MUMBAI: The govt is tightening the prosecution noose round a number of classes of tax defaulters, equivalent to those that stash black money offshore. These classes of taxpayers will not be able to compound their offences (which is a process of paying a stiff compounding charge, in lieu of prosecution).
Revised pointers, working into 30-plus pages, on 'Compounding of offences underneath the direct tax laws', were issued overdue on Friday evening by way of the Central Board of Direct Taxes (CBDT).
These will come into effect from June 17, and observe to all compounding programs received after this date. The revised pointers supersede the sooner pointers issued in December 2014.
Sandeep Bhalla, partner, Dhruva Advisors, issues out: "The earlier CBDT guidelines permitted compounding of offences relating to undisclosed foreign bank accounts and overseas assets, if the taxpayer has cooperated and paid the taxes. The Anti-Black Money Act of 2015, which was subsequently introduced, did not permit compounding. This Act had provided a limited window within which people could come clean against payment of a flat 30% tax and stiff penalties. The revised guidelines have taken this forward and compounding is not permitted both for cases covered under the Anti-Black Money Act and all offences relating to undisclosed foreign bank accounts or assets."
"Compounding shall also not be available where it is proved that a taxpayer enabled others to evade tax, such as through entities used to launder money. The bar also applies where a taxpayer generated bogus invoices of sales or purchase or provided accommodation entries. Offences under the Benami Transactions Prohibition Act, too, cannot be compounded," says Gautam Nayak, tax partner at CNK & Associates.
"Typically, accommodation (bogus) entries are routed through shell companies, as share capital, in order to evade tax. Or to launder money, fake loans are shown in account books by a business entity," explains an I-T legit. While compounding isn't the 'proper' of a taxpayer, this selection can also be exercised, topic to approval of the application by way of the competent government.
During the eight-month period ended November 2017, a thousand-odd instances have been compounded; whereas prosecution court cases were filed for quite a lot of I-T offences, in double the choice of instances. With revised pointers, there's more likely to be a spike in choice of prosecution instances in coming months. The revised pointers do supply that the finance minister may calm down restrictions from compounding, in deserving instances, according to CBDT's record at the matter.
The revised pointers proceed to classify offences in two classes. Category A defaults lift a lower compounding charge, related to offences equivalent to failure to deposit the tax deducted at source (TDS) or failure to report the I-T return. Category B comprises offences equivalent to wilful evasion of tax, failure to produce books of accounts or falsification of books and documents.
“CBDT has equipped for stringent stipulations and obstacles for compounding of offences. Offences like non-deposit of TDS is compoundable on not more than three events, whereas a number of other offences when it comes to wilful try to evade taxes can also be compounded provided that it was once a first-time offence,” explains Bhalla.
While the compounding charges were higher in lots of instances, there's a rest when it comes to delays in deposit of TDS. Here, it's been diminished to 2% monthly (from 3%), if the defaulter has implemented for compounding previous to the default being noticed by way of the I-T government. “The new rules have also equipped for a cap at the compounding charge, which can not exceed the TDS quantity plus hobby if the TDS quantity concerned within the default is less than Rs. one lakh,” explains Nayak.
Revised pointers, working into 30-plus pages, on 'Compounding of offences underneath the direct tax laws', were issued overdue on Friday evening by way of the Central Board of Direct Taxes (CBDT).
These will come into effect from June 17, and observe to all compounding programs received after this date. The revised pointers supersede the sooner pointers issued in December 2014.
Sandeep Bhalla, partner, Dhruva Advisors, issues out: "The earlier CBDT guidelines permitted compounding of offences relating to undisclosed foreign bank accounts and overseas assets, if the taxpayer has cooperated and paid the taxes. The Anti-Black Money Act of 2015, which was subsequently introduced, did not permit compounding. This Act had provided a limited window within which people could come clean against payment of a flat 30% tax and stiff penalties. The revised guidelines have taken this forward and compounding is not permitted both for cases covered under the Anti-Black Money Act and all offences relating to undisclosed foreign bank accounts or assets."
"Compounding shall also not be available where it is proved that a taxpayer enabled others to evade tax, such as through entities used to launder money. The bar also applies where a taxpayer generated bogus invoices of sales or purchase or provided accommodation entries. Offences under the Benami Transactions Prohibition Act, too, cannot be compounded," says Gautam Nayak, tax partner at CNK & Associates.
"Typically, accommodation (bogus) entries are routed through shell companies, as share capital, in order to evade tax. Or to launder money, fake loans are shown in account books by a business entity," explains an I-T legit. While compounding isn't the 'proper' of a taxpayer, this selection can also be exercised, topic to approval of the application by way of the competent government.
During the eight-month period ended November 2017, a thousand-odd instances have been compounded; whereas prosecution court cases were filed for quite a lot of I-T offences, in double the choice of instances. With revised pointers, there's more likely to be a spike in choice of prosecution instances in coming months. The revised pointers do supply that the finance minister may calm down restrictions from compounding, in deserving instances, according to CBDT's record at the matter.
The revised pointers proceed to classify offences in two classes. Category A defaults lift a lower compounding charge, related to offences equivalent to failure to deposit the tax deducted at source (TDS) or failure to report the I-T return. Category B comprises offences equivalent to wilful evasion of tax, failure to produce books of accounts or falsification of books and documents.
“CBDT has equipped for stringent stipulations and obstacles for compounding of offences. Offences like non-deposit of TDS is compoundable on not more than three events, whereas a number of other offences when it comes to wilful try to evade taxes can also be compounded provided that it was once a first-time offence,” explains Bhalla.
While the compounding charges were higher in lots of instances, there's a rest when it comes to delays in deposit of TDS. Here, it's been diminished to 2% monthly (from 3%), if the defaulter has implemented for compounding previous to the default being noticed by way of the I-T government. “The new rules have also equipped for a cap at the compounding charge, which can not exceed the TDS quantity plus hobby if the TDS quantity concerned within the default is less than Rs. one lakh,” explains Nayak.
Govt tightens noose around tax defaulters
![Govt tightens noose around tax defaulters]()
Reviewed by Kailash
on
June 17, 2019
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