3rd Justice Dr B.

P Saraf National Tax Moot Court

Competition , 2017

MOOT PROBLEM

A. Background Insertion of Section 115 BBE in the Income Tax Act,1961

1. A new section 115BBE relating to tax on income referred to in section 68 or section

69 or section 69A or section 69B or section 69C or section 69D was introduced for the first
time with effect from assessment year 2013-14 in the Income tax Act , 1961

Section 115BBE(1), as originally introduced, provided 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, @30%; and

(b) the amount of income-tax with which the assessee would have been chargeable had his
total income being reduced by the amount of income referred to in clause (a) of the
said sub-section.

2. Objective of the above amendment

The objective of the amendment as stated in the Finance Minister's speech and the
Explanatory Memorandum were as follows :

Finance Minister's Speech :

"I propose a series of measures to deter the generation and use of unaccounted money.
To this end, I propose.
 2

. Taxation of unexplained money, credits, investments, expenditures, etc., at the

highest rate of 30 per cent irrespective of the slab of income."

Explanatory Memorandum :

"Under the existing provisions of the Income-tax Act, certain unexplained amounts are
deemed as income under section 68, section 69, section 69A, section 69B, section 69C
and section 69D of the Act and are subject to tax as per the tax rate applicable to the
assessee. In case of individuals, HUF, etc., no tax is levied up to the basic exemption
limit. Therefore, in these cases, no tax can be levied on these deemed income if the
amount of such deemed income is less than the amount of basic exemption limit and even
if it is higher, it is levied at the lower slab rate.

In order to curb the practice of laundering of unaccounted money by taking advantage of

basic exemption limit, it is proposed to tax the unexplained credits, money, investment,
expenditure, etc., which has been deemed as income under section 68, section 69, section
69A, section 69B, section 69C or section 69D, at the rate of 30% (plus surcharge and
cess as applicable). It is also proposed to provide that no deduction in respect of any
expenditure or allowance shall be allowed to the assessee under any provision of the Act
in computing deemed income under the said sections."

3. The amendment applied to all the assessees. However, it did not have much bearing
on profit making companies or firms which were subject to flat rate of tax.

It was only the income added under section 68, etc., that was subject to the flat rate of 30%
tax. If the income was already offered for tax, ordinarily section 68 should not apply unless
the officer rejects the explanation regarding the source of income but makes an addition
under section 68 on the ground that the assessee has not offered proper explanation. To
illustrate, suppose an individual assessee offers income as tuition fees; she is however, not
able to substantiate the tuition fee as regards the payer, etc.; in such circumstances, if the AO
rejects the explanation regarding the source of income and at the same time holds that the
credit is not properly explained then he may resort to section 68 for the purpose of making
such addition. The income so taxed under section 68, etc. would be subject to the flat rate of
tax under section 115BBE(2).
 3

4. Honble Prime Minister of India on 8.11.2016 announced demonetisation of High

Denomination Notes i.e. notes of Rs. 500 and Rs. 1000/-, which ceased to be legal tender
w.e.f. 9.11.2016.

Concerns were raised in the certain quarters that some of the existing provisions of the
Income tax Act, 1961 ( more particularly, sec 115BBE ) could possibly be used for
converting black money into white by just paying tax @ 30 p.c. by depositing demonetised
currency notes, which represented hitherto untaxed accumulated undisclosed income, in the
bank and offering the said money as current years income suo motu in the tax return of the
F.Y: 2016-17 as unexplained credits u/s 68 or unexplained investment u/s 69. Therefore, the
Government proposed to amend the Act to plug these loopholes so as to prevent misuse of
the provisions. The Taxation Laws (Second Amendment) Bill, 2016, was introduced in the
Parliament to make some changes in the Act to ensure that defaulting assessees are subjected
to tax at a higher rate and stringent penalty provision applied to them.

5. The Taxation Laws Second Amendment Act, 2016 has 3 chapters and 5 clauses. The
Amendment Act came into force at once i.e. upon its enactment and assent by the President
which was given on December 16, 2016. Chapter II of the Amendment Act amended existing
provisions of sections 115BBE ( hiking the tax rate from 30 % to 60 % ) and also introduced
a new penal section 271AAC in the Act. Chapter III of the Amendment Act amended the
provisions of the Finance Act, 2016 to the extent of levy of surcharge on income chargeable
to tax at the rates mentioned in section 115BBE; and inserted Chapter IXA to the Finance
Act, 2016 captioned TAXATION AND INVESTMENT REGIME FOR PRADHAN
MANTRI GARIB KALYAN YOJANA, 2016 (PMGKY) giving one more one- time
opportunity to the black money holders to come out clean.

6. The STATEMENT OF OBJECTS AND REASONS as appended to the Taxation

Laws Second Amendment Bill, 2016 is annexed hereto and marked as Annexure :A
 4

B. Writ Petition by AIFTP challenging the vires of the amendment before Single bench
of Calcutta High Court

1. All India Federation Of Tax Practitioners ( in short AIFTP ) is a registered body

having individual members from all over the country and also represents many associations
having the object of protecting the interests of tax payers and tax consultants and to ensure
that the tax laws are just and fair and are administered justly and fairly.

A writ petition was filed in the Calcutta High Court challenging the constitutional validity of
the amendment made in section 115BBE whereby tax rate under the said section was hiked to
60% and a cess @ 25% of tax was imposed. Further, the new penalty provision u/s 271AAC
was also a subject matter of challenge.

2. It was contended before the ld. single judge that the impugned amendment offended
Article 14 of the Constitution of India. It was submitted on behalf of the petitioners that the
classification for the purposes of taxation must satisfy twin conditions-

(a) It is founded on an intelligible differentia that distinguishes persons or things that

are grouped together from those left out of the group.

(b) The differential must have a rational relation to the object sought to be achieved.

Ld. Counsel for the petitioners submitted that though the purpose of the amendment as
evident from the statement of objects and reasons appended to the bill was to prevent the
misuse of the existing provisions in converting undeclared black money in the form of
demonetised currency notes, but the hike in the tax rate and introduction of penal provision
has been made a permanent fixture, offending Article 14. It was submitted that it creates a
clear and hostile discrimination between different assessees. It was submitted that the persons
in the possession of black money had already deposited the money in their respective bank
accounts and the amended provisions could be misutilised by the department in future to
harass the tax payers. Ld. Counsel for the petitioners submitted that now under the amended
provision section BBE, tax shall be chargeable @ 60%plus a cess of 25% of the tax, which
 5

translates into a total tax of 75% of the income taxed u/s 68, section 69 etc., there is a further
provision of levy of penalty u/s 271AAC of 10% of tax @ 60% i.e., 6% of such income,
which makes the entire amendment confiscatory in nature. It was submitted that merely
because the assessee is unable to explain the nature and source of income to the satisfaction
of the assessing officer (in short A.O.), the same will be taxed at the confiscatory rate of tax
as against the maximum marginal rate of 30%. It was submitted that various courts analysing
the provisions of section 68 has held that where the unexplained cash credit is in the business
books of accounts, the same shall be charged under the head Income from Business taxable
at normal rate and the said position of law was prevailing all along. Now, because of the new
amendment, such incomes will be chargeable at the new confiscatory rate of taxation. The
new classification made is arbitrary and there is no intelligible differentiain creating a new
class for subjecting it to such a high rate of taxation.

Ld. Counsel further submitted that the Amendment Act received the presidential assent on
16.12.2016 whereas the announcement of demonetisation was made on 08.12.2016.
Therefore, those who deposited the demonetised currency into their bank accounts prior to
16.12.2016, at the time of deposit, the law prevailing was unamended section 115BBE taxing
such income @ 30%. Therefore, making the amendment effective for the entire A.Y.: 2016-
17, and subsequent years, the legislature has, in effect, made the provision of section 115BBE
as well as the penal provision of section 271AAC retrospective in nature. Ld. Counsel then
submitted that, in the alternative, the provision should be read down and made applicable
only for deposits made between 16.12.2016 to 31.03.2016.

3. Ld. Additional Solicitor General (ASG) appeared on behalf of the Union of India and
submitted that where a provision of law is clear and the language of the statute unambiguous,
it has to be read as it is. He submitted that presumption is always in favour of
constitutionality and the burden is always on the person who attacks it to show that there has
been transgression of constitutional principles. He submitted that the amended provisions do
not offend Article 14 inasmuch as there is intelligible differentia between the different
classes of assessees. The amended provision catches only those who are at the wrong side of
law. He submitted that a tax payer is supposed to explain the nature and source of his income.
It is only where he fails to do so or where investment made by him out of books is caught by
 6

the department, the provision of section 68 / 69 etc. read with section 115BBE can be
invoked. The higher rates of taxation in such circumstances are justified.

4. The findings of the Ld. Single Bench of the Honble Calcutta High court dismissing
the writ petition is reproduced below-

The argument of the petitioner that no justification has been shown for introducing the
amendment in sec 115 BBE to be made a permanent fixture is unacceptable. It was pointed
out that the "statement of objects and reasons" to the Amendment Act did not contain
anything to show why the alleged confiscatory rates of tax as well as new penal provision
was introduced in respect of deposts made subsequent to the expiry of last date of deposit of
demonetised currency in the bank a/cs and taxing other unexplained cash credits. The
petitioner is right to the extent that the statement of objects and reasons did not contain any
justification or reason for making the amendment. The question, however, is whether this
invalidates the amendment. That takes us to the question as to what is the importance and
relevance accorded to the statement of objects and reasons in the process of examination of
the constitutional validity of an amendment. There can be no doubt that the statement of
objects and reasons may be employed as an external aid to construe the statute; it can also be
referred to for the purpose of comprehending the factual background, the prior state of legal
affairs, the surrounding circumstances in respect of the statute and the evil which it seeks to
remedy. The usefulness of the statement of objects and reasons is limited to these aspects and
no authority has been cited before us to show that the absence of any reason or justification
given in the statement of objects and reasons for an amendment would invalidate the
legislative action and would render the amendment unconstitutional on that ground alone.
The legal position that emerges appears to be that the constitutionality of a law has to be
examined and judged on its own terms having regard to the judicially well-recognised
limitations on the legislative powers. If the law offends any provision of the Constitution, it is
liable to be struck down. Several other limitations on the legislative powers have been
judicially recognised and the law has to fall within those limitations. The statement of objects
and reasons may be looked into merely to ascertain the intention of the legislature, the
mischief sought to be remedied, and the state of affairs prevailing prior to the amendment. It
is thus only an external aid to construction and by no means a touchstone to judge the validity
or constitutionality of the statute. That should be decided on the terms of the statute and the
 7

statement of objects and reasons can have no decisive influence on the question. Reading
more into the statement of objects and reasons would lead to this absurd result, namely, that if
sufficient justification for the law is shown in the statement of objects and reasons, then the
law must be held to be valid and constitutional irrespective of the question whether it offends
the relevant provisions of the Constitution or exceeds the judicially recognised limitations on
the legislative powers. It would result in an absurd situation which cannot be countenanced.

Honble Supreme Court had occasion to consider the scope of interference by the Court
under Article 14 while dealing with laws relating to economic activities in R.K. Garg v.
Union of India. It was pointed out in that case that laws relating to economic activities should
be viewed with greater latitude than laws touching civil rights such as freedom of speech,
religion, etc. It was observed that the legislature should be allowed some play in the joints
because it has to deal with complex problems which do not admit of solution through any
doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing
with economic matters, where, having regard to the nature of the problems required to be
dealt with, greater play in the joints has to be allowed to the legislature.

The position came to be considered at great length, regarding exemption of taxes, in East
India Tobacco Company v. State of Andhra Pradesh A.I.R. 1962 S.C. 1733. Though their
Lordships of the Supreme Court held that a taxation law must also pass the test of Article 14,
yet it was laid down that in deciding whether a taxation law is discriminatory or not, it was
necessary to bear in mind that the State has a wide discretion in selecting the persons or
objects it will tax, and that a statute is not open to attack on the ground that it taxes some
persons or objects and not others.

C. Appeal by AIFTP before the Division Bench

1. The petitioners before the Ld. single bench of the Calcutta High Court, aggrieved with the
decision, filed an appeal before the Division Bench of the same High Court which was heard
and order was passed in favour of the petitioners therein. Operative part of the judgement is
reproduced hereunder-
 8

1.1 A perusal of the the STATEMENT OF OBJECTS AND REASONS as appended to

the Taxation Laws Second Amendment Bill, 2016 reveals that para nos 1 & 2 are referring to
the amendment in sec 115BBE by prescribing the confiscatory rates of tax @ 60% plus a cess
of 25% of the tax, which translates into a total tax of 75% of the income u/s 68, section 69
etc. Further, there is a provision for levy of penalty u/s 271AAC of 10% of tax i.e., 6%
income taxed u/s 68/69 etc. Para nos 3 & 4 deal with one time alternative scheme launched
by the govt. named the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan
Yojana, 2016' (PMGKY) enabling the people holding black money in the form of
demonetised currency to come out clean rather than finding illegal ways of converting their
black money into black again. However, we are not concerned with the scheme in this writ
petition. We are concerned with the amendment made in sec 115 BBE and the new penalty
provision u/s 271 AAC.

The STATEMENT OF OBJECTS AND REASONS relevant to amendment made in sec 115
BBE and new penalty provision u/s 271 AAC at paras 1 &2 state that to curb black money,
bank notes of existing series of denomination of the value of five hundred rupees and one
thousand rupees issued by the RBI have been ceased to be legal tender with effect from the
9th November, 2016 and because of the concerns having been raised that some of the existing
provisions of the Income-tax Act, 1961 could possibly be used for concealing black money,
the Government amends the Act to plug the loopholes as early as possible so as to prevent
misuse of the provisions.

1.2 There is merit in the contention of the ld. Counsel for the petitioner that the object
was to prevent the misuse of the existing provision to convert the concealed black money in
the form of demonetised currency notes and offer the same in the return of income and pay
taxes at the lower rate as per the unamended provision. We agree with the ld counsel that
there is lack of nexus between the stated objects and the amendment made. The amendment
made is going to stay permanently in the statute book even after the expiry of the time period
for the deposit of demonetised currency notes. Thus, inspite of the fact that the black money
hoarded in the form of demonetised currency notes having been deposited in the bank
accounts and the govt being free to tax such income at a punitive rate, the punitive rate of
taxation is here to stay.
 9

We find that such unexplained credits/deposits/investments were taxed at the maximum

marginal rate of taxation i.e, 30 % as per the unamended provision of sec 115 BBE and the
logic for the same is not far to seek. The income under any head viz., salary, business, other
sources is taxed at the uniform rate, except capital gains which is taxed in certain
circumstances at a concessional rate, and highest rate of tax being 30 %. Merely because a
person is unable to explain the nature and source of his income but he is offering his income
to tax, there is no logic for taxing the same at such a high confiscatory rate of tax. Suppose,
an advocate receives cash fees/consultation charges of Rs 20,000/- from a particular client
and honestly offers the same to tax, just because he is unable to furnish confirmation from the
client or any other evidence , it defies any logic to tax him at such a high confiscatory rate.

1.3 In our opinion, the Legislature is free to make necessary amendments and also bring
in new legislation but only after disclosing reasons for that and such reasons should not be
inconsistent with the main object of the enactment. A co-ordinate bench of this court in the
case of Exide Industries vs Union of India 292 ITR 470 had the occasion to consider the
constitutional validity of insertion of clause (f) to sec 43B. Their Lordships held as under

The Legislature is free to do so after they disclose reasons for that and such reasons are not
inconsistent with the main object of the enactment. We are deprived of such reasons for our
perusal. Mr. Banerjee, appearing for the revenue, could not enlighten us on that score. We
also do not find such enactment consistent with the original provision being section 43B
which was originally inserted to plug in evasion of statutory liability. The Apex Court
considered the situation in the case of Bharat Earth Movers (supra) when clause (f) was not
there. The apex court, considering all aspects as disclosed by us hereinbefore, rejected the
contention of the revenue and granted appropriate deduction to the concerned assessee. The
Legislature to get rid of the decision of the Apex Court brought about the amendment which
would otherwise nullify the Judge-made law. The Apex Court decisions are Judge-made law
and are applicable to all under the Constitution. We do not for a single moment, observe that
the Legislature was not entitled to bring such amendment. They were within their power to
bring such amendment. However they must disclose reasons which would be consistent with
the provisions of the Constitution and the laws of the land and not for the sole object of
nullifying the Apex Court decision
 10

1.4 In the course of hearing when the above decision was cited by the petitioners
counsel, it was submitted by the Ld ASG that department has filed SLP before Hon'ble Apex
Court against the decision of Exide Industries Ltd (supra) and by its order dated 8.9.2008 in
SLP No.12060/2008, the apex court has stayed the operation of judgment of Hon'ble Calcutta
High Court. Therefore, no credence should be given to the said decision of this court. We are
not impressed by the Ld ASGs contention. In our considered opinion, stay of order of a court
by a higher court means that the order passed by the lower court still continues to exist in law
inspite of the stay and its existence is not destroyed. The stay order acts in personam rather
than in rem.

With deepest regard we have for his Lordship the Ld. Single judge, we are unable to agree
with his Lordship on this issue.

1.5 Now coming to the issue of offence to Article 14 of the Indian constitution and lack or
otherwise of intelligible differentia in singling out certain persons for punitive rate of
taxation and imposing stringent penalty, we may gainfully refer to their Lordships of the
Supreme Court in the case of Venkateshwara Theatre v. State of Andhra Pradesh [1993] 3
SCC 677. The relevant passages of the said decision are as under:

'20. Article 14 enjoins the State not to deny to any person equality before the law or the
equal protection of the laws. The phrase "equality before the law" contains the
declaration of equality of the civil rights of all persons within the territories of India. It is
a basic principle of republicanism. The phrase "equal protection of laws" is adopted from
the Fourteenth Amendment to the U.S. Constitution. The right conferred by Article 14
postulates that all persons similarly circumstances shall be treated alike both in
privileges conferred and liabilities imposed. Since the State, in exercise of its
governmental power, has, of necessity, to make laws operating differently on different
groups of persons within its territory to attain particular ends in giving effect to its
policies, it is recognised that the State must possess the power of distinguishing and
classifying persons or things to be subjected to such laws. It is, however, required that
the classification must satisfy two conditions, namely, (i) it is founded on an intelligible
differential which distinguishes those that are grouped together from others; and (ii) the
differential must have a rational relation to the object sought to be achieved by the Act.
 11

It is not the requirement that the classification should be scientifically perfect of

logically complete. Classification would be justified if it is not palpably arbitrary. [See:
See Special Courts Bill 1978: (1979) 2 SCR 476]. If there is equality and uniformity
within each group, the law will not be condemned as discriminative, though due to some
fortuitous circumstance arising out of a peculiar situation some included in a class get an
advantage over others, so long as they are not singled out for special treatment. [See:
Khandige Sham Bhat v. Agricultural Income-Tax Officer: (1963) 3 SCR 809].

In one of the preceding paragraph, we had given an example to show how an advocate
receiving cash fees/consultation charges from a particular client and honestly offering the
same to tax will suffer punitive taxation just for his honesty. Same goes for a businessman.
Any cash receipt on sale of goods may be viewed with suspicion and the provisions under
challenge may be applied and confiscatory tax imposed. The impugned provisions will create
a class of honest taxpayers, who may be hauled up over the coals, for punitive action and
unequal treatment just for honestly offering their income to tax.. Needless to say, these
provisions will promote dishonesty amongst the taxpayers to keep income, which they cannot
easily substantiate, out of the books to escape the clutches of the arbitrary law now sought to
be applied on the masses.

In our considered opinion, there is not merely discrimination but hostile discrimination in the
amended law.

1.6 It was contended by the ld ASG, referring to the impugned decision of his Lordship,
that taxation laws should be viewed with greater latitude than laws touching civil rights such
as freedom of speech, religion, etc. We are not impressed with this argument either. We
observe that taxation law was not immune to the principle enshrined in Article 14 of the
Constitution which strikes at arbitrariness in any form. A reference may be made to the
decision of the Supreme Court in E.P. Royappa v. State of Tamil Nadu [1974] 3 SCC 3,
wherein the Supreme Court observed as under:

"85. The last two grounds of challenge may be taken up together for consideration.
Though we have formulated the third ground of challenge as a distinct and separate
ground, it is really in substance and effect merely an aspect of the second ground based
on violation of Articles 14 and 16. Article 16 embodies the fundamental guarantee that
there shall be equality of opportunity for all citizens in matters relating to employment or
 12

appointment to any office under the State. Though enacted as a distinct and independent
fundamental right because of its great importance as a principle ensuring equality of
opportunity in public employment which is so vital to the building up of the new
classless egalitarian society envisaged in the Constitution, Article 16 is only an instance
of the application of the concept of equality enshrined in Article 14. In other words,
Article 14 is the genus while Article 16 is a species, Article 16 gives effect to the
doctrine or equality in all matters relating to public employment. The basic principle
which, therefore, informs both Articles 14 and 16 is equality and inhibition against
discrimination. Now, what is the content and reach of this great equalising principle? It
is a founding faith, to use the words of Bose, J., "a way of life", and it must not be
subjected to a narrow pedantic or lexicographic approach. We cannot countenance any
attempt to truncate its all-embracing scope and meaning, for to do so would be to violate
its activist magnitude. Equality is a dynamic concept with many aspects and dimensions
and it cannot be "cribbed, cabined and confined" within traditional and doctrinaire limits.
From a positivistic point of view, equality is antithetic to arbitrariness. In fact equality
and arbitrariness are sworn enemies; one belongs to the rule of law in a republic
while the other, to the whim and caprice of an absolute monarch. Where an act is
arbitrary it is implicit in it that it is unequal both according to political logic and
Constitutional law and is therefore violative of Article 14, and if it affects any matter
relating to public employment, it is also violative of Article 16. Articles 14 and 16
strike at arbitrariness in State action and ensure fairness and equality of treatment.
They require that State action must be based on equivalent relevant principles applicable
alike to all similarly situate and it must not be guided by any extraneous or irrelevant
considerations because that would be denial of equality. Where the operative reason for
State action, as distinguished from motive inducing from the antechamber of the mind, is
not legitimate and relevant but is extraneous and outside the area of permissible
considerations, it would amount to mala fide exercise of power and that is hit by Articles
14 and 16. Mala fide exercise of power and arbitrariness are different lethal radiations
emanating from the same vice: in fact the latter comprehends the former. Both are
inhibited by Articles 14 and 16. (emphasis supplied) "
 13

In view of the above, the appeal succeeds and is allowed. Section 115BBE and Section 271
AAC are struck down being arbitrary, unconscionable and de hors Article 14 of the
constitution.

D. Appeal before the Supreme Court by UOI

The appeal against the decision of the division bench of the Honble Calcutta High Court has
now been filed before the Honble Supreme Court by the Union Of India, which stands
admitted. Both the parties to the lis shall now canvass their respective arguments before the
Apex Court. In their pleadings, they are free to canvass a new point of law, hitherto not
discussed.
 14

Annexure: A

STATEMENT OF OBJECTS AND REASONS

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 five hundred rupees and one thousand rupees (hereinafter
referred to as specified bank notes) issued by the Reserve Bank of India have been ceased to
be legal tender with effect from the 9th November, 2016.

2. Concerns have been raised that some of the existing provisions of the Income-tax Act,
1961 could possibly be used for concealing black money. It is, therefore, important that the
Government amends the Act to plug these loopholes as early as possible so as to prevent
misuse of the provisions. The Taxation Laws (Second Amendment) Bill, 2016, proposes to
make some changes in the Act to ensure that defaulting assessees are subjected to tax at a
higher rate and stringent penalty provision.

3. In the wake of declaring specified bank notes as not legal tender, there have been
representations and 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. Thus, money coming from additional revenue as a result of the decision to ban Rs.
1000 and Rs. 500 notes can be utilised for welfare schemes for the poor.

4. Therefore, an alternative scheme namely, the Taxation and Investment Regime for
Pradhan Mantri Garib Kalyan Yojana, 2016' (PMGKY) is proposed to be provided 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, the declarant shall have to deposit 25% of undisclosed income
in a Deposit Scheme to be notified by the Central Government in consultation with the
Reserve Bank of India under the 'Pradhan Mantri Garib Kalyan Deposit Scheme, 2016'. This
amount is proposed to be utilised for the programmes of irrigation, housing, toilets,
infrastructure, primary education, primary health, livelihood, etc.; so that there is justice and
equality.

5. The Bill seeks to achieve the above objectives.

NEW DELHI;

ARUN JAITLEY.

The 26th November, 2016.