The Income Declaration Scheme, 2016 – extension of last date to declare and some amendments are desirable

[CA DEV KUMAR KOTHARI]

The Income Declaration Scheme, 2016 (IDS)

The IDS  has been enacted vide Chapter IX of the Finance Act, 2016 containing sections 181-199. IDS Rules have been framed. There have been large number of clarifications by way of notifications, circulars and series of FAQ. The last circular seems to be issued on  21.09.2016 , and last series that is sixth series  of FAQ have been issued recently ( not found) in search.

Clarifications are continuing, proper declaration require preparation:

In view of fact that clarifications are still continuing, and still there are many confusions prevailing.

Besides making a proper and complete declaration of undisclosed income,  require lot of preparation ( for collection of information, valuation, etc),  in view of author, it is imperative and desirable that the last date for making declaration should be extended.

Due date for ROI for AY 2016-17 extended to 17.10.16 in audit cases:

 Due date for filing of ITR for Assessment Year  2016-17 (for  previous year ended on 31.03.16) has been extended to 17^th October 2016 in cases where assessee is required to get his accounts audited and also cases where his return of income is dependent on another assessee whose accounts need to be audited.

Under IDS income can be declared for any year up to Assessment year 2016-17 that is for the previous year ended 31.03.2016. This is as per provisions of section 183 which reads as follows (highlights added):

THE FINANCE ACT, 2016

CHAPTER IX

THE INCOME DECLARATION SCHEME, 2016

 Declaration of undisclosed income.

183. (1) Subject to the provisions of this Scheme, any person may make, 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, a declaration in respect of any income chargeable to tax under the Income-tax Act for any assessment year prior to the assessment year beginning on the 1st day of April, 2017-  

(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.  

(2) Where the income chargeable to tax is declared in the form of investment in any asset, the fair market value of such asset as on the date of commencement of this Scheme shall be deemed to be the undisclosed income for the purposes of sub-section (1).  

(3) The fair market value of any asset shall be determined in such manner, as may be prescribed.

(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.”

On reading of the above section we find that:

Declaration under IDS can be made for:

Case where return of income has not been furnished:

a. any assessment year prior to the assessment year beginning on the 1st day of April, 2017 ( that is for anythe previous earlier to year01.04.2016 - 31.03.2017).

In clear terms, it can be said that declaration can be made for all years up to and including assessment year 2016-17 ( that is previous year ended on 31.03.2016)

Conditions :

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

   Here section 139 has been used and not 139(1). Therefore, even if a person has not furnished return within time allowed u/s 139(1) he can file return belatedly is covered and also a person who can file a revised return is also covered..

Cases where return has been furnished but income not disclosed:

          (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.  

As discussed earlier, declaration under  IDS can be made including for Assessment Year 2016-17, for assessment year 2016-17 in some cases there is still time to file return u/s 139(1) up to 17.10.2016.

As per IDS, declaration can be availed even for assessment year 2016-17. Whether ,  any income has remained undisclosed for AY  2016-17 can only be found after filing of return of income for AY 2016-17.

Besides return u/s 139(1) there are other provisions for filing of revised return, belated return etc.

Therefore, time for declaration under IDS  must be after the last date for filing of return of income for assessment year 2016-17.

There seems mistake in IDS:

It seems that there are  some mistakes in IDS.

The declaration should be allowed in respect of income up to assessment year 2015-16 because for assessment year 2016-17 time was available for all assessee and is also available up to 17.10.16 for some assessee.

Keeping the eligibility up to assessment year 2016-17 is likely to create lot of confusions and possible source of harassment by tax authorities on persons who may file return of income under section 139 for assessment year 2015-16 and  2016-17 , but after closure of IDS on 30.09.2016.

In case for AY 2016-17 declaration is acceptable,  than for AY 2016-17 words under section 139(1) must be used instead of under section 139. Furthermore, for AY 2016-17 last date for  declaration should be after the due date u/s 139(1).

For this reason also extension of last date for IDS is desirable.

Discussions to this article

[Ganeshan Kalyani]

Nice article. Your concern seems to be valid. Thanks.