Bailabel Type : bailable

Description

Section 115BBE of the Income Tax Act, 1961 specifically deals with the taxation of income that arises from unexplained sources or concealed income, as defined under several sections of the Act, including sections 68, 69, 69A, 69B, 69C, and 69D.

This provision aims to ensure that income, which is found to be unaccounted for or undisclosed, is subject to a higher rate of tax, thereby discouraging tax evasion and ensuring that individuals and entities disclose their true income.

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Key Provisions of Section 115BBE:

1. Applicability of the Section:

   • Section 115BBE applies to income that is:
     • Not disclosed during the regular course of business or in the normal process of filing returns.
     • Found to be unaccounted for or concealed by the tax authorities during the course of an assessment or investigation under sections 68, 69, 69A, 69B, 69C, or 69D.

2. Income Covered under Section 68 to Section 69D:

   • Section 68: Cash credits – If a taxpayer fails to explain the source of a large cash credit, the same is treated as income.
   • Section 69: Unexplained investments – If a taxpayer makes investments in assets (such as property) but fails to explain the source of funding, this income is treated as unexplained.
   • Section 69A: Unexplained money, bullion, jewellery, or other valuable articles – If a person has unexplained possession of money or assets, the income derived from these assets will be treated as unexplained and subject to tax.
   • Section 69B: Amount of investments exceeding liabilities – If a taxpayer cannot explain the discrepancy between their income and the investments made, the same will be treated as undisclosed income.
   • Section 69C: Unexplained expenditure – If there is unexplained expenditure, or if there is an inability to explain the source of expenditure, this expenditure is treated as income.
   • Section 69D: Amount borrowed or repaid without explaining sources – If loans or advances are raised or repaid but no proper explanation is given for their source, they are treated as unexplained income.

3. Tax Rate under Section 115BBE:

   • The income that is found to be unexplained or concealed, as referred to in sections 68, 69, 69A, 69B, 69C, or 69D, is subject to tax at a higher rate under Section 115BBE.
   • The tax rate applicable under Section 115BBE is 60% of the total unexplained income (plus applicable surcharge and cess).

4. No Set Off or Carry Forward of Losses:

   • One of the key features of this section is that losses arising from unexplained income or concealed income cannot be set off against other sources of income.
   • Losses related to income found under sections 68, 69, 69A, 69B, 69C, or 69D cannot be carried forward to subsequent years either.

5. No Deductions for Expenses:

   • No deductions under sections 30 to 38 (which include various business expenses, depreciation, etc.) are available for any income that is taxed under this section.
   • In other words, the taxpayer will be taxed on the full amount of the undisclosed income, without any deductions for costs, losses, or other expenses.

6. Penalty Provisions:

   • Section 115BBE is designed to act as a penalty in itself by imposing a higher tax rate of 60% on undisclosed income.
   • In addition to the higher tax rate, penalties for concealment of income may also apply under other provisions of the Income Tax Act, such as Section 271(1)(c), where the taxpayer may face further penalties for deliberately providing inaccurate information or concealing income.

Punishment

1. Failure to Pay Tax:

   • If the taxpayer fails to pay the tax on unexplained income, they could face penalties under sections 221 and 270A for non-payment of taxes or for underreporting income.

2. Concealment of Income:

   • If the income has been deliberately concealed, the taxpayer may face penalties under Section 271(1)(c) of the Income Tax Act for concealment of income or for providing false information in the tax return.
   • The penalty under section 271(1)(c) may be as high as 100% to 300% of the tax payable on the concealed income.

3. Failure to File Returns:

   • If the taxpayer fails to file a return of income that includes the undisclosed income, they could face penalties under Section 271F for late filing of returns.

4. Interest for Delay in Payment:

   • Section 234A, 234B, and 234C impose interest for delay in payment of tax or non-payment of advance tax. This interest is calculated on the amount of tax due.