Customer Care No.

91-1145562222

Income Disclosure Scheme,

2016 - Ominous
"Consequences
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After collection of voluminous information from various sources,
the Income Tax Department has launched a comprehensive datamining programme in the form of 'Project Insight'. The data
generated by the programme would consist of various shades of
money, e.g., black, brown, red and white. Sorting of the same
according to its shades would be a daunting task.
The present Scheme is a step towards such 'sorting exercise'
which would help both the assessees and the Department. The
source of the money is best known to an assessee himself and
those who possess black money (undisclosed income) have a
golden chance to come clean.
This article attempts to highlight the "ominous consequences"
which the assessees may face if they do not avail of the
opportunity to come clean.
The Scheme would set a precedent whereby the principle of
"audit altarem partem" would be given a go-bye by a statutory
enactment.
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Preamble
1. The Income Declaration Scheme of 2016 ("the Scheme") introduced by the Finance Act,
2016 does not use the prefix "voluntary", unlike the earlier schemes of 1965, 1976 and 1997.
Those who have not perceived the importance of this omission are advised to take note of the
following ominous words of the Hon'ble Mr. Arun Jaitley, the Minister of Finance which were
uttered by him in a meeting held to popularise the present Scheme:
"Black money holders who do not avail of the government's offer and continue to
hide wealth will be shown "consequences" of doing so".
- Quoted from the newspaper "The Hindu" dated 28th June, 2016 under the heading "Come
clean by Sept. 30 to black money holders".
Equally menacing is the promotional ad of the Department which propagates that:
"your undisclosed income is a time bomb - diffuse the tension".
This article examines, in reverse order, why the scheme is not called "voluntary" and narrates
the so-called"ominous consequences"of not declaring the undisclosed income under the
Scheme. It does not purport to discuss the provisions of the Scheme.
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The Relevant Provision:

2. The so-called "consequences" can be discerned from the deeming provisions contained in
clause (c) of section 197 of the Finance Act, 2016 which is reproduced hereunder:
"Removal of doubts
197. For the removal of doubts, it is hereby declared that(a) & (b)** **

**

(c) where any income has accrued, arisen or received or any asset has been acquired out of
such income prior to commencement of this Scheme, and no declaration in respect of such
income is made under this Scheme, (i) such income shall be deemed to have accrued, arisen or received, as the case may be; or
(ii) the value of the asset acquired out of such income shall be deemed to have been
acquired or made,
in the year in which a notice under section 142, sub-section (2) of section 143 or section 148
or section 153A or section 153C of the Income-tax Act is issued by the Assessing Officer, and
the provisions of the Income-tax Act shall apply accordingly.", 1997 operating between 1-71997 toCare
31-12-1997.
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To begin with, it is noted that a deeming provision of above kind was not made in any of the
earlier schemes, viz:
(a) Voluntary disclosure of income scheme operating between 1-3-1965 to 31-5-1965
introduced by section 68 of the Finance Act, 1965.
(b) Voluntary disclosure of income scheme operating between 19-8-1965 to 31-3-1966
introduced by section 24 of the Finance (No. 2) Act, 1965.
(c) Voluntary Disclosure of Income and Wealth Scheme enacted by a Presidential Ordinance;
later enacted as "The Voluntary Disclosure of Income and Wealth Act, 1976" operating between
8-10-1975 to 31-12-1975.
(d) Voluntary disclosure of Income Scheme, 1997 introduced by the Finance Act
(e)
The High Denomination Bank Notes (Demonetisation) Act, 1978 which came into force
on 16-1-1978.
(f)
National Defence Gold Bonds, 1980 under section 8 of the Taxation Laws (Amendment
and Miscellaneous Provisions) Act, 1965.
(g)
Special Bearer Bonds (Immunities and Exemptions) Ordinance, 1981promulgated on
12-1-1981 and later on enacted into Act 7 of 1981 on 27-3-1981. [The bonds were sold
between 1-2-1981 to 9-1-1982 with interruptions due to a challenge to its constitutional
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