TAXATION LAW

ABSTRACT
Section 278B: Offences By Companies
This paper aims at bringing out the intricacies of prosecution of offences contained in the Income
Tax Act, 1961 and their compounding. This paper further states the various guidelines issued by
the CBDT in this regard.

Compoundable offences are those which can be conciliated by the parties under dispute. The
permission of the court is not required in such cases. When an offence is compounded, the party,
who has been distressed by the offence, is compensated for his grievance.

As per section 278B, where an offence under the Income-tax Act has been committed
by a company, then every person who, at the time the offence was committed was in charge of and
was responsible to the company for the conduct of the business of the company as well as the
company shall be deemed to be guilty of the offence and shall be liable to be proceeded against
and punished accordingly.

However, if such person proves that the offence was committed without his knowledge or that he
had exercised all due diligence to prevent the commission of such offence then he shall not be
deemed to be guilty of the offence.

Where an offence under the Income-tax Act has been committed by a company and it is proved
that the offence has been committed with the consent or connivance of, or is attributable to any
neglect on the part of, any director, manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be deemed to be guilty of that offence and
shall be liable to be proceeded against and punished accordingly.

Where an offence under the Income-tax Act has been committed by a person, being a company,
such company shall be punished with fine and every person referred to above or the director,
manager, secretary or other officer of the company referred to above, shall be liable to be
proceeded against and punished in accordance with the provisions of the Act.