FAQs
Circular No.17 of 2016
Question No.1: Where an undisclosed
income in the form of investment in asset is declared under the Scheme and tax,
surcharge and penalty is paid on the fair market value of the asset as on
01.06.2016,then will the declarant be liable for capital gains on sale of such
asset in the future? If yes, then how will the capital gains in such case be
computed?
Answer: Yes, the declarant will be
liable for capital gains under the Income-tax Act on sale of such asset in
future. As per the current provisions of the Income-tax Act, the capital gains
is computed by deducting cost of acquisition from the sale price. However,
since the asset will be taxed at its fair market value the cost of acquisition
for the purpose of Capital Gains shall be the fair market value as on
01.06.2016 and 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)
.
Question No.2: Where a notice under
section 142(1)/ 143(2)/ 148/ 153A/ 153C of the Income-tax Act has been issued
to a person for an assessment year will he be ineligible from making a
declaration under the Scheme?
Answer: The person will only be
ineligible from declaration for those assessment years for which a notice under
section142(1)/143(2)/148/153A/153C is issued and the proceeding is pending
before the Assessing Officer. He is free to declare undisclosed income for other
years for which no notice under above referred sections has been issued.
Question No.3 :As per the Scheme, declaration
cannot be made where an undisclosed asset has been acquired during any previous
year relevant to an assessment year for which a notice under section 142,
143(2), 148, 153A or 153C of the Income-tax Act has been issued. 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?
Answer: The declarant will not be
eligible for declaration under the Scheme where the undisclosed income relates
to the assessment year where a notice under section 142, 143(2), 148, 153A or
153C of the Income-tax Act has been issued and served on the declarant on or
before 31stday of May, 2016. The declarant is required to file a declaration
regarding receipt of any such notice in Form-1.
Question No.4:In a case where the 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, then what shall be
the method of computation of undisclosed income represented by such undisclosed
asset for the purposes of the Scheme?
Answer: As per sub-rule (2) of rule
3 of the Income Declaration Scheme Rules, 2016, where investment in any asset
is partly from an income which has been assessed to tax, the undisclosed income
represented in form of such asset will be the fair market value of the asset
determined in accordance with sub-rule (1)of rule 3asreduced by an amount which
bears to the value of the asset as on the 1.6.2016, the same proportion as the
assessed income bears to the total cost of the asset.
This is illustrated by an example as
under: 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) =Rs.900
500
Question No. 5 :Can a declaration be
made of undisclosed income which has been assessed to tax and the case is
pending before an Appellate Authority?
Answer: As per section 189 of the
Finance Act, 2016, the declarant is not entitled to re-open any assessment or
reassessment made under the Income-tax Act. Therefore, he is not entitled to
avail the tax compliance in respect of such income. However, he can declare
other undisclosed income for the said assessment year which has not been
assessed under the Income-tax Act.
Question No.6: Can a person against
whom a search/ survey operation has been initiated file declaration under the
Scheme?
Answer:(a) The person is not
eligible to make a declaration under the Scheme if a search has been initiated
and the time for issuance of notice under section 153A has not expired, even if
such notice for the relevant assessment year has not been issued. 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.
(b) In case of survey operation the
person is barred from making a declaration under the Scheme in respect of an
undisclosed income in which the survey was conducted. The person is, however,
eligible to make a declaration in respect of an undisclosed income of any other
previous year.
Question No. 7: Where a search/
survey operation was conducted and the assessment has been completed but
certain income was neither disclosed nor assessed, then whether such un assessed
income can be declared under the Scheme?
Answer: Yes, such undisclosed income
can be declared under the Scheme.
Question No.8: What are the
consequences if no declaration under the Schemeis made in respect of
undisclosed income prior to the commencement of the Scheme?
Answer: As per section 197(c) of the
Finance Act, 2016, where any income has accrued or arisen or received or any
asset has been acquired out of such income prior to the commencement of the
Scheme and no declaration is made under the Scheme, then such income shall be
deemed to have been accrued, arisen or received or the value of the asset
acquired out of such income shall be deemed to have been acquired in the year
in which a notice under section 142/143(2)/148/153A/153C is issued by the
Assessing Officer and the provisions of the Income-tax Act shall apply
accordingly.
Question No.9: If a declaration of
undisclosed income is made under the Scheme and the same was found ineligible due
to the reasons listed in section 196 of the Finance Act, 2016, then will the
person be liable for consequences under section 197(c)of the Finance Act, 2016?
Answer: 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
.
Question No.10: If a person declares
only a part of his undisclosed income under the Scheme, then will he get
immunity under the Scheme in respect of the part income declared?
Answer: It is expected that one
should declare all his undisclosed income. However, in such a case the person will
get immunity as per the provisions of the Scheme in respect of the undisclosed
income declared under the Scheme and no immunity will be available in respect
of the undisclosed income which is not declared.
Question No.11: Can a person declare
under the Scheme his undisclosed income which has been acquired from money
earned through corruption?
Answer: No. As per section 196(b)of
the Finance Act,2016,the Scheme shall not apply, inter-alia, in relation to
prosecution of any offence punishable under the Prevention of Corruption Act,
1988. Therefore, declaration of such undisclosed income cannot be made under
the Scheme. However, 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
193of 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
.
Question No.12: Whether at the time
of declaration under the Scheme, will the Principal Commissioner/Commissioner
do any enquiry in respect of the declaration made?
Answer : After the declaration is
made the Principal Commissioner/ Commissioner will enquire whether any
proceeding under section 142(1)/143(2)/148/153A/153Cis 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.
Question No.13: Will the
declarations made under the Scheme be kept confidential?
Answer: The Scheme incorporates the
provisions of section 138 of the Income-tax Act relating to disclosure of
information in respect of assessees. Therefore, the information in respect of
declaration made is confidential as in the case of return of income filed by
assessees.
Question No.14: Is it necessary to file a
valuation report of an undisclosed income represented in the form of investment
in asset along with the declaration under the Scheme?
Answer: 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
