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Get your tax penalties reduced, without hassle

K.R. Srivats

New Delhi , Aug 1

INCOME-TAX assessees can now look forward to a "hassle-free" experience in getting their penalties reduced by the tax department. The Central Board of Direct Taxes (CBDT) has revised its guidelines for the compounding (the legal term for reduction of penalties) of offences under direct tax laws.

This move comes at the behest of the Finance Minister, Mr Jaswant Singh, who had recently asked the tax department to make "compounding of offences easier" for income tax assessees. Compounding of offences results in reduction in the maximum fine which otherwise would be applicable on a tax violation.

In fact, the proposal of relaxing the guidelines on compounding of offences under direct tax laws was mooted about two years ago by the then President of the Institute of Chartered Accountants of India, Mr N.D.Gupta.

Amendments have now been brought about on the procedures as well as the fees relating to such exercises. Compounding fees have now been reduced for offences such as failure to deduct or pay income tax, failure to furnish returns of income, wilful attempts to evade tax and failure to comply with Section 269SS, informed sources said.

The CBDT has now ruled that all types of cases relating to technical offences are to be compounded by chief commissioners of income tax (CCIT)/Director General of Income Tax (DGIT). Further, the distinction between first offence and subsequent offence is removed. A CCIT/DGIT cannot reject an application for compounding of a technical offence, if all conditions in the guidelines are satisfied.

Hitherto, technical offences were compoundable by CCIT/DGIT only if it were to be the first offence by an assessee, the compounding charges does not exceed Rs 10 lakh and the offence is compounded before the filing of the complaint.

For compounding of non-technical/substantive offences, where the amount involved is more than Rs 1 lakh, the CBDT grants approval only if the Ministry of Law advises that the chances of successful prosecution are not good.

"This requirement of referring the matter to the Ministry of Law has now been done away with," informed sources said.

As regards reduction of fees, the CBDT has now slashed the compounding fee for the offence of wilful attempt to evade tax to 50 per cent of the amount that is sought to be evaded.

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