Advocate Akhilesh Kumar Sah


The Central Government has given another tremendous opportunities in the recently launched its two schemes w.e.f. 01.06.2016 under Income Tax Regime. One is The Income Declaration Scheme, 2016 & another is in respect of reducing tax litigations under the Direct Tax Dispute Resolution Scheme, 2016.

After Voluntary Disclosure of Scheme, 1997, the above schemes are welcome on the part of the Government.

The Central Government had launched Voluntary Compliance Encouragement Scheme, 2013 in respect of service tax dues from the period 01.10.2007 to 31.12.2012 without interest, penalty and other legal proceedings including prosecution.

The recent Black Money [undisclosed foreign income & assets] and Imposition of Tax Act, 2015 gave moderate response in respect of declaration of foreign undisclosed income and assets. There is continued emphasis of Central Government in bringing to India the Black Moneys said to be deposited by Indian citizens at large especially in Swiss Banks.

Under The Income Declaration Scheme, 2016 a declaration under the Scheme may be made in respect of any income or income in the form of investment in any asset located in India and acquired from income chargeable to tax under the Income-tax Act for any assessment year prior to the assessment year 2017-18 for which the declaration had, either failed to furnish a return under section 139 of the Income-tax Act, or failed to disclose such income in a return furnished before the date of commencement of the Scheme, or such income had escaped assessment by reason of the omission or failure on the part of such person to make a return under the Income-tax Act or to disclose fully and truly all material facts necessary for the assessment or otherwise.

Where the income chargeable to tax is declared in the form of investment in any asset, the fair market value of such asset as on 1st June, 2016 computed in accordance with Rule 3 of the Income Declaration Scheme Rules, 2016 shall be deemed to be undisclosed income.

Under the Direct Tax Dispute Resolution Scheme, 2016, a declarant can file a declaration in relation to tax arrears or specified tax in respect of which appeal is pending before the CIT(A).

The Tax Arrear means the amount of tax, interest or penalty determined under the IT Act or WT Act, in respect of which appeal is pending before the CIT(A) or CWT(A) as on 29.02.2016. The pending appeal could be against an assessment order or a penalty order and the Specified Tax means the tax determined in consequence of or is validated by an amendment made with retrospective effect in IT Act or WT Act, for a period prior to the date of enactment of such amendment and a dispute in respect of which is pending as on 29.02.2016.

There is immunity in case of the Direct Tax Dispute Resolution Scheme, 2016 for Tax Arrears in respect of Quantum Appeal, where Dispute Tax is upto Rs. 10 lacs, the declarant has to pay disputed tax and interest in full & get immunity in respect of penalty. Where Disputed Tax exceeds Rs. 10 lacs, the declarant has to pay disputed tax, interest & 25% of minimum leviable penalty & he will get immunity in respect of 75% of minimum penalty. In respect of Penalty Appeal 25% of minimum leviable penalty is to be paid & declarant will get immunity in respect of 75% of minimum penalty.

Central Government is giving another chance for voluntary disclosure of black moneys & for resolving of tax disputes for which concerned/ aimed persons can take best advantage upto 30.09.2016 and Finance Minister Mr. Arun Jaitley has clarified that there shall not be any extension of the last date, as above.

Although in some cases a person can argue why to pay 45%( tax at 30%, a surcharge of 7.5% plus penalty of 7.5%, taking it to a total tax rate of 45%) when there is maximum tax slab is for an individual @30% plus education cess, higher education cess and surcharge @12% where net income exceeds Rs. 1 crore.

Yet, the disclosure scheme is advantageous as there may be scrutiny of the return filed where higher income has been disclosed in the ITR. Also, there are advantages where the income to be disclosed relates to definite dates of the past for which proceedings under section 148 of the IT Act 1961 can be initiated and tax, interest, penalties can be levied and also prosecution proceedings can be initiated.

There is good chance to take advantage of disclosure scheme as well in respect of appeals where there is least chances of favorable decision.

CBDT is expanding TDS/ TCS system apart from using information of AIR/ CIB and PM Narendra Modi has warned of stringent actions after 30.09.2016 against tax-dodgers.

But there should not be indiscrimination with taxpayers who comply with the harsh provisions of the tax laws rather there should be rewarding scheme for honourable taxpayers.

Here, the following observation in CWT vs. Arvind Narottam (1988) 173 ITR 479 (SC) at page 487, may be noteworthy:

“It is true that tax avoidance in an underdeveloped or developing economy should not be encouraged on practical as well as ideological grounds One would wish, as noted by Reddy J, that one could get the enthusiasm of Justice Holmes that taxes are the price of civilization and one would like to pay that price to buy civilization But the question which many ordinary taxpayers very often, in a country of shortages with ostentatious consumption and deprivation for the large masses, ask is, does he with taxes buy civilization or does he facilitate the waste and ostentation of the few Unless waste and ostentation in Government spending are avoided or eschewed, no amount of moral sermons would change people’s attitude to tax avoidance.”

The modern steps taken by Mr. Arun Jaitley, FM shall be helpful in bringing out black money and its transactions to a great extent and shall help to economy of India.

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February 2024