times of normal rate should apply. How’ever. since both applications were tiled under prev’ious guidelines, all such applications w’ill be cumulatively considered as ’first’ application. in terms of Para 10.6 of the revised guidelines. Thus. offence under these applications will be considered as clubbed together for calculation of conipciunding charges.

# It is noted that the applicant has opted for compounding for this offence for the tourth time in fourth application and accordingly compounding charges at 1.6 times of normal rate should apply. However. since first tw’c› applications were filed under previous guidelines. both these applications will be cumulatively considered as ‘first’ application. in terms of Para 10.6 of the rev’ised guidelines. 01 .11.2024 application will be considered as ‘second’ and this application will be considered as ‘third’. Thus. otTence under first two applications will be considered as clubbed together for calculation of compounding charges.

• 4’hetlier compounding application may be filed suo-moto? If yes. how the compounding charge shall bc determined?

Ans: Yes. compounding application may be filed suo-moto at any time. after the offence(s) is committed. irrespective of whether it comes to the notice of department or not. The compounding cliai ge depends on sequence of application as well as offence applied r r and is independent of n’hether application is filed suo-moto or in compliance to the notice of department. (Ref: para 4.1.3 and 10 of the guidelines)

• Whether compounding application maj be tiled after launch of the prosecution? If yes, how the compounding charge will be determined‘?

Ans: Yes. If application is filed within 12 months from end of the month in which prosecution complaint is filed. the compounding charge will be determined as per para 10.2 to 10.5 of guidelines as illustrated in Question no. 30 abo› e. For applications filed after 12 months. the compounding charge so calculated shall be increased by 50% as per para 10.7. (Ref: para 10 of the guidelines)

Illustration: Assessee had made TDS default of Rs 10,00,000/- for 3 months during FY 2019-

20. The prosecution has been launched on 01/04/2022 ti/s 276B ot’ the Income Tax Act.

image

• How io ctimpute compounding charges for otfence ti/s 276CC in the absence of information on tax sought to be evaded or the tax on under-reported income due to assessincnt/reassessment being not carried out?

Ans: In such cases, compounding charges shall be the minimum compounding charge applicable for compounding of offence u/s 276C C as per Annexure-4 of the guideline, (Ref: Annexure 4 of the guidelines)

• V hetlaer compounding charges include Prosecution Establishnient Expenses and Litigation Expenses?

Ans: No. Siicli cxpense have been rciiiox’ed in rev ised guidelines.

• Is there any specific path tier payment of compounding char8e”

Ans: Yes. there is a path on e-filint, website ot the department and payment may be made by login through PAN or TAN. The path of the same is as under:

“Login on e-F iling portal —• e-Pay Tax —• Lew Payment —• Income Tax —• Minor Head —r Other Receipts (500) — compounding charges”. (Ref: para 9.9 of the guidelines)

• V’liether the compounding charge can be made under PAN in case the applicant being a deductor‘?

Ans: The compounding charge shall be made under TAN of the deductor. How’ever, if the applicant is the co-accused then compounding t’ee z may be made under PAN of co-accused as the co-accused rnuy not have access to the TAN of main accused.

Loyuin r›n e-£ iling portal though TIN—• e-Paj I ax —• Nett Payment —• Income Tax —• Minor Head  Ollici‘ Receipts (50fi) —• compounding charges”. (Ref: para 9.9 of the guidelines)

€L Extension of time (Compounding charges)

• Whether the time for payment of coinpound‹*8 Charges may be extended?

Ans: \”es, up to a maximum period of 24 months. as per conditions mentioned in para 9.4 of the guidelines. (Ref: para 9.4 of the guidelines)

• fi’hetlier time for payment ot c‹›inpounding charges iiiaj be extended bej ond 24 months’?

Ans: No›. beyond 24 months extension is not allowable and the application shall be rejected followed by initiation o1’ prtasecution pi‘oceedings, ii’ trot already initiated. However, the

applicant can file new application for the same particulars which shall be treated as a suhseqijent application for the purpose of determination of compounding charges. (Ref: para 9.4 and 10.3 of the guidelines)

Q39. As per the new guidelines. the pai’inent period for compounding charges may be extended up to 24 months only from the end of the month in which the compounding charges were intimated. For pending applications where the payment initiation was made before the issuance or the revised guidelines but not fully paid, how’ will the period of 24 months be calculated? Additionally, will such applications require approval for extension under paragraph

9.4 of the guidelines?

Ans: For applications pending as on 17.10.2024, wherein compounding charges were not fully paid within time allowed as per earlier Guidelines or u’herein time allowed had not elapsed. the period ot 24 months w ill commence from the end of the month of issuance of these guidelines viz October 2024. The extension of timelines will require approval as prescribed in para 9.4 of they Guidelines.(Ref: para 3.1 and 9.4 of the guidelines)

Q.4tl Are extension tor payment of compounding charges subject to interest or additional charges?

Ans: No. interest or additional charges are not applicable on extension allowable under para

9.4 of the guidelines. Further, for cases pending as on date of issuance ot revised guidelines. additional compounding charge (chargeable under pre ions guidelines) shall not be applicable and compounding charge shall be detemiined as per Para 10 of the guidelines. (Ref: para 9.4 and 10 of the guidelines)

H. Co -accused and abettors-offence by Companies and HUF

• Whether co-accused can file compounding application under revised guideline?

Ans: Yes, co-accused may apply for compounding ot’ offence separately or conjointly. (Ref:

para 11 of the guidelines)

• Where the compounding application of the co-accused was rejected earl ier on the ground that the main accused has not tiled for compounding, whether such applicants will be eligible for lil ing again‘? If yes, whether such application shall be a subsequent application?

Ans: Yes. other than the case where application was rejected in past on merit. any of the co- accused applicant is eligible to file compounding ‹application again separately or conjointly. Such application shall be treated as a subsequent application for the purpose of determination of compounding charges. (Ref: para 3.2, 11 and 10 of the guidelines)

• Similarly. where the compounding application of the main accused was rejected earlier on the ground that the co- accused has not filed for compounding or given undertaking. whether such applicants will be eligible tor tiling again? If yes. whether such application shall be a subsequent application?

Ans: Yes, other than the case where application was rejected in past on merit, the main accused applicant is eligible to file compounding application ajain separately or conjointly with the co-

accused. Such application shall be a subsequent application for the purposc of determination of compounding charges. (Rel’: para 3.2, 11 and 10 of the guidelines)

• lt an  a|aplici tion filed lay ct›-accused or accused kinder previous guidelines is pending,

«hether thej are required to life a fresh application under revised guidelines?

Ans: No. .A11 such pending applications u ill be clubbed together and none of the applicants (main accused and/or co-accused) are required to file a fresh application under rex ised guidelines. This consolidated application shall be considered as tirst application for the purpose ot determination ct compounding charges. (Ref: para 4.2.4, 11 and 10 of the guidelines)

• If application is filed by main accused or co-accused or by both of them co-jointly. w hether separate compounding tec shall be applicable for co-accused or not?

Ans: Nti separate compoundine fee tor co-accused shall be payable. irrespective of the fact that application has been iiled by main accused or co-accused or by both ot them co-jointly. Only compounding charge(s) for the concerned offence(s) shall be payable. as per para 10 of the re› ised guidelines. fence such payiiient is made by the applicant being main accused or cc›- accused or both o1 them conjointly. the Competent A uihority shal1 compound concerned otfences for ma in accused as well as all the co-accused. (Ref: para 11 and 10 of the guidelines)

• Whether any person other than main accused or co-accused can file compounding application liar compounding of an of’fence of company or HUF?

Ans: ho. person other than main accused or co-accused cannot file compounding application. “I he applicant is red uired to disclose his status as main accused or co-accused in the serial no.

4 of compuunding application tAimexure-1 o1 revised guidelines). (Ref: para 11 and

Annexure -1 of the guidelines)

• V’1int w’ill happen it co-accused has not been identified by the department for offences u s 278B’?

Ans: In cases w there co-acciise‹â have not been identified or such idenli fication is under progress u/s 278B oI the Incoiiie 1 ax Act. either the main accused or anj person who can substantiate along with supporting documents that lie vi as in-charge or responsible for conduct of the business of the company during the time of commission of oft’ence. to be considered as

’deemed It be ’gui1tj

guidelines)

u/s 278B(1 ). can file an application as co-accused. (Ref: para 11 of the

• lt’ any person tiled a compounding application as a co-accused in the scenario given at Q. No. 46, whether there is any requirement to identify other co-accused?

Ans: In such cases there will be no requirement to identify other co-accused for the purpose of the compounding of‘ the offence. I4owev er. if such compounding application is rejected for any rcason, all UO•aCcused shall need to be identified as per Section 278B ot’ the Incomc Tax Act to file pt r›.sec uiion complaint be titre the concerned C’ouH. (Ref: para 11 and 10 of the guidelines)

Q.J9 Can co-accused liirnisli an undertaking for withdrawal of appeals as required in para 4.5 tel’ the griidclincs. on behalt of the main accused‘?

Ans: ho, co-accused cannot furnish undertaking for w’ithdra v’al of appeal on behalf of the main accused. Stich undertaking shall be Irirnished bj the main accused onlj w’hich must be attached with the application if application has’ been tiled by the co-accused. since ott’ences of both main accused and co-accused are being compounded. under para 1.1.2 of the revised guidelines. (Ref: parti 11 of the guidelines)

• lt iipplication has been lilcd by only main accuscd or co-accused. in such case against whom name the compounding order shall be passed?

Ans: The ct›napound lng order it!S 279(2 I shall be passed in the name of’ person(s) is ho have applied for compounding. It co-accused has applied. then order shall include the name ‹at main accused ‹if so. Further. in a case where main accused has applied and co-accused has been ideiiiilic•d. the order shall be passed in the nunie taI main accused and co-accused. (Ref: Annexure-1 and 3 of the guidelines)

• Whether co-accused can file compounding application where the liability of main accused company ceases under Insolvency Bankruptcy Code’?

Ans: l“he liability of co-acc used does not extinguish even if the liability ot main accused company ceases. The co-accused may file compounding application in such cases. either scparately or conjointly and payment ot’ compounding charge can be made by co-accused or the main accused company. (Ref: para 11.4 of the guidelines)

• The assessee company /inain accused is under NCLT.’CIRP/Liquidation and either there is nioriitoriiim due to the prof isions of’ section 14 or liquidation process has been initiated against the company due to the prox’isions of sectitin 33 of the lnsol vency Bankniptcy Codes’ ll3C” 1. ln such condii i‹ans. wliethei Para 4.3 o1’ the guidelines tregai ding payment of all taxes. interest and other sunis) w i1 bC g1// icablc or not’?

Ans: The conditions prescribed in paragraph 4.3 of the Guidelines will apply, as explained below:

Case 1: IJuring the Moratorium Period: The demand due from the main accused is not extinguished during the moratorium period. lt u co-accused files an application for compounding during the moratorium period, paragraph 4.3 of the guidelines will apply.

Case 2: .4fter Rejection of the Resolution Plan (Liquidation Proceedings): Upon rejection of the res‹alution plan. liquidation proceedings commence under Section 33 of IBC. The pendinti demand becomes a valid c laim befibre the liquidator. If a co-accused tiles an application tier compounding after re jection oI the resolution plan. paragraph 4.3 of the gilidelines will ‹ippli .

Case 3: After Approx’al of the Resolution Plan: Once the rcsolution plan is approvcd under Section 31 of the IBC, the main accused company is absolved of the offence, provided there is change iIi the management in terms of conditions prescribed in section 32A of the IBC. The co-accused(s). however. continue to be liable for the offence. If a co-accused tiles an applicai iota for compounding after approval of the resolution plan. paragraph 4.3 of the guidelines ix’ill apply.

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