New rules make it difficult for Taxpayers to escape just by paying penalty


Under the new rules, the Central Board of Direct Taxes (CBDT) has issued the guidelines for tax defaulters. It clearly states that any offences associated with any misconduct of activity shall not be compoundable. As per this rule, tax evaders would no longer be able to compound offences just by paying a penalty to avoid any prosecution. Moreover, the new latest rules incorporated by the Income Tax Department will be applicable for all the cases received on or after June 17. The government has announced this in lieu of disallowing compounding of offences related to benami transactions and undisclosed foreign income under direct tax laws.

Before few days, the CBDT allowed compounding of tax evasion offences related to undisclosed foreign bank accounts and overseas assets if the taxpayer paid penalty & the taxes with interest.Though, the Anti-Black Money Act, 2015 didn’t permit compounding in serious tax evasion cases under the law.

Offences in category A and B-

The offences have been categorized into two groupings, in category A it includes failure to pay tax deducted at source or taxable under section 115-0. However, the category B include wilful to evade tax, failure to produce amounts & documents and false statement during verification.The first category offences in the new Income Tax return rules are open to compounding while the rest aren’t. However, if the individual or entity makes a Category A offence on more than three occasions then it will not be compounded.

The revised provisions dictate that any offence occurred under the black money and imposition of the income tax act, 2015 will not be compounded. In addition, any wrongdoing under the Benami Transactions Act, 1988 would not merit compounding.

CBDT said, “Notwithstanding anything contained in these guidelines, the Finance Minister may relax restrictions for compounding of an offence in a deserving case, on consideration of a report from the Board on the petition of an applicant.

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