115BBE. of Income Tax Act after Taxation Laws (Second Amendment) Act, 2016 received the Assent of President on 15.12.2016

[ Note-1 ] [Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D.

[Note-2 ] 115BBE. “(1) Where the total income of an assessee,—

(a) 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; or

(b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a),

the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent.; and

(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).”.

(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance 3[or set off of any loss] shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1).]

Note-1  Inserted by the Finance Act, 2012, w.e.f. 1-4-2013.

Note-2 Taxation Laws (Second Amendment) Act, 2016  substituted Section 115BBE(1) with effect from the 1st day of April, 2017 . Before this substitution Section 115BBE was read as follow

115BBE. (1) Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of—

3 The italicised words shall be inserted by the Finance Act, 2016, w.e.f. 1-4-2017.

Evasion of taxes deprives the nation of critical resources which could enable the Government to undertake anti-poverty and development programmes. It also puts a disproportionate burden on the honest taxpayers who have to bear the brunt of higher taxes to make up for the revenue leakage. As a step forward to curb black money, bank notes of existing series of denomination of the value of Rs.500 and Rs.1000 [Specified Bank Notes(SBN)] have been recently withdrawn the Reserve Bank of India.

Concerns have been raised that some of the existing provisions of the Income-tax Act, 1961 (the Act) can possibly be used for concealing black money. The Taxation Laws (Second Amendment) Bill, 2016 (‘the Bill’) has been introduced in the Parliament to amend the provisions of the Act to ensure that defaulting assessees are subjected to tax at a higher rate and stringent penalty provision.

Further, in the wake of declaring specified bank notes “as not legal tender”, there have been suggestions from experts that instead of allowing people to find illegal ways of converting their black money into black again, the Government should give them an opportunity to pay taxes with heavy penalty and allow them to come clean so that not only the Government gets additional revenue for undertaking activities for the welfare of the poor but also the remaining part of the declared income legitimately comes into the formal economy.

In this backdrop, an alternative Scheme namely, ‘Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016’ (PMGKY) has been proposed in the Bill. The declarant under this regime shall be required to pay tax @ 30% of the undisclosed income, and penalty @10% of the undisclosed income. Further, a surcharge to be called ‘Pradhan Mantri Garib Kalyan Cess’ @33% of tax is also proposed to be levied. In addition to tax, surcharge and penalty (totaling to approximately 50%), the declarant shall have to deposit 25% of undisclosed income in a Deposit Scheme to be notified by the RBI under the ‘Pradhan Mantri Garib Kalyan Deposit Scheme, 2016’. This amount is proposed to be utilised for the schemes of irrigation, housing, toilets, infrastructure, primary education, primary health, livelihood, etc., so that there is justice and equality.

An overview of the amendments proposed in the Bill are placed below;

Overview of Amendments Proposed                                                       

The provisions of section 115BBE of Income Tax Act (India) are as under:

             The Finance Act, 2012 inserted section 115BBE in the Income-Tax Act (‘the Act’) to tax unaccounted money represented by the additions covered by sections 68, 69, 69A, 69B, 69C and 69D at flat 30% without any deductions or basic threshold exemption limit.

Sections 68 to 69D contemplate additions for unaccounted/unexplained income detected by the AO during search or survey or scrutiny. This is clear from the words “where any sum is found credited in the books of an assessee”(section 68), “Where in any financial year the asssessee is found to be the owner of any money, bullion, jewellery or other valuable article”(section69A)

             Section 115BBE provides that where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of— (a)the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty per cent; and (b)the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a).

             Section 115BBE further provides that notwithstanding anything contained in the Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing his income referred to in (a) above.

             Section 115BBE was enacted “In order to curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit”

Section 115BBE can be invoked only by AO and cannot be invoked by assessee to show huge cash deposits in bank as income in ITR at special tax rate of 30% under Section 115BBE.

Section – 115BBE, Income-tax Act, 1961

1 Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D.

115BBE. (1) Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of—

(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance 2[or set off of any loss] shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1).]

1 Inserted by the Finance Act, 2012, w.e.f. 1-4-2013.

2 The italicised words shall be inserted by the Finance Act, 2016, w.e.f. 1-4-2017.

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