Income Declaration Scheme Beneficial to Ineligible Persons?  

Manish Mewara from Jaipur : Recently, an online Book of CA. K.C.Moondra on Income Declaration Scheme has been published. In the chapter-11 of this book, author has explained how the Income Declaration Scheme is beneficial to Ineligible Persons. As per this book, this scheme is not applicable to ineligible persons and therefore, their assessments older than 6 years can not be re-opened whereas in case eligible persons, their assessment since 01.04.1940 can bo re-opened.

Before this chapter, readers might have read the Chapter-3 in which we have discussed about the ineligibility of certain persons / incomes from the Income Declaration Scheme. We have already reproduced the text of section 196 of the Finance Act, 2016 in Chapter 3 and we concluded, this scheme is not applicable to following persons :-

S.No	Ineligible Persons / Incomes	Related Laws
A.	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 subject to proviso (some conditions).	Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974
B.	Any income in relation to prosecution for any offence punishable under Chapter IX (Offences Relating to Public Servants) or Chapter XVII (Offences against property) of the Indian Penal Code.	The Indian Penal Code.
C.	Any income in relation to prosecution for any offence punishable under the Narcotic Drugs and Psychotropic Substances Act, 1985.	The Narcotic Drugs and Psychotropic Substances Act, 1985.
D.	Any income in relation to prosecution for any offence punishable under the Unlawful Activities (Prevention) Act, 1967 .	The Unlawful Activities (Prevention) Act, 1967.
E.	Any income in relation to prosecution for any offence punishable under the Prevention of Corruption Act, 1988.	The Prevention of Corruption Act, 1988.
F.	Any person notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.	The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992.
G.	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.	The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
H.	A person to whom 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.	The Income-tax Act, 1961.
I.	A person against whom a search has been conducted under section 132 or requisition has been made under section 132A 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.	The Income-tax Act, 1961.
J.	A person against whom 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 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.	The Income-tax Act, 1961.
K.	A person against whom 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.	The Income-tax Act, 1961 with reference to Agreement with foreign countries (Sec. 90) or specified territories and Double Taxation Relief (sec. 90A)

 

From the very first sentence of sec. 196 of the Finance Act, 2016 (Scheme), it is clear that above said persons were not only debarred from the benefits of the scheme but the complete scheme is not applicable to such ineligible persons. It means that such ineligible persons are unaffected from this scheme and this scheme makes no difference for such ineligible persons.

When the complete scheme is not applicable to such ineligible persons, the sec. 197(c) of the Finance Act, 2016 (The Scheme) is also not applicable to such ineligible persons. It means that all the provisions of Income-tax Act, 1961 including benefit of sec. 149 of the Income-tax Act will remain available to ineligible persons but benefit of sec. 149 of the Income-tax Act, 1961 will not be available to eligible persons.

As on today, as per provision  of sec. 149, no case of undisclosed / concealed income can be reopened generally  for the Indian incomes pertaining to period till 31.03.2009 (Assessment Year 2009-10) i.e. older than 6 years except the income in relation to any asset (including financial interest in any entity) located outside India. For clarifying the limitation provisions of sec. 149, we are reproducing here under text of sec. 149 of the Income-tax Act, 1961 –

Time limit for notice (For Reopening the Cases).

149. (1) No notice undersection 148 shall be issued for the relevant assessment year,—

(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c);

(b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year;

(c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.

 Explanation.— In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section.

(2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.

(3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year.

 Explanation.—For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.

Conclusively, all persons who are ineligible for the Income Declaration Scheme are not at all looser from this scheme but all the persons who are eligible for the Income Declaration Scheme are looser whether they declare or not under this scheme. Alternatively, it can be said that this scheme is beneficial for Ineligible persons in comparison to Eligible persons.