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06/15/2019
EGALITARIANISM, EQUALITY, EQUITY AND EFFICIENCY-SOCIAL VIRTUES
06/15/2019

THE NEWS

India’s direct taxes body has tightened framework for compounding of offenses almost shutting the window for money laundering, non-disclosure of foreign assets or possession of a Benami Asset.

KEY-HIGHLIGHTS OF THE NEW GUIDELINES:

  • The new guidelines have exclusion provisions, under which, offenses done under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Act, 2015, the Benami Transactions (Prohibition) Act, 1988 cannot be compounded in normal cases. This includes money laundering cases.
  • The latest guidelines from the Central Board of Direct Taxes, clearly state offenses in this category cannot normally be compounded.
  • However, the finance minister can relax restrictions on consideration of a report from the Central Board of Direct Taxes.

CLASSIFYING OFFENCES:

The latest guidelines of CBDT, classify offenses into three categories explained below:

  • First Category: It includes defaults under tax deducted or collected at source, failure to file the return.
  • Second Category: The second category, for which compounding will not be allowed, deal with willful evasion of tax, removal or concealment or transfer or delivery of property to thwart tax recovery in a search operation.
  • Third Category: The third category of offences that “shall normally not be compounded” includes offences committed by a person for which he was convicted by a court of law under direct tax laws, enabling others to evade taxes, launder money by generating bogus invoices, offences relating to undisclosed foreign bank account or assets under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 or under the Benami Transactions (Prohibition) Act, 1988.

COMPUNDABLE OFFENCES:

  • Compoundable offenses are those which can be conciliated by the parties under dispute, without the requirement of the permission of the court. Compounding means that the authorities agree to not prosecute offenders in return for a consideration.
  • Section 320 of The Code of Criminal Procedure, 1973 deals with the compounding of offenses. The section has been divided into two parts:

Offenses Compoundable without the Permission of the Court

  • It consists of offenses punishable under The Indian Penal Code, 1860 that could be compounded under this part without the permission of the court.
  • These are mostly non-cognizable offenses, compounding of such offenses requires only verification of the compromise from the court whether it is duly executed or not.
  • For example- adultery, causing hurt, theft, cheating, and criminal trespass

Offenses Compoundable with the Permission of the Court

  • It consists of offenses punishable under the Indian Penal Code, 1860 that could be compounded under this part with the permission of the Court before which any prosecution for such offense is pending.
  • These are mostly cognizable offenses.
  • For example- criminal breach of trust, voluntarily causing grievous hurt, assault on a woman with the intention to outrage her modesty and causing miscarriage.

RELATED ACTS:

  • Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015:It is an Act of the Parliament of India which aims to curb black money, or undisclosed foreign assets and income and imposes tax and penalty on such income.
  • Benami Transactions (Prohibition) Act, 1988:The act bans all Benami Transactions and gives the government the right to recover property held Benami without paying any compensation

CENTRAL BOARD OF DIRECT TAXES (CBDT):

  • The Central Board of Direct Taxes (CBDT) is a statutory authority functioning under the Central Board of Revenue Act, 1963.
  • It provides inputs for policy and planning of direct taxes in India and is also responsible for the administration of direct tax laws through the IT Department.
  • The officials of the Board in their ex-officio capacity also function as a Division of the Ministry dealing with matters relating to levy and collection of direct taxes.

CONCLUSION:

The root cause for the increasing rate of black money in India is the lack of strict punishments for the offenders. CBDT’s recent move will shut the window for black money; it clearly shows the government’s intent to not allow any breather to such erring taxpayers. In addition to this, the Government needs to take appropriate reforms to aid in curbing the black money generated and circulated in the country.

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