Comprehensive Analysis of Income Declaration Scheme 2016

The Income Declaration Scheme 2016 has been framed under Chapter IX of the Finance Act 2016. As per Circular No. 16/2016, scheme received the assent of the President on 14-05-2016The scheme shall come into force on 01-06-2016. It comprises sections 181 to 199 of Finance Act 2016. In this article an attempt has been made to consolidate the entire law published till date on the Scheme.

1. Object of the Scheme

The Scheme provides an opportunity to persons who have paid not full taxes in the past to come forward and declare the undisclosed income and pay tax, surcharge and penalty totaling in all to forty-five per cent of such undisclosed income declared.

2. Duration of Making Declaration under the Scheme [Section 183]

The declaration under the Scheme can be made on or after the date of commencement of this Scheme but before a date to be notified by the Central Government in the Official Gazette. As per Notification No. 32/2016 dated 19-05-2016, the declaration u/s 183(1) can be made till 30-09-2016.

3. Income against which declaration can be made [Section 183]

Declaration can be made only against income chargeable to tax under Income Tax Act.

Comments:

However , if a person makes declaration in respect of income which is not chargeable to tax under Income Tax Act, say, a person makes declaration about capital receipt or exempt income, such declaration shall not come under the purview of Income Declaration Scheme but as per Section 191 of the Scheme the tax and surcharge paid u/s 184 or penalty paid u/s 183 shall not be refundable.

However, if only tax or only surcharge is paid, whether section 191 shall operate is not clear from the scheme.

4. Assets against which declaration can be made

As per Circular No. 16/2016 dated 20-05-2016,

A declaration under the aforesaid Scheme may be made in respect of any income or income in the form of investment in any asset located in India

5. Assessment Years for which declaration can be made [Section 183]

The declaration under the scheme can be made for any assessment year prior to the assessment year beginning on the 1st day of April, 2017

Hence declaration can be filed up to Assessment Year 2016-17 only.

6.Who can make declaration [Section 183]

Any person can make declaration.

Comments

Such person can be residents or non resident. The person making declaration may be non assesee also i.e. a person who is not assessed to tax. He may be a person not having PAN or a person who has not filed his return of Income. However as per Point No. 3 of Form-1 for Declaration, PAN of the declarant is asked for and it also says “In case PAN is not held, please apply for PAN and quote here “

The person making declaration under the Scheme has been defined as “Declarant” u/s 182

7. Circumstances under which declaration can be filed [Section 183]

Declaration can be filed by declarant for Income:

(a) for which he has failed to furnish a return under section 139 of the Income-tax Act;

(b) which he has failed to disclose in a return of income furnished by him under the Income-tax Act before the date of commencement of this Scheme;

(c) which has escaped assessment by reason of the omission or failure on the part of such person to furnish a return under the Income-tax Act or to disclose fully and truly all material facts necessary for the assessment or otherwise.

Comments:

1. Declaration can be filed for failure to file return u/s 139(1) as well as u/s 139(4).

2. Apparentely, Failure to disclose income in a return may , however , can be u/s 139, 142, 148 or 153A. However S.183(1) is subject to provisions of the scheme . As per Section 196 the scheme shall not apply where notice is issued u/s 142,148 or 153A. Hence again failure to disclose income in return u/s 139 can be made up under the scheme where proceedings under other sections have not been initiated.

3. Escapement of Income by reason of omission or failure on part of declarant can only be covered under the Scheme. Where the assessee has already made a disclosure in return in good faith and income has not been charged to tax and now assessee wants to get away by availing the benefit of this scheme, may find it difficult to get covered by the provisions of this Scheme .

8. Forms in which income may be declared under the Scheme

The Income under the scheme may be declared in the form of investment in any asset [S.183(2)]

9. Computation of Undisclosed Income represented by Asset

As per Section 183(2) , FMV of asset on 01-06-2016= Deemed Undisclosed Income u/s 183(1). As per Section 183(3), FMV of an asset shall be determined in prescribed manner.

However section 183(1) does not mention about Undisclosed Income. Hence the anamoly, ostensibly seminal, may mar the entire scheme.

10. Information to be Furnished regarding Undisclosed Income/OR WHERE Income Declared in the form of Investment is Assets

As per Statement of Undisclosed Income annexed to Form 1 i.e. Declaration of Undisclosed Income, following information to be imparted

a) Regarding Undisclosed Income

• Asstt Year to which Income Pertains
• Amount of Undisclosed Income
• Nature of Undisclsoed Income

b) Where Undisclosed Income is in the form of Investment in assets:

1	Immovable Property	Nature (Land/Building), Address, Name in which held, Date of Acquisition, Total Acquisition Cost, Value as per Regd. Valuer on 01-06-2016 along with report and FMV as per Rule 3 to be provided
2	Jewellery	a) Purity, Weight, Value of Gold, b) Carat, Cut, Colour, Clarity, Value of Diamond (of I carat or more) c) Value of Diamond (less than 1 carat) and other precious stones d) Value of other precious metals to be provided
3	Artistic Work	Nature, Name under which held, Date of Acquisition, Total Acquisition Cost, Value as per Regd. Valuer on 01-06-2016 along with report and FMV as per Rule 3 to be provided
4	Quoted Shares and Securities	Name of Issuer, Number of Shares, Type of Security, Recognized Stock Exchange where quoted, Name under which held, Date of Acquisition, Total Acquisition Cost, Value as per Regd. Valuer on 01-06-2016 along with report and FMV as per Rule 3 to be provided
5	Unquoted Equity Shares	Name of Issuer, Number of Shares, Type of Security, Name under which held, Date of Acquisition, Total Acquisition Cost, Value as per Regd. Valuer on 01-06-2016 along with report and FMV as per Rule 3 to be provided
6	Unquoted Shares other than equity shares	Name of Issuer, Number of Shares, Type of Security, Name under which held, Date of Acquisition, Total Acquisition Cost, Value as per Regd. Valuer on 01-06-2016 along with report and FMV as per Rule 3 to be provided
7	Any Other Asset	Description of Asset, Name under which held, Date of Acquisition, Total Acquisition Cost, Value as per Regd. Valuer on 01-06-2016 along with report and FMV as per Rule 3 to be provided
Valuation Report As per Circular No. 17/2016 dated 20-05-2016, 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. However, the declarant should have the valuation report. While e-filing the declaration on the departmental website a facility for uploading the documents will be available

11. Determination of Fair Market Value

Determination of fair market Value of assets to be made as per Rule 3 of The Income Declaration Scheme Rules, 2016 as under:

1`	Value of Bullion, Jewellery or Precious Stone	Higher of i) Cost of Acquisition and ii) The price such bullion, jewellery or precious stone shall ordinarily fetch if sold in the open market as on the 1st day of June, 2016, on the basis of the valuation report obtained by the declarant from a registered valuer
2	Valuation of archaeological collections, drawings, paintings, sculptures or any work of art (hereinafter referred to as artistic work)	Higher of i) Cost of Acquisition and ii) The price such artistic work shall ordinarily fetch if sold in the open market as on the 1st day of June, 2016, on the basis of the valuation report obtained by the declarant from a registered valuer.
3	Fair market value of an immovable property	Higher of i) Cost of Acquisition and ii) The price such property shall ordinarily fetch if sold in the open market as on the 1st day of June, 2016, on the basis of the valuation report obtained by the declarant from a registered valuer.
4	Quoted Shares and Securities	Higher of i) Cost of Acquisition and ii) The price determined by taking a) If Share is traded on 01-06-2016, Avg of Lowest and Highest price on 01-06-2016 on recognized stock exchange[RSE] b) If Share is not traded on 01-06-2016,Avg of Lowest and Highest price on date immediately preceeding 01-06-2016, when shares are traded on RSE
5	Unquoted Equity Shares	Net Worth x Paid up Value of Equity Share capital Total amount of paid up equity share capital as shown in the balance-sheet Net Worth = Value of [Assets – Liabilities], where in Assets = [FMV of Bullion, Jewellery, Precious Stone +FMV of Artistic Work +FMV of Shares and securities +FMV of Immovable property] determined as per Rule 3 + Book Value of Other Assets – Income Tax Paid (-Refund Claimed) – Unamortized Amount of Deferred Exp – Amount shown as but not representing any asset Liabilities= Book Value of Liabilities in B/s less i) The paid-up capital in respect of equity shares ii) The amount set apart for payment of dividends on preference shares and equity shares iii) Reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation iv) Any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto v) Any amount representing provisions made for meeting liabilities, other than ascertained liabilities; vi) Any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares
6	Unquoted Shares and Securities other than Equity Shares	Higher of i) its cost of acquisition and ii) the price that the share or security shall ordinarily fetch if sold in the open market on the 1st day of June, 2016, , on the basis of the valuation report obtained by the declarant from a registered valuer
7	Value of other Assets	Higher of i) Cost of Acquisition or the amount invested and ii) The price the asset would fetch if sold in the open market as on the 1st day of June, 2016, Comments: Report of registered value not required. Extraordinary price can also be taken as value

12. Where undisclosed income is represented in the form of investment in asset and such asset is partly from income that has been assessed to tax earlier

As per Rule 3(2), The fair market value of the asset determined in accordance with sub-rule (1) shall be reduced by an amount which bears to the value of the asset as on the 1st day of June, 2016, the same proportion as the assessed income bears to the total cost of the asset .

An Illustration in this regard has been provided by Circular No. 17/2016 dated 20-05-2016

Investment in acquisition of asset in previous year 2013-14 is of Rs.500 out of which Rs.200 relates to income assessed to tax in A.Y. 2012-13 and Rs.300 is from undisclosed income pertaining to previous year 2013-14. The fair market value of the asset as on 01.06.2016 is Rs.1500.

The undisclosed income represented by this asset under the scheme shall be: 1500 minus (1500 X 200/500) = Rs.900

13. Allowance or Expenditure against Income declared

As per Section 183(4), No deduction in respect of any expenditure or allowance shall be allowed against the income in respect of which declaration under this section is made.

Comments

The provision is similar to one contained in S.69C and S.115BBE. Although there is no specific bar under the Scheme for setting off any loss as introduced by Finance Act 2016 u/s 115BBE, but since as per Section 188, income declared under the Scheme shall not be included in total Income for any assessment year, there is no implication even if section 183(4) is silent about setting off of loss.

14. Tax , Surcharge and Penalty under the Scheme

Tax	30% of Undisclosed Income [184(1)]
Surcharge= Krishi Kalyan Cess	25% of Tax =7.5% of Undisclosed Income [184(2)]
Penalty	25% of Tax =7.5% of Undisclosed Income [185]
Total	45% of Undisclosed Income

Since Charging section 183(1) is silent about undisclosed Income, operation of S.184 and 185 may also become doubtful.

15. Application of Tax and Penalty Rates under Income Tax Act and Finance

Act

The Income of the assessee under Income tax Act may be chargeable to tax at concessional rates say 10% rate for royalty and Fee for technical services or 15% rate for Short Term Capital Gain on listed shares. Also the assessee under the Finance Act may be eligible for basic exemption limit or may be taxable at slab of 10% or 20%. The assessee, if foreign Company may be taxable @ 40%. Further there may be a surcharge of 12% on Income exceeding 1 crore. But rates under the Scheme have overriding impact over the Income Tax Act and the Finance Acts.

16. Person to whom Declaration to be made

As per Section 186(1) declaration shall be made to Principal Commissioner or Commissioner.

As per Circular No. 19/2016 dated 25-05-2016 it has been clarified that the declaration to be made to Principal Commissioner or the Commissioner who exercises jurisdiction over the declarant under section 120 of the Income-tax Act, 1961, as notified by CBDT from time to time over such declarant,

17. Form and Verification of Declaration

Form and Verification of declaration shall be prescribed u/s 186(1). The provisions for manner of furnishing of declaration are absent. As per Section 199(2), rules may provide for the form in which a declaration may be made under section 183 and the manner in which the same may be verified. Again S.199(2) is also silent about framing of rule regarding furnishing of declaration.

However Rule 4 of The Income Declaration Scheme Rules, 2016 deals with form, its verification as well manner of furnishing the Form [Again a case of delegate exceeding the powers under the law]

Form	Form-1
Manner of Furnishing	Either of i) electronically under digital signature ii) through transmission of data in the form electronically under electronic verification code iii) in print form, to the concerned Principal Commissioner or the Commissioner who has the jurisdiction over the declarant [Comments: Manner of Furnishing not mentioned in law] As per Circular No. 19/2016 dated 25-05-2016 it has been clarified that the declaration to be made to Principal Commissioner or the Commissioner who exercises jurisdiction over the declarant under section 120 of the Income-tax Act, 1961, as notified by CBDT from time to time over such declarant,
Inquiry in respect of Declaration	As per Circular No. 17/2016 dated 20-05-2016, in Q.No.12, it is mentioned that 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.
Acknowledgement	The Principal Commissioner or the Commissioner shall issue an acknowledgement in Form-2 to the declarant [Not mentioned in Scheme]
Period of issuing Acknowledgement	Within fifteen days from the end of the month in which the declaration under section 183 has been furnished
Proof of payment of tax, surcharge and penalty	The proof of payment of tax, surcharge and penalty made pursuant to the acknowledgement issued by the Principal Commissioner or the Commissioner shall be furnished by the declarant to the such Principal Commissioner or Commissioner in Form 3. [Comments: Proof of Payment to be submitted after receipt of Acknowlegment from CIT/Pr. CIT. As per Form-1, the form can be submitted along with payable figure. As per 187(2) read with NN 32/ 2016, proof to be submitted till 30-11-2016]
Certificate of Income Declared	The Principal Commissioner or the Commissioner shall grant a certificate in Form-4 to the declarant within fifteen days of the submission of proof of payment of tax, surcharge along with penalty by the declarant under section 187 of the Act in respect of the income so declared [Not mentioned in Law under the Scheme Farmed by Finance Act 2016]

18. Signing of Declaration [Section 186(2)] :

Status/Situation of Declarant	Declaration to be signed by
Individual	Individual Himself
Where Individual is absent from India	By the individual concerned or by some person duly authorised by him in this behalf
Where the individual is mentally incapacitated from attending to his affairs	By his guardian or by any other person competent to act on his behalf
Comments: There is no specific requirement to attach power of attorney along declaration where Signatures are done by authorized person. But power of attorney must be attached as evidence of authorization.
Where the declarant is a Hindu undivided family	Karta
Where the Karta is absent from India or is mentally incapacitated from attending to his affairs	By any other adult member of such family
Where the declarant is a company	By the managing director thereof
Where for any unavoidable reason such managing director is not able to sign the declaration or where there is no managing director	By any director thereof
Where the declarant is a firm	By the managing partner thereof
Where for any unavoidable reason such managing partner is not able to sign the declaration, or where there is no managing partner as such	By any partner thereof, not being a minor
Where the declarant is any other association	By any member of the association or the principal officer thereof;
Where the declarant is any other person	By that person or by some other person competent to act on his behalf.
For LLP, Political party or Local Authority also, the person competent to act on behalf of LLP, political party or Local Authority may sign

19. Only one Declaration can be filed [Section 186(3)]

Any person, who has made a declaration under sub-section (1) of section 183 in respect of his income or as a representative assessee in respect of the income of any other person, shall not be entitled to make any other declaration, under that sub-section in respect of his income or the income of such other person, and any such other declaration, if made, shall be void.

Comments: Since an embargo has been placed on making any other declaration, the revision of declaration already filed is not possible. Also different declarations for different assessment years can not be filed. One declaration to be filed for multiple assessment years as per Point no. 5 of the Form-1. Further if a person files a declaration in representative capacity say as Karta of HUF, whether he can file another declaration in Individual capacity is not clear from the Scheme

As per Form-1 , Declarant is required to furnish a declaration that

“…………………..

b. in addition to my own income in respect of the assessment year(s) for which the declaration is made, income of other persons in respect of which I am chargeable to tax and income accruing or arising from the assets held by me through any other person for which I had failed to furnish a return under section 139 of the Income-tax Act, 1961/which I had failed to disclose in a return of income furnished by me before the commencement of the Scheme/which has otherwise escaped assessment, has also been disclosed in this declaration

c) The income of any other person in respect of which I am not chargeable to tax has not been included in this declaration

…………………………..”

20. Time for payment of Tax etc.

As per Section 187(1), The tax and surcharge payable under section 184 and penalty payable under section 185 in respect of the undisclosed income, shall be paid on or before a date to be notified

by the Central Government in the Official Gazette. As per Notification No. 32/2016 dated 19-05-2016, tax, surcharge u/s 184 and penalty u/s 185 can be paid till 30-11-2016

21. Submission of Proof of Tax etc and Time Limit for Submission

As per Section 187(2), The declarant shall file the proof of payment of tax, surcharge and penalty on or before the date notified under sub-section (1), i.e. 30-11-2016 with the Principal Commissioner or the Commissioner, as the case may be, before whom the declaration under section 183 was made.

22. Consequences of Failure to pay

As per Section 187(3), If the declarant fails to pay the tax, surcharge and penalty in respect of the declaration made under section 183 on or before the date specified under sub-section (1), the declaration filed by him shall be deemed never to have been made under this Scheme.

Further As per Section 197(b), where any declaration has been made under section 183 but no tax, surcharge and penalty referred to in section 184 and section 185 has been paid within the time specified under section 187, the undisclosed income shall be chargeable to tax under the Income-tax Act in the previous year in which such declaration is made

Comments: S.187(3) deals only with consequences of failure to pay . It does not say that if a person fails to submit the proof of tax etc with in time limt, then also the declaration shall never be deemed to have been made.

Further, if declaration is deemed to have been never made, whether department can make use of the information coming to its possession under the Scheme ?

As per Section 197(b), income is chargeable to tax in the previous year in which declaration is made.

As per Circular No. 16/2016 dated 20-05-2016,

The declarant shall not be liable for any adverse consequences under the Scheme in respect of, any income which has been duly declared but has been found ineligible for declaration. However, such information may be used under the provisions of the Income-tax Act.

23. Exclusion of Undisclosed Income from Total Income

As per Section 188, The amount of undisclosed income declared in accordance with section 180 shall not be included in the total income of the declarant for any assessment year under the Income tax Act, if the declarant makes the payment of tax and surcharge referred to in section 184 and the penalty referred to in section 185, by the date specified under sub-section (1) of section 187

Comments: If the declarant fails to pay tax etc with in time specified u/s 187, only then undisclosed Income shall be excluded from total Income. However, if tax etc is not paid with in due time, then undisclosed income may be included in total income. Further, late submission of proof shall not have any impact on inclusion/exclusion of undisclosed Income i.e. undisclosed income not to be included in total income where merely proof of tax etc is submitted late.

24. No Reopening of assessment to be made in respect of Income declared under the scheme [Section 189]

A declarant under this Scheme shall not be entitled, in respect of undisclosed income declared or any amount of tax and surcharge paid thereon, to re-open any assessment or reassessment made under the Income-tax Act or the Wealth-tax Act, 1957, or claim any set off or relief in any appeal, reference or other proceeding in relation to any such assessment or reassessment.

Comments: Section 189 bars the reopening of assessment or reassessment. However, it should have been further extended to take care of revision also.

Further Section 189 talks about disentitlement of declarant but not the privilege of Income Tax department to reopen the assessment.

Further the declarant is barred from claiming any relief in appeal in respect of income declared under the scheme. It means if the assessee’s income declared is say also the subject matter of appeal, he shall have to contest the case on its standalone merits. The assessee can not take the advantage of income declared in the scheme while pleading his appeal.

As per Circular 17/2016 dated 20-05-2016 under such circumstances, the declarant can however, declare other undisclosed income for the said assessment year which has not been assessed under the Income-tax Act.

25. Tax, Surharge and Penalty paid under the Scheme is not refundable

As per section 191, Any amount of tax and surcharge paid under section 184 or penalty paid under section 185 in pursuance of a declaration made under section 183 shall not be refundable.

Comments: Although the amount paid under the scheme is not refundable but , In case a declarant , say, instead of paying tax in HUF capacity pays in Individual capacity, whether the same can be adjusted to HUF’s declaration should be clarified in this regard.

26.Immunity from Penalty and Prosecution

As per Section 192,

• Notwithstanding anything contained in any other law for the time being in force,
• nothing contained in any declaration made under section 183 shall be admissible in evidence against the declarant
• for the purpose of any proceeding relating to imposition of penalty, other than the penalty leviable under section 185, or
• for the purposes of prosecution under the Income-tax Act or the Wealth-tax Act, 1957.

27. Declaration made by misrepresentation or suppression of facts [Section 193]

Notwithstanding anything contained in this Scheme, where a declaration has been made by misrepresentation or suppression of facts, such declaration shall be void and shall be deemed never to have been made under this Scheme.

28. Exemption from payment of Wealth Tax on Assets represented by Declared Income [Section 194(1)]

Where the undisclosed income is represented by cash (including bank deposits), bullion, investment in shares or any other assets specified in the declaration made under section 183 for which

• Wealth tax return is not filed for AY 2015-16 or earlier assessment year or asset is not disclosed in Wealth Tax return filed or value of asset is understated in the Wealth tax return
• then notwithstanding anything contained in Wealth Tax Act
• No Wealth Tax shall be payable on assets or upto value of asset so represented in declaration of Income under the scheme

29. Condition for Exemption from Wealth Tax[194(2)]

As per Section 194(2), the exemption from Wealth Tax shall not apply unless the conditions specified in sub-sections (1) and (2) of section 187 are fulfilled by the declarant i.e. unless tax, surcharge and penalty is paid with in due date.

30. Person other than Declarant can not claim any benefit, concession,

Immunity under the Scheme[Section 197 (a)]

Comments

Following benefits, concessions and Immunities are available under the Scheme:

a) Income declared under the scheme shall not form part of total income

b) The Contents of declaration are not admissible in evidence against the declarant.

c) Immunity from Benami Properties Act provided the property is transferred in the name of declarant till 30-09-2017

d) Immunity from Wealth Tax payment u/s 194

e) Immunity from penalty And prosecution u/s 192

f) Tax and Penalty Rates u/s 184 and 185

The above benefits shall only be available to declarant and not any other person. If declaration is filed in different name and tax is inadvertently filed in different name, then subject to timely payment u/s 187, immunity shall be available to declarant and not the person in whose name the tax has been deposited

31. Consequences of not making declaration under Income Declaration Scheme

Normally under VDIS Scheme, there are no harsh consequences of not disclosing the Income and the assessee is not placed at a position inferior to that he would be if there was no VDIS. But this scheme as per Section 197(c) says:

Where any income has accrued, arisen or received or any asset has been acquired out of such income prior to commencement of this Scheme, and no declaration in respect of such income is made under this Scheme,—

(i) such income shall be deemed to have accrued, arisen or received, as the case may be; or

(ii) the value of the asset acquired out of such income shall be deemed to have been acquired or made,

in the year in which a notice under section 142, 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 the provisions of the Income-tax Act shall apply accordingly

At the onset, the purpose is to disincetivise the assessee for not making the declaration under the scheme and provide for higher valuation of asset by providing deeming provisions but scheme of fixing the year of deemed accrual or acquisition is not clear.

E.g. As per 197(c) for assessment year 2016-17, notice u/s 148 for undisclosed income of AY 2016-17 is issued on 30-09-2018 , then income shall be deemed to have accrued in 2018-19, being the year of issue of notice and not in previous year 2015-16 relevant to assessment year 2016-17. In such a case, how shall AO assess the assessee, when the income itself is not deemed to have arisen in AY 2016-17. Further the Income tax law has not been amended to provide for such fiction.

As per Press Release dated 14-05-2016, Non-declaration of undisclosed income under the Scheme, will render such undisclosed income liable to tax in the previous year in which it is detected by the Income tax Department

As per Circular 17/2016 dtd 20-05-2016 , Where declaration found hit by S.196, whether 197(c ) shall apply ?

The Board has stated 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.

32. Benami Transacton [S.190]

If declarant provides consideration for asset but held in name of some other person and is transferred back to declarant with in period notified by Central Govt, provisions of Benami Transactions Prohibtion Act 1988 shall not apply and declaration of Income represented by such asset can be made under this Scheme by person providing the considerations. As per Form-1 for Declaration of Income :

As per Notification No. 32/2016 dated 19-05-2016, the property to be transferred from benamidar to declarant up to 30-09-2017

“The undisclosed income declared in the form of investment in benami property and existing in the name of benamidar shall be transferred in the name of the real owner on or before 30th September, 2017, failing which immunity under Benami Transactions (Prohibition) Act, 1988 shall not be available.”

33. Non Application of the Income Declaration Scheme:

As per Section 196, The Income Declaration Scheme 2016 shall not apply in following cases:

1	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:[COFEPOSA] However, if order of detention has been revoked under COFEPOSA or has been set aside by Court of Competent Jurisdiction, the person can avail the benefit of this Scheme.
2	In relation to prosecution for any offence punishable under Chapter IX or Chapter XVII of the Indian Penal Code
3	In relation to prosecution for any offence punishable under the Narcotic Drugs and Psychotropic Substances Act, 1985 [NDPS]
4	In relation to prosecution for any offence punishable under Unlawful Activities (Prevention) Act, 1967
5	in relation to prosecution for any offence punishable under Prevention of Corruption Act, 1988;
6	To any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992;
7	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;
8	in relation to any undisclosed income chargeable to tax under the Income tax Act for any previous year relevant to an assessment year prior to the assessment year beginning on the 1st day of April, 2017— (i) where a notice under section 142 or sub-section (2) of section 143 or section 148 or section 153A or section 153C of the Income-tax Act has been issued in respect of such assessment year and the proceeding is pending before the Assessing Officer; or Comments: If proceeding is not pending before AO but appellate bodies, whether declaration can be filed subject to not claiming any relief in appeal u/s 189 Circular 16/2016 dated 20-05-2016 For the purposes of declaration under the Scheme, it is clarified that the person will not be eligible under the Scheme if any notice referred above has been served upon the person on or before 31st May, 2016 i.e. before the date of commencement of this Scheme. As per Circular 17/2016, Discussing the querry No. 3 on “If the notice has been issued but not served on the declarant, then how will he come to know whether the notice has been issued, the CBDT has stated that The declarant will not be eligible for declaration under the Scheme where a notice has been issued and served on the declarant on or before 31st day of May, 2016 Further In the form of declaration (Form 1) the declarant will verify that no such notice has been received by him on or before 31st May, 2016. However no such declaration is there in Form-1 except for the wording mentioned in Section 196 Further as per Circular 17/2016 dated 20-05-2016 Declarant is free to declare undisclosed income for other years for which no notice under above referred sections has been issued (ii) where a search has been conducted under section 132 or requisition has been made under section 132A or a survey has been carried out under section 133A of the Income-tax Act in a previous year and a notice under sub-section (2) of section 143 for the assessment year relevant to such previous year or a notice under section 153A or under section 153C of the said Act for an assessment year relevant to any previous year prior to such previous year has not been issued and the time for issuance of such notice has not expired; As per Circular 17/2016 dated 20-05-2016 In this case, however, the person is eligible to file a declaration in respect of an undisclosed income in relation to an assessment year which is prior to assessment years relevant for the purpose of notice under section 153A As per Circular In the case of survey, a person is eligible to make a declaration in respect of an undisclosed income of any other previous year other than in which the survey was conducted Comments: In such a case the declarant shall be able to make a declaration even for the previous years before the year in which survey is conducted, although incriminating material for such period is in the possession of the department. (iii) where any information has been received by the competent authority under an agreement entered into by the Central Government under section 90 or section 90A of the Income-tax Act in respect of such undisclosed asset.

Application of Section 197(c) to Declaration found ineligible due to S.196

As per Circular No. 17/2016 dated 20-05-2016, 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. [Q.No.9]

However, while answering to Q.No.11 in respect of declaration made by person for undisclosed Income which has been acquired from money earned through corruption, it has been stated by Circular NO. 17/2016 dated 20-05-2016 that if such a declaration is made and in an event it is found that the income represented money earned through corruption it would amount to misrepresentation of facts and the declaration shall be void under section 193 of the Finance Act, 2016. If a declaration is held as void, the provisions of the Income-tax Act shall apply in respect of such income as they apply in relation to any other undisclosed income

34. Capital Gain on Transfer of Asset which subject matter of Declaration under the Scheme

a) Cost of Acquisition

As per Section 49(5), introduced by Loksabha on 29-04-2016 at the time of passing Finance Bill 2016:

‘‘(5) Where the capital gain arises from the transfer of an asset declared under the Income Declaration Scheme, 2016, and the tax, surcharge and penalty have been paid in accordance with the provisions of the Scheme on the fair market value of the asset as on the date of commencement of the Scheme, the cost of acquisition of the asset shall be deemed to be the fair market value of the asset which has been taken into account for the purposes of the said Scheme.’’.

As per Circular 17/2016 also cost of acquisition for the purpose of Capital Gains shall be the fair market value as on 01.06.2016

b) Period of Holding

As per Circular 17/2016 the period of holding shall start from the said date (i.e. the date of determination of fair market value for the purposes of the Scheme)

It means period of holding to be reckoned from 01-06-2016.

35. Confidentiality of the Declarations

As per Section 195 of Finance Act, 2016 section 138 is applicable to declarations made under the Income Declaration Scheme. As per Circular No. 17/2016 dated 20-05-2016, therefore, the information in respect of declaration made is confidential as in the case of return of income filed by assesses.

Conclusion: The above discussion reveals that all the nuts and bolts of the Scheme have not been screwed up properly. While the Scheme shall become operational from 01-06-2016, there is requirement to reduce the load of information required for making declaration under the scheme. Further the valuation date being 01-06-2016, the declarant may end up paying high amount of tax. The success of the scheme shall depend upon the political willingness of the Government with full throttle . If any half hearted attempts are made, the masses shall refrain from the scheme.