The Central Board of Direct Taxes (CBDT) vie a circular dated 3rd January 2020 has relaxed the time limit for compounding application beyond 12 months from the date of filling the prosecution in Court, as a one-time measure till 31st January 2020. Compounding of offence is a process whereby the taxpayer committing default can file an application to the Competent authority accepting that the taxpayer has committed an offence and so that same should be condoned by depositing fine or compounding fee. But the Income Tax Department of India has strict the norms against tax evasion by restricting compounding of offence saying that such application to be filed within 12 months from the date of filling suit in the Court so that a person or entity would not be able to unreasonably settle a case of tax evasion by just paying the tax as well as penalty and interest.
Prior to this, vide a circular dated 9th September 2019, the CBDT had provided an opportunity to taxpayer for filling application for compounding of an offence under the Income-tax Act 1961 beyond 12 months period from the date of filling suit in Court till 31st December 2019. But the CBDT has received many representations that the taxpayers are not able to avail the benefit of one-time relaxation due to genuine hardships.
So, to help the taxpayers, CBDT has again relaxed the timeline by 1 month till 31st January to file application for compounding of offence. Such application shall e filed before competent authority, that is – Principal Chief Commissioner of Income Tax/ Chief Commissioner of Income Tax /Principal Director General of Income Tax/ Director General of Income Tax concerned on or before 31st January 2020.