On 9th September 2019, Central Board of Direct Taxed (“CBDT” ) has issued 2 circulars with respect to the procedure for identification and processing of cases for prosecution under the Income Tax Act, 1961 and the relaxation of time limit for compounding the offence for which prosecution is pending.
As per the Circular No. 25/2019, the CBDT has given a one-time window period till 31.12.2019, to file the compounding applications before the Competent Authority i.e. the Pro CCIT/CCIT/Pr. DGIT/DGIT, for compounding of the offences for which prosecution is pending and the compounding applications could not be filed within the stipulated period of 12 months as per the Compounding Guidelines dated 23.12.2014, or was rejected or withdrawn as such application was filed beyond the period of 12 months. However, in the Circular, it has been clarified that the such relaxation shall not be available in respect of an offence which is generally/normally not compoundable, in view of Para 8.1 of the Guidelines dated 14.06.2019.
The said circular can be accessed at the following link: https://www.incometaxindia.gov.in/communications/circular/circular_25_2019.pdf
As per the Circular No. 24/2019, the CBDT, in order to reduce the prosecutions, has enhanced the threshold for launching prosecution in respect of the offences for default in filing TDS, income tax returns and evasion of tax:
I. Offences u/s 276B: Failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B. Cases where non-payment of tax deducted at source is Rs. 25 Lakhs or below, and the delay in deposit is less than 60 days from the due date, shall not be processed for prosecution in normal circumstances.
In case of exceptional cases like, habitual defaulters, based on particular facts and circumstances of each case, prosecution may be initiated only with the previous administrative approval of the Collegium of two CCIT/DGIT rank officers as mentioned in Para 3.
II. Offences u/s 276BB: Failure to pay the tax collected at Source Same approach as in Para 2.i above.
III. Offences u/s 276C(1): Wilful attempt to evade tax, etc. Cases where the amount sought to be evaded or tax on under-reported income is Rs. 25 Lakhs or below, shall not be processed for prosecution except with the previous administrative approval of the Collegium of two CCIT/DGIT rank officers as mentioned in Para 3.
Further, prosecution under this section shall be launched only after the confirmation of the order imposing penalty by the Income Tax Appellate Tribunal.
IV. Offences u/s 276CC: Failure to furnish returns of income. Cases where the amount of tax, which would have been evaded if the failure had not been discovered, is Rs. 25 Lakhs or below, shall not be processed for prosecution except with the previous administrative approval of the Collegium of two CCIT/DGIT rank officers as mentioned in Para 3.
Further, for most of the offences, the CBDT has added one more obligation on the sanctioning authority to seek the prior administrative approval of a collegium of two CCIT/DGIT rank officers, including the CCIT/DGIT in whose jurisdiction the case lies, before initiating the prosecution. The list of the offences, annexed with the circular, is as under: