Rationalisation of provisions of the Income Declaration Scheme, 2016 and consequential
amendment to section 153A and 153C

The existing provisions of clause (c) of the section 197 of the Finance Act, 2016 provide that where any income has accrued, arisen or been received or any asset has been acquired out of such income prior to commencement of the Income Declaration Scheme, 2016 (the Scheme), and no declaration in respect of such income is made under the Scheme, then, such income shall be deemed to have accrued, arisen or received, as the case may be, in the year in which a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or section 148 or section 153A or section 153C of the Income-tax Act is issued by the Assessing Officer, and provisions of the said Act shall apply accordingly.

In view of the various representations received from stakeholders citing genuine hardships if the said provision is made applicable, it is proposed to omit clause (c) of section 197 of the Finance Act, 2016.

This amendment will take effect retrospectively from lst June, 2016.

However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or seizure operation (including 132A cases) and the same is represented in the form of undisclosed investment in any asset, it is proposed that section 153A relating to search assessments be amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year already provided upto the tenth assessment year if—

(i) the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant four assessment years(falling beyond the sixth year);

(ii) such income escaping assessment is represented in the form of asset;

(iii) the income escaping assessment or part thereof relates to such year or years.

It is however proposed that the amended provisions of section 153A shall apply where search under section 132 is initiated or requisition under section 1 32A is made on or after the 1st day of April, 2017.

It is also proposed to consequentially amend section 1 53C to provide a reference to the relevant assessment year or years as referred to in section 1 53A.

These amendments will take effect from lst April, 2017.

[Clauses 59, 61, & 150]

Extract of relevant clause from Finance Bill, 2017

Amendment of section 153A.

59. In section 153A of the Income-tax Act, in sub-section (1),—

(i) in clause (a), first proviso and the second proviso, after the words “six assessment years” wherever they occur, the words “and for the relevant assessment year or years” shall be inserted;

(ii) in clause (b), after the words “requisition is made”, the words “and of the relevant assessment year or years” shall be inserted;

(iii) in the third proviso, after the words “requisition is made”, the words “and for the relevant assessment year or years” shall be inserted;

(iv) after the third proviso, the following shall be inserted, namely:—

‘Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless––

(a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years;

(b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and

(c) the search under section 132 is initiated or requisition under section 1 32A is made on or after the 1st day of April, 2017.

Explanation 1.––For the purposes of this sub-section, the expression “relevant assessment year” shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made.

Explanation 2.––For the purposes of the fourth proviso, “asset” shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.’.

Amendment of section 153C.

61. In section 153C of the Income-tax Act, in sub-section (1),—

(a) in the long line, after the words “total income of such other person”, the words “for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is “made and” shall be inserted;

(b) in the second proviso, after the words “requisition is made”, the words, brackets, figures and letter “and for the relevant assessment year or years as referred to in sub-section (1) of section 153A” shall be inserted.

Amendment of Act 28 of 2016.

150. In the Finance Act, 2016,––

(i) in section 50, for the words, figures and letters “with effect from the 1st day of April, 2017”, the words, figures and letters “and shall be deemed to have been substituted with effect from the 1st day of April, 2013” shall be substituted;

(ii) in section 197, clause (c) shall be omitted and shall be deemed to have been omitted with
effect from the 1st day of June, 2016.

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