Taxing the disclosed unexplained income
@ 85% may not be achieved through proposed amendments
1. Government
has proposed amendments in section 115BBE, Finance Act 2016 and proposed a new
section 271AAC so as to provide the following:-
a) Amendment
in Section 115BBE- Where the total income of assessee includes any income
referred to in section 68, section 69, section 69A, section 69B, section 69C or
section 69D and reflected in the return of income furnished under section 139,
the income tax payable on said income shall be @ 60%.
b) Amendment
in Finance Act, 2016 – The Surcharge on income chargeable to tax u/s 115BBE
shall be 25%.
c) Proposed
section 271AAC – Where income determined includes any any income referred to in
section 68, section 69, section 69A, section 69B, section 69C or section 69D,
the assessee shall be liable to pay penalty @ 10% of the tax payable u/s
115BBE.
2. The
Schema of Act for computation of Income is as under;-
a) AO
will first compute the Income under various head of Income.
b) After
that , If AO found that conditions of section 68 to Section 69D are met, then
amount specified in those sections may be deemed to be the income of the
assessee and same will be aggregated with the income determined under clause
(a)
3. Conditions
of Section 68 to 69D are CAUSE and EFFECT thereof is treating unexplained
credit/expenditure/assets as income of assessee. For example, if the assessee
is found to be owner of money and
a) such
money is not recorded in the books of accounts, if any, maintain AND assessee
offers no explanation about the nature and source of acquisition of money
(CAUSE),
b) then
money may be deemed to be income of assessee.(EFFECT)
4. These
sections will not have any implications where CAUSE is Income and EFFECT is assessee
being the owner of money.
5. In
other words, these section deals with unexplained credit/expenditure/assets and
not with unexplained income. Thus if assessee himself disclose certain amount as his income in ITR, though it remain
unexplained on his part, it cannot be said that income is deemed under the
provisions of section 68 to 69D.
6. Thus
in the absence of disclosed unexplained
income being falling under section 68 to 69D, section 115BBE will not have
any implications and as a result thereof that proposed amendment in section
115BBE may not yield the desired result of taxing the unexplained income at
higher rates.
7. I
think, that there should have been
separate section under Chapter XII – Determination of Tax in special cases,
whereby higher tax rate maybe prescribed in the case where the assessee
disclose certain income in his return but unable to explain the source thereof
to the satisfaction of AO.
