Undisclosed foreign bank accounts: CBDT issues guidelines for compounding of offences
NEW DELHI: The Central Board of Direct Taxes (CBDT) has issued guidelines for compounding of offences under Income Tax Act, 1961/Wealth Tax Act, 1957, in cases of persons holding undisclosed foreign bank accounts/assets. The CBDT on Friday issued directions to all field formations, including principal chief commissioners, chief commissioners and principal DGs Income-Tax, to compound cases, where an assessee has cooperated fully or partially and paid taxes.
The CBDT clarified that the matter was examined in consultation with the Special Investigation Team (SIT) on black money.
The ET, on Aug 12, reported that SIT had approved compounding of offences under the Income-Tax Act, for Indians holding accounts in foreign banks, many of whom are facing prosecution for tax evasion and concealment of income. According to the compounding guidelines, “The cases in which the assessee has admitted accounts/assets either fully (all accounts with which he is associated) or partially (only a few accounts out of all accounts with which he is associated), paid taxes and penalty and cooperated with the department may be considered for compounding as per the guidelines dated 23.12.2014, only after filing the complaints.” In the guidelines issued on December 23, 2014, the CBDT had clarified that offences may be compounded by the authority on its satisfaction of the eligibility conditions and keeping in view factors such as conduct of the person, nature and magnitude of the offence and facts and circumstances of each case.
It said, prosecution instituted under Indian Penal Code, if any, cannot be compounded as per these guidelines. However, Section 321 of Criminal Procedure Code, 1973 provides for withdrawal of such prosecutions.
And the eligibility conditions for compounding included that, the person has paid outstanding tax, interest, penalty and any other sum due, relating to the offence for which compounding has been sought, the person undertakes to pay the compounding charges including the compounding fee, the person undertakes to withdraw appeal filed by him, if any, in case the same has a bearing on the offence sought to be compounded.
Meanwhile, compounding guidelines issued on September 4 clarified that “such cases can be compounded only after filing the prosecution complaint(s) and shall not be compounded at the stage of show cause notice and/or without filing the complaint in the court.” However, the CBDT has decided not to compound cases, where assessee has failed to cooperate.
The guideline said, “The cases in which the assessee has not admitted the foreign bank account (s)/assets and/or has not cooperated with the department in the assessment, penalty & recovery proceedings shall not be compounded.” Earlier, field formation had sought clarifications from CBDT, “whether offences relating to undisclosed foreign bank accounts/assets could be compounded as per the extant guidelines of the Board dated 23.12.2014.” The CBDT, had then presented this proposal to SIT probing black money, which in August approved the proposal.
In the meantime, the CBDT has also clarified that “there is no provision for compounding of offences under the newly enacted Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015. Consequently, the above clarifications will not apply to cases coming under the purview of this Act.” Compounding of offences is a discretionary power (under Section 279 of the I-T Act) vested with the tax authorities, who have so far refrained from entertaining such applications in the case of account holders of HSBC and Liechtenstein Bank. In case of compounding, the matter is resolved between I-T authorities and account holders, without any intervention by courts.
A panel set up by I-T authorities, which will include chief commissioner (central), director-general (investigation) and the commissioner of the zone where the case is being processed, will clear applications for compounding.
The compounding exercise will cover cases of Indians, who have bank accounts in HSBC Geneva, Liechtenstein-based LGT Bank and banks based in the British Virgin Islands.
