- Section 115BBE imposes tax at a flat rate of 60% (w.e.f.. A/Y 17-18) without making any deduction in respect of any expenditure or allowance as may be admissible to an assessee under any provision of the Act.
- Sub section 2 starts with Non- Obstante clause “Notwithstanding anything contained in this Act” which supports the view that no deduction in respect of any expenditure or allowance or set off of any loss is admissible.
- This Section is applicable where assessee’s income is recorded in books but has not been offered to tax and the assessee fails to prove the nature and source to the satisfaction of the A.O.
- This section is also applicable to the assessee who are not required to maintain books of accounts but is found to have made unexplained investment, unexplained expenditure or he is found to be in possession of money, bullion, jewellery or other valuable articles.
- Where an assessee voluntarily shows income in his return but he is unable to prove the source of such income to the satisfaction of the A.O., such income could be held to be liable under section 115BBE.
- Further a penalty of 10% shall be levied U/S 271AAC. No other penalty shall be levied.
- Further a surcharge of 25% on such tax was also imposed by amending sub section (a) in section 2 of chapter II of Finance Act 2016.
- This is further subject to normal cess and higher education cess as applicable.
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in a group of cases held that section 68 would require both the identity of the depositor and his creditworthiness to be proved. Where a company furnishes the address and permanent account number (PAN), such identity is established. As regards creditworthiness in a matter of subscription to public issue, more may not be expected from the assessee. The burden of proof that is expected as regards creditworthiness has to be decided in the light of the facts of each case. Where the subscriptions were received through banking channels as prescribed under SEBI regulations, the inference that the subscribers lack creditworthiness could not have been lightly drawn without some investigation on the part of the Assessing Officer. The addition without such investigation should be treated as based upon mere surmises. The principle that identity is more important in such cases has been reiterated and that even where creditworthiness is not established to the satisfaction of the Assessing Officer, it need not be unexplained income of the company, since the legitimate inference is that the income is that of the subscriber as long as the advance of the amount to the company is established and there is nothing to suggest that the amount belonged to the company. The view upheld by the Supreme Court in Steller Investments case (supra) was rendered in the context of a Departmental appeal against the rejection of reference on the decision of the Tribunal, reversing the decision of the Commissioner (Appeals) setting aside the assessment for detailed investigation regarding the genuineness of the subscriptions towards share capital. It was the said order of setting aside, which was reversed in the circumstances, where lack of genuineness was not established by the Assessing Officer. The reason, why the Supreme Court upheld the High Court order was that the Tribunal s decision was based on facts.