Commissioner’s power to compound offences

Commissioner’s power to compound offences

Section 202 of the Income Tax Ordinance, 2001, updated up to June 30, 2021, now allows the Chief Commissioner, with the prior approval of the Board, to compound offences either before or after the institution of proceedings.

The Finance Act, 2021, brought about several amendments to the Income Tax Ordinance, 2001, with Section 202 standing out as a pivotal change. The text of Section 202 reads: “Power to compound offences.—Notwithstanding any provisions of this Ordinance, where any person has committed any offence, the Chief Commissioner may, with the prior approval of the Board, either before or after the institution of proceedings, compound such offence subject to payment of tax due along with default surcharge and penalty as is determined under the provisions of this Ordinance.”

This provision introduces a significant shift in the approach to dealing with tax-related offenses. It empowers the Chief Commissioner to exercise discretion in compounding offences, offering an alternative resolution pathway that is subject to specific conditions.

The key element of this amendment lies in the Chief Commissioner’s ability to compound offences either before or after the initiation of legal proceedings. This flexibility provides an avenue for resolving issues without resorting to prolonged and resource-intensive legal processes. It is noteworthy that the Chief Commissioner can only exercise this power with the prior approval of the Board, ensuring oversight and adherence to established guidelines.

The option to compound offences is contingent upon the offender’s willingness to fulfill certain conditions, including the payment of tax due along with default surcharge and penalty as determined by the provisions of the Income Tax Ordinance, 2001. This approach encourages a more cooperative and conciliatory environment between taxpayers and tax authorities, promoting the resolution of issues through mutual agreement.

The amendment is expected to have several positive implications. Firstly, it offers a more efficient and expeditious means of resolving tax-related offenses, saving both time and resources for all parties involved. Secondly, it aligns with the global trend of introducing flexibility and discretion in tax enforcement, recognizing that not all cases require the same level of legal scrutiny.

Industry experts have welcomed this development, noting that it marks a step towards a more balanced and adaptive tax enforcement mechanism. The ability to compound offences provides a practical alternative to lengthy legal battles, fostering a cooperative environment that is conducive to addressing tax-related issues in a timely and mutually beneficial manner.

The amendment to Section 202 of the Income Tax Ordinance, 2001, granting the Chief Commissioner the power to compound offences, signifies a shift towards a more flexible and cooperative approach in tax enforcement. This change is anticipated to expedite the resolution of tax-related issues, ultimately contributing to a more efficient and responsive tax administration system in Pakistan.