bird's eye view of income disclosure scheme...

2016

CA. Pramod Jain

B.Com(H), FCA, FCS, FCMA, LL.B,

MIMA, DISA

9/12/2016

Income Disclosure Scheme 2016

– A Bird’s Eye View

CA. PRAMOD JAIN

B. COM (H), FCA, FCS, FCMA, LL.B, DISA, MIMA

Income Tax – IDS 2016 2

CONTENTS

S. No Content Page No(s).

1 Statutory Summary 3

2

Who can avail of the Scheme?

3-5

3 What can be declared? 5-6

4 Valuation of Declared Assets 6-9

5 Valuation in case any asset is from partly

assessed income 9

6 Valuation Report 9-10

7 Taxation on sale of an asset declared under this

scheme 10-11

8 Rate of Tax 11

9 Time Limits 11-12

10 Procedure of Scheme 12

11 Immunities / Confidentiality 12-13

12 Consequences of Non-declaration 13-14

CA. PRAMOD JAIN



INCOME DISCLOSURE SCHEME 2016

Income Disclosure Scheme 2016 is one of the most important schemes currently in force which

is to come to end on 30th

September 2016. This document contains a brief of the scheme to

understand the same, so that interested person can utilize this opportunity to come clean.

STATUTORY SUMMARY

S. No. Provisions Particulars

1 Chapter IX of Finance

Act 2016

Sections 181 to 199 of Finance Act 2016

2 Income Declaration

Scheme Rules 2016

Rules 1 to 4 - As amended thrice vide notification

numbers:

• 60 dated 20th July 2016

• 70 dated 12th

August 2016

• 74 dated 17th

August 2016

3 FAQs • 17 dated 20th

May 2016

• 24 dated 27th June 2016

• 25 dated 30th

June 2016

• 27 dated 14th

July 2016

• 29 dated 18th

August 2016

4 Other Circulars • 16 dated 20th

May 2016

• 31 dated 30th

August 2016

• 32 dated 1st September 2016

• Explanatory dated

5 Challan • Challan No. 286 for payment of tax, surcharge and

cess under the scheme

WHO CAN AVAIL OF THIS SCHEME?

Any person including a non-resident or a foreign company having a PAN can make a

declaration under this scheme i.e., individual, HUF, firm, LLP, company, trust, AOP, etc can

avail of this scheme.

It has been clarified by CBDT that where a person is having undisclosed income in the form of

an immovable property in the name of his spouse, he can declare the same in his own name if the

funds for acquisition of the said property were provided by him.

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In case a company is amalgamated or converted into LLP and the income relates to the period

prior the amalgamation / conversion, then the declaration under this scheme shall be made by

the amalgamated company or converted LLP for that period.

However, the following persons cannot avail of this scheme:

• Any person in respect of whom an order of detention has been made under the

Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

• In relation to prosecution for any offence punishable under:

o Chapter IX or Chapter XVII of the Indian Penal Code

o Narcotic Drugs and Psychotropic Substances Act, 1985

o Unlawful Activities (Prevention) Act, 1967; and

o Prevention of Corruption Act, 1988

• Any person notified under section 3 of the Special Court (Trial of Offences Relating to

Transactions in Securities) Act, 1992

• In relation to any undisclosed foreign income and asset which is chargeable to tax under

the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act,

2015

• In relation to any undisclosed income chargeable to tax for any AY prior to AY

beginning on the 1st April 2017:

o Where a notice u/s 142 / 143(2) / 148 / 153A / 153C of the Income-tax Act has

been issued in respect of such AY and the proceeding is pending before the

Assessing Officer:

� If the notice is issued and served on the declarant on or before 31st May,

2016, only then the assesse would be ineligible.

• For example a person on whom a search has been conducted in

April, 2016 but notice u/s 153A is not served upto 31.05.2016

then he is not eligible to declare undisclosed income under the

Scheme.

• In a case where notice has been received after 31st May 2016, the

assessee shall be eligible to make a declaration under the Scheme

for the said AY.

� The assesse can make declaration for other years for which notice has not

been issued and served.

� If any search/ survey operation was conducted and the assessment has

been completed but certain income was neither disclosed nor assessed,

then also such unassessed income can be declared under the Scheme

� Also where summons u/s 131(1A) have been issued by the department or

letters for enquiry under NMS or u/s 133(6) are issued but no notice u/s

142 or 143(2) or 148 or 153A or 153C has been issued, then such

persons are eligible for the Scheme.

o Where a search has been conducted u/s 132 or requisition has been made u/s

132A or a survey has been carried out u/s 133A in a previous year and a notice

u/s 143(2) / 153A / 153C has not been issued and the time for issuance of such

notice has not expired:

CA. PRAMOD JAIN



� However, the person is eligible to file a declaration in respect of an

undisclosed income in relation to an AY which is prior to AY relevant

for the purpose of notice under section 153A

� Also a person is eligible to make a declaration in respect of an

undisclosed income of any other previous year other than the year of

survey.

o Where any information has been received by the competent authority under an

agreement entered into by the Central Government u/s 90 / 90A in respect of

such undisclosed asset

o Where any proceeding is pending before the Settlement Commission

WHAT CAN BE DECLARED?

An assesse can declare any income (which may represent any asset, etc):

o For which he has failed to furnish ITR

o For which he has failed to disclose in any ITR filed before 1st June 2016.

o Which has escaped assessment by reason of the omission or failure on the part of such

person to furnish ITR or to disclose fully and truly all material facts necessary for the

assessment or otherwise.

Any asset / liability can be declared which could be in any form including:

o Cash

o Bank balances including FDRs

o Immovable Property

o Agricultural Land

o Jewellery

o Bullion

o Precious stones

o Archaeological collections

o Drawings

o Paintings

o Sculptures

o Any work of art

o Plant & Machinery

o Shares / Debentures / Other Securities

o Creditors / loans being fictitious liability

o Any bogus expenditure / donation / claim

It is pertinent to note that declaration cannot be made of undisclosed income which has been

assessed to tax and the case is pending before an Appellate Authority. However, he can declare

other undisclosed income for the said AY which has not been assessed.

Also, the income declared for an earlier assessment year can be taken into account to explain the

transactions provided there is a nexus between the income declared and the transactions of the

subsequent assessment year. For example Mr A can explain declaring income Rs. 2 Crores for

CA. PRAMOD JAIN



AY 2011-12 and with the income earned constructing building on his disclosed land in AY

2011-12 for Rs. 1.5 Cr and for Rs. 0.5 Cr in AY 2012-13.

CBDT has clarified that where a person has invested his undisclosed income in a house property

say in FY 2010-11 which has not been let out and the person also owned another house property

from disclosed sources, which has been claimed as self-occupied property. In case the person

declares the undisclosed house property at its FMV on 01.06.2016, no action will be taken for

bringing the annual value of the undisclosed property to tax as income from house property by

deeming it to be let property as provided u/s 23(4)(b) of the Income-tax Act for the earlier

previous years. However, where the house property was let-out during the relevant period, the

actual rent received or receivable will be required to be declared under the Scheme in addition to

the FMV of the house property as on 01.06.2016

VALUATION OF DECLARED ASSETS

Main aspect of the scheme is the valuation of the assets which is to be declared. The assets will

have to be valued as per Rule 3, which is summarised hereafter.

o Cash in hand, balance with bank, FDRs any liquid assets and Creditors / loans being

fictitious liability would be valued at their actual holdings.

o Jewellery, Bullion, Precious stones, Archaeological collections, Drawings, Paintings,

Sculptures, any work of art, Plant & Machinery – at higher of:

o Cost of acquisition; and

o FMV on 1st June 2016, on the basis of valuation done by registered valuer.

o Shares and securities:

o Quoted share and securities – higher of:

� Cost of acquisition; and

� Price determined by taking average of the lowest and highest price of

such shares and securities quoted on a recognised stock exchange as on

the 1st June 2016 or if not traded on 1

st June 2016, then of immediately

preceding 1st June 2016, when such shares / securities were traded.

� In a case where such shares / securities are traded on more than one

exchange, then the quoted price of the share shall be computed with

reference to the recognized stock exchange which records the highest

volume of trading in the share on 1st June 2016

o Unquoted shares – higher of:


� Price determined on 1st June 2016 as per following formulae:

(A+B-L) x (PV) / (PE); where:

A = Book value of all the assets as per audited balance sheet as on 31st

March 2016 (if not audited then last balance sheet which is

approved and adopted in AGM) [other than bullion, jewellery,

precious stone, artistic work, shares, securities and immovable

property] as reduced by:

CA. PRAMOD JAIN



• any amount of income-tax paid, if any, less the amount of

income-tax refund claimed, if any, and

• any amount shown as asset including the unamortised

amount of deferred expenditure which does not represent the

value of any asset;

B = FMV of bullion, jewellery, precious stone, artistic work, shares,

securities and immovable property as determined in this scheme;

L = Book value of liabilities shown in the balance sheet as per audited

balance sheet as on 31st March 2016 (if not audited then last balance

sheet which is approved and adopted in AGM), but not including:

• paid-up equity shares

• amount set apart for dividend on preference and equity

shares

• reserve and surplus including loss other than set apart for

depreciation

• provision for taxation, other than amount of income-tax

paid, if any, less income-tax refund receivable, if any, to

the extent of the excess over the tax payable with reference

to the book profits

• provisions made for meeting liabilities, other than

ascertained liabilities

• contingent liabilities other than arrears of dividends

payable in respect of cumulative preference shares

PE = Total amount of paid up equity share capital as shown in the

balance-sheet as per audited balance sheet as on 31st March 2016

(if not audited then last balance sheet which is approved and

adopted in AGM)

PV = Paid up value of such equity share

o Unquoted securities other than equity shares – higher of:


� FMV on 1st June 2016 on the basis of valuation done by a registered

valuer

o Immovable Properties – higher of:

o Cost of acquisition; and

o FMV on 1st June 2016 on the basis of valuation done by a registered valuer

� However, if the immovable property is evidenced by a registered deed

with any registrar, then the assesse has an option to take the FMV as:

• Stamp duty value; plus

• Related cost inflation index in proportion to index of FY 2016-17

(1125) which bears to year in which property was registered.

• In case the property is registered prior to 1st April 1981, then

FMV would be basis of valuation obtained from a registered

valuer as increased by cost inflation index in proportion to index

of FY 2016-17 which bears to FY 1981-82 (100).

CA. PRAMOD JAIN



o Few examples for valuation of immovable property under this scheme are given

here under:

� Mr. A purchased a property through a registered deed on 1.5.15 for Rs. 2

Crore (50 C value). FMV of the property as per registered valuer as on 1st

June 2016 is Rs. 1.50 crore. Value for purpose of declaration under IDS

shall be Rs. 2 Crore.

� FMV as on 1st June 2016 made by registered valuer Rs. 1 Crore. Stamp

duty value by authority Rs. 2 Crore (as per s. 50C / 43CA). Value for

purpose of declaration under IDS can be Rs. 1 Crore.

� Property acquired through registered deed in FY 1991-92 for Rs. 10

Lakhs. Stamp Duty Value at that time was Rs. 20 Lakhs. Cost inflation

index for FY 1991-92 is 199. FMV of the property as on 1st June 2016 as

valued by registrar is Rs. 2 Crores. Stamp Duty value (as per s. 50C) as

on 1st June 2016 is Rs. 3.50 Crore. Cost inflation index for FY 2016-17 is

1125. The assesse has an option to take FMV as Rs. 11306533/- being

(Rs. 20 Lakhs x 1125 / 199) even though FMV by registered valuer and

stamp duty authority is high.

� Mr. ‘X’ purchased a piece of land in year 2004-05 for Rs.10 lakh,

however the stamp duty value was Rs.15 lakh. Thereafter, in the period

2005-06 to 2007-08. He constructed a house on the said land. The amount

to be declared in respect of the said property shall be (A + B) where:

• A= Value of land (if the assessee opts for valuation on the basis of

indexation) shall be Rs.15 lakh x 1125/497 = Rs. 33.95 Lakhs

• B= FMV of the house (excluding value of the land) as on

01.06.2016 as determined by the registered valuer or the cost of

construction whichever is higher.

o Interest in Partnership Firm / AOP / LLP:

o Determine the net asset of the firm by formulae – (A+B-L), where A, B, and L

means same as valuation for unquoted shares in a company (discussed above)

o Share of partner / member of the net asset would be:

� To the extent of capital – in proportion to which the capital is contributed

by partner / member;

� Balance of net asset - in accordance with the agreement of partnership or

AOP or LLP for distribution of assets in the event of dissolution or in the

absence of such agreement, as per profit / loss sharing ratio.

o Any other asset – at higher of:

o Cost of acquisition or amount invested; and

o FMV on 1st June 2016.

An example of multiplicity of undisclosed incomes is as under:

Mr. B earned undisclosed income of Rs. 90 lakh in FY 2010-11. Out of the same, he acquired an

immovable property in the FY 2011-12 for Rs.50 lakh, made personal expenditure to the extent

of Rs.20 lakh and balance Rs.20 lakh is left with him as cash in hand on 01.06.2016. The fair

market value of the immovable property as on 01.06.2016 is Rs.80 lakh. The declaration under

this scheme would be made as under:

CA. PRAMOD JAIN



1. Rs. 80 lakh being fair market value of the immovable property as on 01.06.2016

2. Rs. 20 lakh being the cash in hand as on 01.06.2016

3. Rs. 20 lakh being the balance of undisclosed income [Rs. 90 lakh – (Rs.50 lakh + Rs. 20

lakh)] which is not represented in the form of investment in any asset.

4. Thus the total undisclosed income to be declared in this case will be Rs. 1.20 crore.

VALUATION IN CASE ANY ASSET IS PARTLY FROM ASSESSED INCOME

In case investment in any asset is partly from an income which has been assessed to tax prior to

AY 2017-18, the FMV of the asset as determined above shall be reduced by an amount which

bears to the value of the asset as on the 1st June 2016, the same proportion as the assessed

income bears to the total cost of the asset.

For example:

Investment in acquisition of asset in previous year 2011-12 is of Rs.5,00,000 out of which

Rs.2,00,000 relates to income assessed to tax in A.Y. 2010-11 and Rs.3,00,000 is from

undisclosed income pertaining to previous year 2011-12.

The fair market value of the asset as on 1st June 2016 is Rs.1,50,00,000/-

The undisclosed income represented by this asset under the scheme shall be:

1,50,00,000 - (1,50,00,000 X 2,00,000/5,00,000 ) = Rs.90,00000/-

VALUATION REPORT

It is very important to note that the valuation report is to be obtained only from a registered

valuer. Registered valuer here means a person registered as a valuer u/s 34AB of the Wealth-tax

Act, 1957. A list of various classes of valuers registered with IT department for this purpose is

given at http://incometaxindia.gov.in/Pages/income-declaration-scheme.aspx. However, the

same is not exhaustive, yet one should ensure that the valuer is duly registered with IT

department for such valuations.

It is not mandatory to file the valuation report of the undisclosed income represented in the form

of investment in asset along with the declaration, though stated in the declaration form, Form-1.

The valuation report from a registered valuer shall not be questioned by the department.

However, the valuer is expected to furnish a true and correct valuation report in accordance with

the accepted principles of valuation. In case of any misrepresentation, appropriate action as per

law shall be taken against the registered valuer by the department.

However, the jurisdictional Pr. Commissioner/ Commissioner in order to ascertain the

correctness of the value of the asset quoted in Form-1 may require the declarant to file the

CA. PRAMOD JAIN



valuation report before issuing the acknowledgment in Form-2. In such a circumstance, it will be

necessary for the declarant to make the report available to the Pr. Commissioner/Commissioner.

TAXATION ON SALE OF AN ASSET DECLARED UNDER THIS SCHEME

CBDT has earlier stated that the when the asset declared under this scheme is sold, its cost and

date of holding both would be as on 1st June 2016. However, CBDT later clarified, is

supersession of its earlier stand that, though the cost would be taken as per the FMV as on 1st

June 2016 declared under the scheme, the period of holding of asset shall be based on the actual

date of acquisition of such asset. However, the indexation benefit in respect of the amount

declared under the Scheme shall be available from 1st June 2016 only. For example:

Mr. ‘A’ purchased a house on 01.10.2011 for Rs.10 lakh and declares FMV of the same as on

01.06.2016 under the Scheme at Rs.20 lakh. If the said house is sold on 01.10.2017 for Rs.30

lakh, the holding period for the house for purposes of computation of capital gain shall be 6 years

i.e. from 01.10.2011 to 01.10.2017.

As the holding period exceeds 3 years, the gains arising from such transfer shall be treated as

long term capital gain. However, the indexation benefit in this case shall be available on Rs.20

lakh from 01.06.2016 to 01.10.2017, i.e. 20 Lakhs x cost inflation index of FY 2017-18 / 1125

(cost inflation index of FY 2016-17)

RATE OF TAX

The tax rate for the purpose of scheme is:

1. Tax – 30% of the income disclosed;

2. Surcharge – 25% of the tax i.e., 7.5% of the income disclosed; and

3. Penalty - 25% of the tax i.e., 7.5% of the income disclosed; and

Hence total payment of tax etc would be 45% of the income disclosed. As per the original

scheme whole of the sum payable was to be paid by 30th

November 2016, however as amended

by circular no. 59 dated 20th

July 2016, the sum payable can now be paid in instalments as

under:

o not less than 25% of the sum payable – by 30th

November 2016

o not less than 50% of the sum payable – by 31st March 2017

o balance amount – by 30th

September 2017

For example an assessee making declaration under this scheme discloses his undisclosed income

on this tax, surcharge and penalty comes to Rs. 10,00,000/-, then the same can be paid as under:

o Rs. 2,50,000/- by 30th

November 2016

o Rs. 2,50,000/- by 31st March 2017

o Rs. 5,00,000/- by 30th

September 2017

Assuming that the assesse avail of the instalments and utilize the funds bearing interest @ 12%,

then the effect rate of tax, etc payable under the scheme comes to 42.30%

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In case of payment of complete amount is not made but only part payment is made by the due

dates, then the entire declaration made under the Scheme shall be invalid

It is pertinent to note that in case any income is declared on which tax is deducted (TDS), then

credit for TDS shall be allowed only in those cases where the related income is declared under

the Scheme and the credit for the tax has not already been claimed in the return of income file

for any assessment year

The rate of tax is 45% only. CBDT has clarified that in a case a person declares Rs. 100 lakh as

undisclosed income, being the FMV of undisclosed immovable property as on 1st June, 2016 and

pays tax, surcharge and penalty of Rs.45 lakh (30 lakh + 7.5 lakh + 7.5 lakh) on the same out of

his other undisclosed income. In this case the declarant will not get any immunity under the

Scheme in respect of undisclosed income of 45 lakh utilized for payment of tax, surcharge &

penalty but not included in the declaration filed under the Scheme. To get immunity under the

Scheme in respect the entire undisclosed income of Rs.145 lakh, the declarant has to declare

undisclosed income of Rs.145 lakh (Rs.100 lakh being the undisclosed income represented by

immovable property and Rs.45 lakh being the payment made from undisclosed income) and pay

tax, surcharge and penalty under the Scheme amounting to Rs.65.25 lakh i.e., 45 per cent of

Rs.145 lakh.

Payment of tax can be made as usual through online mode as well as in cash over the counter in

authorised banks and related instructions have already been issued by RBI to bankers on this

matter.

TIME LIMITS

Various time limits under the scheme are as under:

Date Requirement

30th

September 2016 File declaration in Form No. 1

30th

November 2016 Pay not less than 25% of the sum payable under the scheme

31st March 2017 Pay not less than 50% of the sum payable under the scheme

30th

September 2017 Pay balance amount (of the total amount as reduced by earlier

amount payable) under the scheme

30th

September 2017 Transfer the property from the benami holder to the declarant or his

legal representative

CBDT has clarified that in a case where the declarant gets the benami asset transferred in his

name without payment of any monetary consideration to the benamidar, there would be no

capital gains chargeable in the hands of benamidar consequent upon such transfer as the

consideration for acquisition of benami property has already been paid by the beneficial owner

and the FMV of the property has been declared by the beneficial owner under the Scheme. Since,

the transfer of property from benamidar to beneficial owner is only to regularize and there will

be no involvement of monetary consideration for transfer of immovable property by the

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benamidar in the name of the declarant, the question of capital gains in the hands of benamidar

and TDS of 1% thereon shall not arise

PROCEDURE OF SCHEME

Procedure for the Scheme in brief is as under:

o Declaration is to be made in Form 1:

o Using DSC; or

o Electronically through EVC; or

o In print form to jurisdictional Pr CIT / CIT

o The declaration in Form 1 can be revised on or before the date of closure of the Scheme

provided the undisclosed income in the revised declaration is not less than the

undisclosed income declared in the declaration already filed

o After the declaration is made the Principal Commissioner/ Commissioner will enquire

whether any proceeding under section 142(1)/143(2)/148/153A/153C is pending for the

assessment year for which declaration has been made. Apart from this no other enquiry

will be conducted by him at the time of declaration.

o Pr CIT / CIT to issue acknowledgment in Form 2 within 15 days from the end of the

month in which declaration is made

o Proof of payment of tax, etc to be made by declarant to Pr. CIT / CIT in Form 3

o Pr. CIT / CIT to grant certificate in Form 4 within 15 days of submission of full and

final payment of tax, etc. in Form 3

CBDT has clarified that the purpose of obtaining information about the nature of undisclosed

income in Form 1 is to know whether the undisclosed income is in the form of moveable asset,

immovable asset, gold, jewellery or cash. Here, the nature of income need not be confused with

the source of income. There is no need to indicate the source of income at all. In the column

meant for nature of undisclosed income one has to write the nomenclature such as ‘immovable

property’, ‘moveable property’, ‘gold’, ‘jewellery’ or ‘cash’ etc. This will enable the taxpayer to

establish the link between the income declared under the scheme and the claim, if any, made in

respect of such undisclosed income in the return of income filed subsequently or during any

assessment proceedings

IMMUNITIES / CONFIDENTIALITY

Pursuant to section 188 of the Finance Act 2016, the income declared shall not to be shall not

be included in the total income of the declarant for any AY under the Income-tax Act.

Section 195 of the Act provides that provisions of section 138 of the Income-tax Act shall apply

in relation to the proceedings under the Scheme. Vide notification S.O. 2322(E) dated

06.07.2016, an order has been passed by the Central Government directing that no public

servant shall produce before any person or authority any such document or record or any

information or computerized data or part thereof as comes into his possession during the

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discharge of official duties in respect of a valid declaration made under the Scheme. Therefore,

the information in respect of declaration made is confidential as in the case of return of income

filed by assessees

CBDT has clarified that the Scheme provides immunity under the Income-tax Act, 1961, the

Wealth-tax Act, 1957 and the Benami Transactions (Prohibition) Act, 1988. Immunity from

Benami Transactions (Prohibition) Act is subject to the condition that the property will be

transferred to the declarant (being the person who provided the consideration for the property)

latest by 30th September, 2017.

CBDT has also clarified that immunity from initiation of prosecution would be available to the

Directors of the company or the partners of the firm in respect of the undisclosed income

declared under the Scheme by the company or partnership firm, as the case may be.

CBDT on 1st September 2016 has clarified that wherever in the course of search u/s 132 or

survey u/s 133A any document is found as a proof for having already filed Form 1 including a

valid declaration acknowledgement in Form 2, no enquiry would be made IT department in

respect of sources of undisclosed income or investments.

It has also clarified that the information contained in the declaration made under the Scheme will

not be shared with any other tax or law enforcement agency. However, in my view if the

information comes to the knowledge of regulators of other economic laws including Service Tax,

VAT, Companies Act, SEBI Act & regulations etc., (from assesse himself, or otherwise) the

immunity is doubtful.

CBDT has clarified that cases of the declarant shall not be selected for scrutiny under the CASS

only on the ground that there is increase in capital in the balance sheet as a result of the

declaration made under the Scheme. However, in my view unless the ITRs are changed to

specifically state that a particular increase is due to IDS 2016, it would be impossible to

differentiate the increase in capital, cash, investment, etc due to IDS or otherwise. Again if such

change is made in ITR, the confidentiality is at stake. CBDT need to work on this issue in a way

by which a declarant is not harassed due to being a declarant of IDS 2016

CONSEQUENCES OF NON-DECLARATION

As per section 197(c) of the Finance Act, 2016, where any income has accrued or arisen or

received or any asset has been acquired out of such income prior to the commencement of the

Scheme and no declaration is made under the Scheme, then such income shall be deemed to

have been accrued, arisen or received or the value of the asset acquired out of such income shall

be deemed to have been acquired in the year in which a notice under section

142/143(2)/148/153A/153C is issued by the Assessing Officer and the provisions of the Income-

tax Act shall apply accordingly. CBDT has stated that, if such undisclosed income is detected in

the form of investment in any asset then value of such asset shall be as if the asset has been

CA. PRAMOD JAIN



acquired or made in the year in which the notice under section 148/153A/153C is issued and the

value shall be determined in accordance with rule 3 of the Rules

CBDT has clarified that in respect of such undisclosed income which has been duly declared in

good faith but not found eligible, then such income shall not be hit by section 197(c) of the

Finance Act, 2016. However, such undisclosed income may be assessed under the normal

provisions of the Income-tax Act, 1961

CBDT has clarified that if an undisclosed income represented in the form of an asset or

otherwise pertains to a year falling beyond the time limit allowed under section 149 of the

Income-tax Act, 1961 and the said undisclosed income is not declared under the Scheme, then as

per the provisions of section 197(c) of the Finance Act, 2016, the said undisclosed income shall

be treated as the income of the year in which a notice u/s 148 of the Income-tax Act has been

issued. Tough the said provision is inconsistent with the existing time lines provided under the

Income-tax Act for reopening a case. However, since the Scheme contained in Chapter IX of the

Finance Act, 2016 is a later law in time, the provisions of the Scheme shall prevail over the

provisions of earlier laws.

However, in my view the provisions of s. 197(c) would be tested in the courts of law.

I hope this document is of use to you. Your suggestions and comments would be highly

appreciated

Best Regards

CA. Pramod Jain

[email protected]

+91 9811073867

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