Section 115BBE seems to be the biggest loophole in the Income Tax Act, 1961 whereby, any person can evade tax on concealed income of previous years by declaring such accumulated income as income of current financial year and paying tax @ 30%+surcharge+cess thereon (without causing any penalty, interest and prosecution).
Suppose people take disadvantage of this section in A.Y. 2017-18 (FY 2016-17) and government says nothing, then some people will again accumulate black money and will misuse this section say after 10 years again and in this way, it will continue to cause big leakage to government exchequer and will be the disincentive to people to be the honest tax payer.
So, it’s a requirement to change provisions of this section. Suggested drafting of that change is given below.
“In section 115BBE of the Income-tax Act, sub-section (1A) shall be inserted with effect from the 1st day of April, 2017 (i.e. w.e.f. AY 2017-18), which reads as under.
(1A) Notwithstanding anything contained in this Act, “at the rate of thirty per cent” referred in subsection 1(a) above, shall be replaced by “at the rate of fifty per cent” for Assessments Year 2017-18.”
“After section 69D of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2018 (i.e. w.e.f. AY 2018-19), namely:—.
69E Notwithstanding anything contained in this Act, aggregate amount determined under section 68, 69,69A and 69B of this Act, shall be deemed to be the income of such financial year (as referred to in said sections) and financial years preceding such financial year, in manner specified in example given below.
Example: Income of assesse, determined under section 68, is say Rs. 50,00,000/- and returned or assessed income (whichever is available at that point of time of assessment) of previous year and financial years preceding such previous year are as under.
|F.Y.||Returned / Assessed Income||Allocation of Deemed income of Rs. 50,00,000/-|
|2015-16||15,00,000||5,00,000 (Remaining amount)|
Appropriate changes should be made in section 147, 148 and 149 also.
Constitutional validity of these suggested changes can’t be challenged, as opportunity was already given in the form of Income Declaration Scheme 2016 to all assessees. Further, allowing escapement of tax in present section 115BBE modus operandi will be injustice to honest tax payers and tax payers who have declared under Income Declaration Scheme 2016. Not making injustice is making justice and in this way, these amendments will be the steps of justice in this new era of India after demonetization.
CA. Tejas K. Andharia
B. COM, F.C.A., D.I.S.A.(ICAI), D.I.R.M.(ICAI)