Re: Issue relating to Prosecution cases of penny stock 276(C) (1) Category B cases

Please clarify that reply to question no. 22 in last line it has been clarified that “assessee covered under prosecution is not eligible to file unless prosecution is compounded before filing the declaration.” For compounding assessee has to pay Tax, Interest, penalty relating to offence, further undertakes to pay compounding charges, withdraw the appeals . Is it mean that the assessee had first to pay compounding fee equal to 125/150 percent of tax sought to be evaded, compounding charges then only he can go for VSV. Then what benefit such assessee gets from this scheme.
Further what will be the effect on right of compounding in future as compounding is one time feature.

Under the Scheme of Income tax, Quantum proceedings, penalty proceedings and prosecution proceedings are separate. Compounding charges are with respect to settlement of the prosecution proceedings and to avoid imprisonment; this has no bearing on the quantum proceedings. What the last lines means is that, where an assessee has compounded the matter i.e. although a case of instituted against him in the criminal court, he shall be eligible to settle the quantum appeal under VSVA. Circular No 9 of 2020 dt 22-04- 2020 also clarified  once again clarified the position on prosecution proceedings .    

Further, the right of compounding is not a one time feature, please refer to Guidelines for Compounding of Offences under Direct Tax Laws, 2019 dated June 14, 2019. Future compounding will not be affected .

 

  

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