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3rd Justice Dr B.P Saraf National Tax Moot Court Competition , 2017
BEFORE THE HON’BLE
SUPREME COURT OF INDIA
SPECIAL LEAVE PETITION
Union Of India …………….……………………………………………...……………….….

………….……..
APPELLANT
v.
All India Federation Of Tax Practitioners
…………................………………..………………………….…...…………………………..
RESPONDENT
UPON SUBMISSION TO THE HON’BLE CHIEF JUSTICE AND HIS COMPANION
JUSTICES OF THE SUPREME COURT OF INDIA

3RD JUSTICE DR B.P SARAF NATIONAL TAX MOOT COURT COMPETITION, 2017
WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT
TABLE OF CONTENTS

INDEX OF AUTHORITIES
STATUTES REFERRED
CASES REFERRED

TABLE OF ABBREVIATIONS
ABBREVIATIONS TERMS
1. A.I.F.T.P All India Federation of Tax Practitioners
2. Sec. Section
3. Art. Article
4. ITA Income Tax Act, 1961
5. Del. Delhi
6. HC High Court
7. L’d Learned
8. Hon’ble Honourable
9. ITR Income Tax Return
10. AO Assessing Officer
11. IDS Income Declaration Scheme
Govt., PM. Ors. UOI Anr.
Rs. SC. v. AO
Ed. CIT ITO ITR HDN IT SCC

STATEMENT OF JURISDICTION
The Hon’ble Supreme Court of India has jurisdiction to hear the instant matter under Article 136
of the Constitution of India.
Article 136 of the Constitution of India reads as:
“136. Special leave to appeal by the Supreme Court. — (1) Notwithstanding
anything in this Chapter, the Supreme Court may, in its discretion, grant special
leave to appeal from any judgment, decree, determination, sentence or order in
any cause or matter passed or made by any court or tribunal in the territory of
India.
(2) Nothing in clause (1) shall apply to any judgment, determination, sentence or
order passed or made by any court or tribunal constituted by or under any law
relating to the Armed Forces.”

STATEMENT OF FACTS
THE BACKGROUND
1. Govt. of India in year 2013 initially amended Sec. 115 BBE of ITA wherein assesses
were subject to a flat tax rate of 30% on all unexplained credits under Sec. 68 to 69D
with an objective to curb the practice of laundering of unaccounted money, by taking
advantage of the basic exemption limit.
2. On 8th November 2016 the PM, announced the demonetisation of Rs.500 and Rs.1000
currency notes which ceased to be legal tender.
3. Concerns were raised that certain provisions of ITA could be misused to convert black
money into white money.
THE AMENDMENTS MADE POST DEMONETISATION
4. The Government therefore amended certain provisions of ITA and the Finance Act.
5. Under the amended section 115 BBE and 271 AAC the assesse would be now subject to
a tax rate of 78% and 82% of income respectively if their income fell under sections 68,
69, 69A, 69B, 69C, 69D of the ITA,1961.
THE JUDICIAL PROCEEDINGS
6. AIFTP a registered body for safeguarding the interests of consultants and tax payer, filed
a writ petition at the Calcutta HC challenging the constitutional validity of the
amendment.
7. The primary argument advanced was that the proposed amendment was violative of Art.
14 and 19 of the Indian Constitution for it was not based on the principles of intelligible
differentia.

8. Ld. Single Judge of Calcutta HC dismissed the petition stating “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, and that the statement of objects
and reasons can have no decisive influence on the question involved.”
9. The petitioners before the Ld. single bench of the Calcutta HC, aggrieved with the
decision, filed an appeal before the Division Bench of the same HC, which passed an
order in favour of the petitioner.
10. The bench stated that equality and arbitrariness are sworn enemies; and that one belongs
to the rule of law in a republic while the other, to the whim and caprice of an absolute
monarch.
11. Section 115BBE and Section 271 AAC were therefore struck down by the bench as
being arbitrary, unconscionable and de hors Art. 14 of the constitution.
12. Now the appeal against the decision of the division bench of the Hon’ble Calcutta HC
has now been filed before the Hon’ble SC by the UOI.

QUESTIONS PRESENTED
ISSUE: I: WHETHER THE AMENDED PROVISIONS COULD BE MISUTILISED BY THE

DEPARTMENT TO HARASS THE TAX PAYERS IN THE FUTURE.
ISSUE: II: WHETHER THE AMENDED PROVISIONS ARE IN CONSONANCE WITH

THE PRINCIPLES OF STATUTORY INTERPRETATION.
ISSUE: III: WHETHER THE AMENDED PROVISIONS VIOLATE THE BASIC

PRINCIPLES OF CONSTITUTION AND HENCE THE JUDGEMENT BY THE HON’BLE
DIVISION BENCH OF CALCUTTA HC IS LIABLE TO BE QUASHED.
ISSUE: IV: WHETHER THE RETROSPECTIVE NATURE OF THE AMENDED

PROVISIONS IS VALID.
ISSUE: V: WHETHER THE BILL WAS PASSED IN AN UNDEMOCRATIC MANNER.

SUMMARY OF PLEADINGS
[ISSUE I] THAT THE AMENDED PROVISIONS COULD BE MISUTILISED BY THE

DEPARTMENT TO HARASS THE TAX PAYERS IN THE FUTURE.
[ISSUE II] THAT THE AMENDED PROVISIONS ARE NOT IN CONSONANCE

WITH THE PRINCIPLES OF STATUTORY INTERPRETATION.
[ISSUE III] THAT THE AMENDED PROVISIONS VIOLATE THE BASIC

PRINCIPLES OF CONSTITUTION AND HENCE THE JUDGEMENT OF THE
DIVISION BENCH OF CALCUTTA HC IS LIABLE TO BE QUASHED.
[ISSUE IV] THAT THE RETROSPECTIVE NATURE OF THE AMENDED

PROVISIONS IS NOT VALID.
[ISSUE V] THAT THE BILL WAS PASSED IN AN UNDEMOCRATIC MANNER.

PLEADINGS
ISSUE: I: WHETHER THE AMENDED PROVISIONS COULD BE MISUTILISED BY

THE DEPARTMENT TO HARASS THE TAX PAYERS IN THE FUTURE.
It is humbly submitted that the amended provisions could be misutilised by the department to
harass the taxpayers as it will continue to stay in the statute even after people in possession of
black money have deposited it. Amended provisions lack guidelines and can be misutilised.
[1.1] There is no reason behind taxing at such high rate just because the assessee is unable to
explain the nature and source of income. [1.2] More power is given to lower tax officials which
can be misused resulting into harassment of the taxpayers. [1.3] There is also scope of
harassment as there can be double taxation on the basis of the six sections. [1.4] It is also
humbly submitted that the amendment saying voluntary disclosure is confusing in nature and
can led to harassment. [1.5]
[1.1] THAT THE AMENDED PROVISIONS LACK GUIDELINES AND CAN BE

MISUTILISED.
It is humbly submitted that the amended provisions lack guidelines so as to proving the “nature
and source” of income, investments, assets and expenditures, etc. A taxpayer can be harassed
and left at the mercy of the A.O. just because he cannot explain the “nature and source’ of
income.
It is humbly submitted that the Sec. can be invoked arbitrarily to buy peace and avoid
complication and in the absence of the desired guidelines, when an assessee offers his income
for taxation under the provisions of Sec. 115BBE of the Act where he feels that he would not be
able to substantiate his returned income and prove the nature and source of his income to the
satisfaction of the AO. The new powers of departmental officers may in some cases lead to

harassment, as the A.O. may insist on large scale application of these sections in case of even
genuine source of income.1
Sections 68 and 69A apply where an assessee maintains books of accounts. Sections 69, 69B
and 69C apply to those assessees who either do not maintain books of accounts or even if they
maintain accounts, the items covered by these sections are not recorded in such books. Section
69D applies to all assessees, i.e. those who maintain and those who do not maintain books of
accounts. There are no legal precedents/guidelines as to when an assessee can be said to have
discharged satisfactorily his onus of proving the source of such investments, money, bullion,
jewellery, other valuable articles, etc., as are found in his possession, and/or the source of
expenses incurred.2
Even the basic exemption limit of 2.5 lakhs given to the common man over which no questions
were to be asked was also nowhere mentioned in the fine print of the bill. This amendment
would apply for all amounts (cash credits in the books of individuals, companies, etc.) for which
the concerned person is not able to provide an explanation to the tax officer. However, any
amount (whether or not, it is more than Rs. 2.5 lakhs) would also be subject to tax if the
explanation regarding its source is found to be unsatisfactory. Hence, there arises a fear
psychosis in the minds of the tax payers.
[1.2] THAT THERE’S NO REASON BEHIND TAXING AT SUCH A HIGH RATE JUST
BECAUSE THE ASSESSEE IS UNABLE TO EXPLAIN THE NATURE AND SOURCE
OF INCOME.
It is humbly submitted that there is no reason behind taxing at such high rate just because the
assessee is merely unable to explain the nature and source of his income to the “satisfaction” of
the AO.
1Dindayal Dhandharia, Analysis of the Proposed Amendments to Section 115BBE,July 20,2017, available at [2016]
76 taxmann.com 206.
2 Id.

It is humbly contended that while applying 115BBE under Sec. 68 of the ITA the A.O has to be
pragmatic and not pedantic.3 It is also held by the Hon’ble SC (hereinafter referred to as SC)
that merely if an assessee falied to take the of due care, in a case such as the present, does not
mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to
conceal his income.4 It is to be looked from a more circumstantial and factual perspective before
applying these deeming provisions than considering it as unexplained. 5 6
It is humbly contended that 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.7 This situation will fall under the provision of Sec. 68 and the same is
attracted when any sum is found credited in the books of an assessee. The words "any sum" are
wide enough to cover the transactions of "Cash Sales" appearing in the books of an assessee
and, therefore, if the assessee offers no explanation about the nature and source of "cash sales"
or the explanation offered by him is not, in the opinion of the AO, satisfactory, cash sales may
be deemed as unexplained incomes chargeable to tax under Sec. 68 of the Act8 . In practical
situations, it would be very difficult for assessees to keep fool-proof and detailed record of its
transactions relating to purchases and sales. Petty traders running stalls on way-sides, hawkers,
3 CIT v. Excel Industries 358 ITR 295.
4 Price Waterhouse Coopers Pvt. Ltd. v. CIT And Another (2012) 348 ITR 306 (SC).
5 Mak Data P. Ltd., vs. Commissioner of Income Tax-II 358 ITR 593.
6 CIT v. Baroda Tin 221 ITR 661.
7 Moot proposition, p9.
8 Davinder Singh v/s ACIT 101 TTJ (Asr-ITAT) 505.

etc. do not issue cash memos/bills and obtain purchase invoices. Wholesale Departmental stores
like making numerous transactions of sales in a day cannot carry out the exercise of "KYC", i.e,
"know your customer" like banks. Although in cases of cash sales, an assessee is not required to
prove the "source of source"9 , yet then it would be a herculean task for him to prove the nature
and source of "cash sales".
Hence, it is humbly contended that the Department need not locate the exact source of receipt
where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his
books.10 The department applied deeming provisions whenever there was no satisfactory
explanation from the assessee even without delving into the real facts and circumstances of the
cases. In the case of B.C. Paul v. CIT11 just because the assessee failed to prove the receipts from
horse racing as a genuine claim, the application of section 68 by the AO was upheld. Similar
scenario was seen in Avdhesh Kumar Jain v. CIT12 , ITO v. Jethu Ram Prem Chand 13 and these
cases prove the harassing nature of the draconian provisions.
Sec. 69 does not provide any guideline about the extent and length of the discretionary power
given to AO in the matter of treating the investment as income which is unexplained or
unsatisfactorily explained by the investor-assessee. Therefore, AO is expected to appreciate the
reasonable explanation offered to him, the evidences produced before him about the nature and
9 Sarogi Credit Corpn. V. CIT 1975 CTR (Pat) 1; See also CIT -Vs- Dwarkadhish Capital Pvt. Ltd. reported in
(2011) 330 ITR 298 (Delhi).
10CIT v. M. Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A see also, Govindarajulu Mudaliar v. CIT [1958] 34
ITR 807 (SC).
11 B.C. Paul v. CIT [1981] 6 Taxman 170 (Cal.).
12 Avdhesh Kumar Jain v. CIT [1990] 48 Taxman 266 (All.).
13 Jethu Ram Prem Chand [2001] 114 Taxman 219 (Delhi)(Mag.).

source of investment and he can not make the addition merely on surmises, conjectures as well
as without any supporting evidences.14
It is also humbly contended that the amended section is unnecessarily harsh on shares and loans
received by firms. If a company receives share application money from some subscribers of
shares through banking channels but is unable to prove their identities or is unable to prove the
genuineness of the same to the satisfaction of the AO, such share application money could be
taxed at the rate of 75%. This despite the fact that the impugned addition may not have any
correlation with demonitisation of HDNs and the transaction be routed through banking
channels. Though largely Courts have treated bank transactions with greater sanctity, there have
been cases where even Courts have held that mere payment through banking channels is not
sufficient to prove genuineness.15
Similarly, if a firm receives loans through proper banking channels from a party who after the
end of the year and before the assessment proceedings becomes untraceable or unable to give
evidence in favour of the assessee, the amount of loans could be subject to tax at the rate of
75%. This is a draconian provision because due to factors such as lapse of time/ loss of
documentary proof etc., an assessee may not be able to prove his claim to the satisfaction of the
AO, which in most cases is highly subjective. Due to the implementation of this provision, a
situation may arise where the AO is not convinced about the genuineness of assessee’s claim
despite voluminous documentary evidence as a result of which the exorbitant tax rate of 75% is
invited on the assessee.
[1.2.1] Levy of further taxation under section 271AAC is harsh
Amendments have also been proposed to the penalty provisions for additions under sections 68,
69, 69A, 69B, 69C and 69D. In addition to the above mentioned 75%, if the AO makes any
14 Ashok Kumar Rastogi V CIT (1991) 100 CTR 204. See also Sumati Dayal v. CIT 214 ITR 801 (SC);
Khandelwal Constructions v. CIT 227 ITR 900; Rajshree v. CIT 256 ITR 331.
15 Sarita Aggarwal v. ITO [2015] 373 ITR 586 (Delhi).

addition of the nature referred to in Sec. 68, 69, 69A, 69B, 69C and 69D, in addition to being
taxed at the rate of 75%, penalty at the rate of 10% of the tax payable under section 115BBE
(i.e. at the rate of 6% of the unaccounted cash/ addition made) is payable under the newly
proposed section 271AAC which makes the Penal Tax rate in excess of 80%.
Furthermore, it also does not view with much leniency the case of an assessee who believing
that it does not possess the requisite documentary evidence to support his claim suo motu offers
a particular income in his return. In spite of offering the same in his return, the tax rate would be
of 75%. This is clear from the use of the words “and reflected in the return of income furnished
under section 139” in the amended section 115BBE(1)(a). Though, respite is proposed to be give
from penalty of 10% under section 271AAC in such cases cases by virtue of proviso to the sub-
section (1) therein, the assessee must not only disclose the incomes of the referred nature in its
return but also pay tax thereon before the 31st March of the financial year for the penalty to be
not leviable. Thus, even the flexibility to pay self assessment tax is denied to the assessee.16
By virtue of sub-section (2) of section 271AAC, levy of penalty in cases of addition under
sections 68, 69, 69A, 69B, 69C and 69D are taken out of the purview of the newly introduced
penal provisions in section 270A vide the Finance Act and dealt with exclusively by this
proposed section 271AAC. As per section 273B of the IT Act, if the assessee shows reasonable
cause for failures referred to in the sections mentioned in section 273B, no penalty can be
levied. However, no leeway has been made in the said section 273B for penalty leviable under
section 271AAC. This means the moment the AO makes an addition under section 68 of the Act,
levy of penalty under section 271AAC would be automatic. This makes the provision
unwarrantedly harsh and unfair.17
It is humbly submitted that the amended provision is highly confiscatory in nature and can be
used as a weapon to harass the taxpayers who are honest and men of small means.
16 Rahul Sarda, Pradhan Mantri Garib Kalyan Yojana: Last Call To Tax Evaders To Come Clean, itatonline.org
(July 11,2017, 10:15 a.m.), http://www.itatonline.org/articles_new/pradhan-mantri-garib-kalyan-yojana-last-call-to-
tax-evaders-to-come-clean/.
17 Id.

[1.3] THAT MORE POWER IS GIVEN TO LOWER TAX OFFICIALS WHICH CAN BE
MISUSED
It is humbly contended that too much discretion, as in the present case, results in harassment or
abuse of power when, for example, the official, knowing fully well that ordinary people do not
keep accounts, demands back-to-back proofs. If officials approach the implementation of the
new law with this mindset, then the common people definitely be accused of corruption.
It is humbly submitted that excessive power is vested on the lower tax officials i.e. the A.O. as it
is evident from the word “satisfaction”. The word “satisfaction” gives them a discretionary
power which can be misutilsed resulting into harassment.
[1.4] THAT THERE IS SCOPE OF HARASSMENT AS THERE CAN BE DOUBLE

TAXATION
To trap income which are being shown without substantiating proper source and which are not
generating any tax thereon, the proposed amendment has been made. Though provision will
definitely help department to track those persons who are in practice to show or build up capital
only by disclosure of income and taking benefit of lower tax rate or nil tax, yet the new powers
of departmental officers may in some cases lead to harassments, as the A.O. may insist on large
scale application of these sections in case of even genuine source of income.
For example, in case any lady assessee shows income of vague nature and the department feels
that it belongs to her husband, then the department is to make assessment in the hands of lady
and make substantive assessment of such income in the hands of husband. If the case of the
department is that income does not belong to the assessee, why they treat it as her income at all.
It is to find out, whom it actually belongs to and tax it in his hands. If the income shown by a
lady assessee is from vague sources and the A.O. feels it to be bogus, if such amount is invested
by her, then the A.O. may also trap her u/s 69 by questioning source of investment and deeming
the amount in certain cases as unexplained investment. For being just and avoid double
jeopardy, it needs to be provided that where any addition is made u/s 68 as deemed income,

there need not be any addition of corresponding investment u/s 69. This is due to absence of
guidelines.
It is also humbly contended that where any income is voluntarily offered for taxation by an
assessee and its nature and source are not explained, no addition or special treatment is called
for, as no prejudice is caused to the Department. No doubt, the purpose of the groups of sections
68, etc., is to bring to tax the unexplained income and once the assessee himself offers the same
for taxation, the purpose of the Department is served. The AO has no reason for taxing the same
once again by applying the deeming provisions of any of the groups of six sections.
[1.5] THAT VOLUNTARY DISCLOSURE IS PERPLEXING IN NATURE
It is humbly put forth that the amended provisions lacked the ingredients of a voluntary
disclosure programme. Voluntary disclosure schemes are, generally, framed so as to grant
immunity to a declarant from penal consequences under specified laws. Even in respect of the
"Income Declaration Scheme, 2016 (IDS)", the Government stated that it is not an amnesty
scheme although immunities were granted from the provisions of Benami Transactions
(Prohibition) Act, 1988, Wealth Tax Act, 1957, penalties and prosecutions. So, a contrary view is
plausible that the resorting to the provisions of section 115 BBE by an assessee need not be
equated with a voluntary disclosure. (webinar)
Once it is concluded that both the assessee and the AO can include income of the nature
specified in the group of six sections in the total income, it becomes irrelevant whether an
assessee's action amounts to voluntary disclosure or not.
It is humbly submitted that there is lack of clarity regarding the voluntary nature of the amended
section and hence it is harassing in nature.
ISSUE: II: WHETHER THE AMENDED SECTIONS ARE IN CONSONANCE WITH

THE PRINCIPLES OF STATUTORY INTERPRETATION.
It is humbly submitted that the Statement of Objects and Reasons for the Taxation Laws Second
Amendment) Act (hereinafter referred to as the Amended Act) is not in consonance with the

principles of statutory interpretation.[2.1] It is also humbly submitted that the scheme of

Pradhan Mantri Garib Kalyan Yojana (hereinafter referred as PMGKY) also does not comply
with the statements of objects and reasons. [2.2]
[2.1] THAT THE STATEMENT OF OBJECT AND REASONS ARE NOT IN

CONSONANCE WITH THE PRINCIPLES OF STATUTORY INTERPRETATION.
It is humbly submitted that, a statute may generally be classified with reference to its duration,
nature of operation, object and extent of application. Amending statutes belong to those statutes
classified with reference to achieve certain objectives for such a statute makes and addition to or
operates to change the original law so as to effect an improvement or more effectively carry out
the purpose for which the original law was passed. It is this nature of an amending statute that
gives importance to the statement of objects and reasons while construing amending statutes.
Finance Minister’s Budget speech marks the very beginning of the Budget saga. It carries high
significance providing the purpose and object of the introductions, deletions and amendments to
the existing statutes. Courts have in numerous instances referred to and relied on the Budget
Speech, Memorandum and Notes on Clauses as external aid to understand the intention of
legislature and interpret various tax provisions.
In K.P. Varghese v Income Tax Officer Ernakulam18, the SC has stated that interpretation of
statute being an exercise in the ascertainment of meaning, everything which is logically relevant
should be admissible. In the same case the SC had also examined the relevance of Budget
Speech and held that Budget Speech which states the circumstances in which the amendment
came to be passed, explains the reason for the introduction of the Bill, can always be referred to
for the purpose of ascertaining the mischief sought to be remedied by the legislation and the
object and purpose for which the legislation was enacted.
18 K.P. Varghese v Income Tax Officer Ernakulam, AIR 1981 SC 1922.

In case of Kerala SIDC v. CIT19 it was held that the speech of the Minister or the mover of the
bill can be taken into consideration to ascertain the legislative intent or the purpose behind
legislation.
Further in case of Jodhpur Chartered Accountants Society v. Union of India20 the HC while
upholding the constitutional validity of service tax on chartered accountants relied on Finance
Minister’s Budget speech explaining the concept of sales tax.
In the case at hand the amendments and its consequences deviates from the implications of
Statements of Objects and reasons. It said that the amendment was to prevent the misuse of
existing provisions in converting undeclared black money in the form of demonetised currency
notes, but the hike in the tax rate and the introduction of penal provision has been made a
permanent fixture, offending Art. 14.Therefore it can be substantiated by the importance of
Statements of Objects and Reasons in determining reasonableness of classification classification
under an Act is to see if it infringes the fundamental right guaranteed under Art. 14 of the
Constitution21. It has already been noticed that in Subodh Gopal’s case22 S.R. DAS, J. purported
to use the Statement of Objects and Reasons to the Bill for judging the reasonableness of the Act
in the context of the fundamental right under Art. 19(1) of the Constitution.
It is further humbly submitted that the amendment is not in consonance with its statement of
objects and reasons for the primary purpose of the amendment was to prevent tax evasion.
The amendment deters from the objective it sought to achieve is dealt under three limbs;
1. The amendment deters from the mentioned objective as it is unable to differentiate
between individuals who are merely unable to explain the source of their income from
those holding black money.
19 Kerala SIDC v. CIT 259 ITR 51 SC.
20 Jodhpur Chartered Accountants Society v. Union of India (2002) 176 Ctr Raj 177.
21 Thangal Kunju Musaliar v. M. Venkatachalam Potti, AIR 1956 SC 246, p. 265 : 1955 (2) SCR 1196 ; See also
Shashikant Laxman Kale v. Union of India, AIR 1990 SC 2114 : 1990 (4) SCC 366 .
22 State of West Bengal v. Subodh Gopal Bose, AIR 1954 SC 92 : 1954 SCR 587 .

2. The very purpose of the amendment was to plug in the loopholes during demonetisation
but the resulting amendment being a permanent fixture would also affect the assesses in
future.
3. Further such confiscatory rates of tax, could result in the provision being wrongly used
by the AO to harass assesses, which would increase the possibility of harassment of the
assesses by the AO in future.
The amendment not only fails to meet the intent of legislation at the ground level, but is also
posing severe penuries to honest tax payers.
It is thereby conclusive to say that this lack of nexus between the amending statue and the
objective it sought to achieve, assumes importance while interpreting the constitutionality of the
amendment.
[2.2] SCHEME OF PRADHAN MANTRI GARIB KALYAN YOJANA DOES NOT
COMPLY WITH THE STATEMENTS OF OBJECTS AND REASONS
It is humbly submitted that the PMGKY scheme was introduced to bring the black money into
the formal economy during the time of demonetisation but it is not an effective tool to do so as
only 25% of the black money could be used by the people which will eventually discourage the
people to declare their money. Even it will hamper trade and business.
It is also humbly contended that PMGKY is not a potent tool to curb black money hence
deviating from its purpose so claimed. Under this scheme the Government will not ask the
source of the funds which may prove ineffective in curbing black money. The accounts of
housewives, small retailers, labourers and artisans can be used illicitly since Government
declared not to scan them. It is worth notable that the scheme only covers cash deposits and not
the black money which is stacked in other forms so rendering the purpose of the scheme
ineffective. The deposits in accounts of foreign countries were also out of their scheme thus
leaving a large amount of black money undisclosed there. (webinar)
It is also humbly contended that every time the Government brings these amnesty schemes, the
fear of being penalised is lost.

[ARGUENDO] The Statements of Objects can’t be ignored in these matters of heavy public
importance even if they are alone not enough to render an Act unconstitutional because the
Government can give any vague explanation to an Act which can eventually harass the
taxpayers.
ISSUE: IV: WHETHER THE RETROSPECTIVE NATURE OF THE AMENDED

PROVISIONS ARE VALID
It is humbly submitted that the retrospective nature of 115BBE and 271 AAC of ITA are not
valid.
The Taxation Laws (Second Amendment) Bill, 2016 proposes to substitute section 115BBE of
the Act with effect from 1st April, 2017. It means that the proposed provisions would be
applicable with effect from Assessment Year 2017-18.
It is well settled that -
1. A statute is retrospective when it takes away or impairs any vested right

acquired under the existing laws, or creates a new obligation, or imposes a
new duty, or attaches a new liability in respect of transactions or
considerations already past.
2. A substantive law determine the rights and liabilities of the parties concerned,
whereas procedural laws govern the manner in which such rights or
obligations are to be enforced or realised.
3. A law applicable to the assessment is the law as it stands in the year of
assessment and not that during the year in which the income was earned.

It is humbly submitted that in Karimtharuvi Tea Estate Ltd. v. State of Kerala23, it was held:
" Now, it is well-settled that the Income-tax Act, as it stands amended on the first day of
April of any financial year must apply to the assessments of that year. Any amendments in
the Act which come into, force after the first day of April of a financial year, would not
apply to the assessment for that year, even if the assessment is actually made after the
amendments come into force."
In Scindia Steam Navigation Co. Ltd. v. Commissioner of Income-tax24, a Division Bench of the
Bombay HC, considered the question-as to the effect of an amendment which came into force
after the commencement of the financial year. The facts in that case were these. The assessee's
ship was lost as a result of enemy action. The Government paid the assessee in 1944 a certain-
amount as compensation which exceeded the original cost of the ship. The Income-tax Officer
included the difference between the original cost and the written down value of the ship in the
total income of the assessee for the assessment year 1946-47. The Tribunal upheld that decision
and referred the question, whether the sum representing the difference between the original cost
and the written down value was properly included in the assessee's total income computed for
the assessment year 1946-47. It was argued that the fourth proviso to section 10(2)(vii) of the
Income-tax Act (inserted by the Amendment Act of 1946 with effect from May 4, 1946) under
which the inclusion of the amount was justified by the department, had no application to the
case.
The learned judges held that:
"as it was the Finance Act of 1946 that imposed the tax for the assessment year 1946-47,
the total income had to be computed in accordance with the provisions of the Income-tax
Act as on April 1, 1946; that as the amendments made by the Amendment Act of 1946 with
effect from May 4, 1946, were not retrospective, they could not be taken into consideration
23 Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 (SC).
24 Scindia Steam Navigation Co. Ltd. v. Commissioner of Income-tax [1954] 26 I.T.R. 686.

merely because the assessee was assessed after that date ; and that the assessee was not
liable to pay tax on the sum because the fourth proviso to section 10(2)(vii) of the Income-
tax Act under which it was sought to be taxed was not in force in respect of the assessment
year 1946-47".
The SC affirmed this decision in CIT v. Scindia Steam Navigation Co. Ltd.25 .It is noted that the
rate of tax on income subjected to tax under section 115BBE of the Act is specified in the Act
itself and not in the annual Finance Act. The Taxation Laws (Second Amendment) Bill, 2016,
inter alia, proposes to amend the provisions of Section 115BBE of the Act so as to enhance the
rate of tax from thirty per cent to sixty per cent and also sub-section (9) of section 2 of the
Finance Act, 2016 so as to impose a surcharge at the rate of twenty-five per cent of the tax.
It is humbly contended that the proposed amendment to section 115BBE is hit by the decision in
Karimtharuvi Tea Estate Ltd. v. State of Kerala26 's case and the proposed amendment to the
Finance Act, 2016 is hit by the decision in CIT v. Scindia Steam Navigation Co. Ltd. 's case27 .
It is humbly contented that the amended is to take effect from April 1, 2017 and not merely after
demonetisation of HDNs. This amendment does not seek to restrict its application to deposit of
unaccounted incomes and cash in the wake of demonetisation of HDNs. The proposed seems to
have lost its sight of the Statements of Objects and Reasons as the amendment itself contradicts
its objectives. In the name of “plugging loopholes” it is only increasing the tax rate of certain
types of incomes/ additions and has no correlation with the demonitisation of HDNs. It covers in
its sweep all additions that the AO may make an account of failure of assessees to explain
25 CIT v. Scindia Steam Navigation Co. Ltd. [1961] 42 I.T.R. 589(SC).
26 Karimtharuvi v. . State of Kerala 60 ITR.
27 CIT v. Scindia 42 I.T.R.

source and genuineness of loans, identities of donors/ lenders, unexplained expenditure/

investments, amounts borrowed or repaid on hundi.28
It is humbly submitted that the impugned amendment has no correlation to its stated objectives
and the act of making the same as retrospective is unconstitutional.
ISSUE: V: WHETHER THE SAID LEGISLATION WAS PASSED IN AN

UNDEMOCRATIC MANNER
It is humbly submitted that the Taxation Laws (Second Amendment Bill), 2016 was passed in an
undemocratic manner. The same has been relayed on the following grounds;
That the passage of Taxation Laws (Second Amendment Act), 2016 violated the Rules of
Procedure and Conduct of business of Lok Sabha. [5.1] That the passage of the Bill disallowed
any amendments and the bill was passed through voice vote among din. [5.2] That the nature of
the bill was changed and it was bulldozed as a money bill to circumvent the scrutiny of Rajya
Sabha. [5.3]
[5.1] THAT THE PASSAGE OF TAXATION LAWS (SECOND AMENDMENT BILL),

2016 VIOLATED THE RULES OF PROCEDURE AND CONDUCT OF BUSINESS OF
LOK SABHA.
It is humbly submitted that the passage of Taxation laws (Second Amendment) Bill, 2016
violates the rules of procedure and conduct of business in Lok Sabha. The same has been
relayed on the following grounds;
[5.1.1]That the Taxation Laws (Second Amendment Bill), 2016 was not listed in the List of
Business and was passed without any debate
28Rahul Sarda, Pradhan Mantri Garib Kalyan Yojana: Last Call To Tax Evaders To Come Clean , ITAonline (July
15,2017,11:28 a.m.), http://www.itatonline.org/articles_new/pradhan-mantri-garib-kalyan-yojana-last-call-to-tax-
evaders-to-come-clean/.

It is humbly submitted that the Taxation Laws (Second Amendment) Bill, 2016 was listed for
introduction in a supplementary list to the original list of business, instead of List of business
and was taken up in an urgency the following day amid sloganeering and passed without a
debate.
According to the Lok Sabha procedure, when a Bill is to be introduced, it is included in the List
of Business in advance. This is done as the members need time to go through and understand the
legislation, which has been brought into the house. This particular one involved cross
referencing sections from the ITA, then figuring out what changes are being made and the
implications of the same. Additionally, there needs to be some time given to figure out and
propose amendments to the proposed legislation. It also provides an opportunity to the members
of the house to raise objections to the introduction of the bill, if they have any.
It is humbly submitted that, this bill was not included in the List of Business, because of which
it deprived the other members of the house the opportunity to raise opposition against its
introduction under the Rules of Procedure and Conduct of Business in Lok Sabha under Sec.
72(1)29.
It is humbly contended that the second stage of the bill is that the Bill may be taken into
consideration under Rule 7430 . of the Rules of Procedure and Conduct of Business in Loksabha.
Then, under Rule 7531 of the Rules of Procedure and Conduct of Business in Loksabha, there
may be a discussion on the principles of the Bill but again due to hasty decisions these rules
were not followed.
29 Loksabha Rules of Procedure and Conduct of Business (15th ed.).
30 Id.
31 Id.

Thus, the Taxation Laws (Second Amendment) Bill, 2016 was passed hurriedly without any
debate. It is humbly contended that a bill which is of huge importance to the nation cannot be
passed without any debate and in breach of the rules of Procedure of introduction in Lok Sabha.
[5.1.2]That the Taxation Laws (Second Amendment Bill), 2016 did not procure the required
assent of the President as the same was pre assumed.
It is humbly contended that the introduction of the bill was done very hurriedly and in that
President’s recommendation and assent under Art. 11732 and 27433 (CITATION) of the
Constitution of India was not taken and the Government pre assumed president’s
recommendation and went ahead with introducing the bill on the same day as it was listed in the
supplementary list to the original list of business.
It is humbly contended that through Rule 8234 of the Rules of Procedure and Conduct of
Business in Lok Sabha the order of the President granting or withholding the sanction or
recommendation to an amendment to a Bill is required to be taken and the same shall be
communicated to the Secretary General by the Minister concerned in writing. But the
Government paid no heed to these rules and passed it in utter emergency.35
[5.2] THAT THE PASSAGE OF THE BILL DISALLOWED ANY AMENDMENTS AND
THE BILL WAS PASSED THROUGH VOICE VOTE AMONG DIN .
It is humbly submitted that the bill also disallowed amendments moved by opposition members
as they required approval of the President which could not be obtained due to paucity of time as
the bill was to be hurriedly passed. The suggested amendments required President’s assent as
32 Art. 177, the Constitution of India.
34 Loksabha Rules of Procedure and Conduct of Business (15th ed.).
35Statement
regarding Taxation Bill (Second Amendment) Act, Loksabha (29.11.2016), http://164.100.47.194/
Loksabha/Debates/uncorrecteddebate.aspx.

amendments to a bill that may relate to drawing money from the Consolidated Fund of India
need President's approval.
Further, the Loksabha resolved to passing the bill through a voice vote among din within
minutes and without any discussion. The house was in utter turmoil for the past few days due to
nationwide strikes and agitation against demonetisation, there had been total washout, with the
session being the government’s least productive session. On the day of passing of the bill too
there was unrest and that is when a bill of such heavy national importance was introduced and
even passed through a voice vote among din, which was both an improper and an inconclusive
method adopted for passing of such an important bill. It is hence humbly submitted than in
Loksabha the bill was not properly introduced or even properly passed.36
[5.3] THE NATURE OF THE BILL WAS CHANGED AND IT WAS BULLDOZED AS A
MONEY BILL TO CIRCUMVENT THE SCRUTINY OF RAJYA SABHA.
It is humbly put forth that the current political dispensation by the virtue of having a majority in
the Lok Sabha is resorting to undermine Rajya Sabha by changing the hue of the bill to money
bill. This is being actively done to streamline its passage through the parliament, as was seen in
the case of Aadhar Bill. Art. 110 (1)37 of the Constitution defines a money bill which says that a
Bill is deemed to be a Money Bill if it contains provisions dealing with six specific matters
under Art. 110 (1)(a) to (1)(f) broadly related to imposing, abolishing or regulating a tax;
regulating government borrowings; the Consolidated and Contingency Funds of India; and “any
matter incidental to any of the matters specified in (the previous six) sub-clauses…”
It is humbly submitted that by the virtue of Art. 110(3) of the Constitution of India the Hon’ble
Speaker is entitled to adjudge that whether a bill is money bill or not. Here the Taxation Bill
(second amendment act) was deemed a money bill by the speaker, which enabled the
Government to pass the bill without further debates in Rajya Sabha as they have majority in
Loksabha.
36 Id.
37 Art. 110(1), the Constitution of India.

It is humbly contended that the decision of the Hon’ble Speaker in deciding the Taxation Bill
(second amendment act) as a money bill should be reviewed as the bill should go through a
debate in Rajya Sabha as the bill is itself very important for the present scenario of the country
amidst demonetisation and money laundering.
It is again humbly contended that Art.110(3) of the Indian Constitution also grants 'finality' to
the Indian speaker's decision. It reads:
“If any question arises whether a bill is a Money Bill or not, the decision of the Speaker
of the House of People thereon shall be final.”
The Indian Constitution does not mention that the speaker's decision "shall be conclusive for all
purposes" and "shall not be questioned in any court of law" unlike the 1911 British Law which
says:
“Any certificate of the Speaker of the House of Commons given under this Act shall
be conclusive for all purposes, and shall not be questioned in any court of law.” 38
Therefore, although the Indian Constitution grants conclusivity to the speaker's decision, it does
not explicitly bar judicial review.
The SC has on multiple occasions exercised judicial review over such decisions. In the case
Kihoto Hollohan vs Zachillhu39, the "final" decision of the speaker regarding disqualification of
members of the House under Tenth Schedule of the Indian Constitution, has been held to be a
judicial decision subject to judicial review. This suggests that the "final" status given by the
Indian constitution does not automatically immune the Indian speaker's decision or certificate
from judicial review.
38
House of Commons, Participation of Members of the House of Commons bill [HL],2006. https://
www.publications.parliament.uk/pa/ld200506/ldbills/061/2006061.pdf.
39 Kihoto Hollohan vs Zachillhu (AIR 1993 SC 412).

There is ample jurisprudence on what happens when the SC’s power of judicial review comes
up against Art. 122 – which states that the validity of any proceeding in the parliament can
(only) be called into question on the grounds of procedural irregularities. In the crucial judgment
of Raja Ram Pal vs Hon’ble Speaker, Lok Sabha and Others40, the court evaluated the scope of
judicial review and observed that although parliament is supreme, unlike Britain, proceedings
which are found to suffer from substantive illegality or unconstitutionality, cannot be held
protected from judicial scrutiny by Art.12241, as opposed to mere irregularity.
Several past decisions of the SC discuss how the tests of legality and constitutionality help
decide whether parliamentary proceedings are immune from judicial review or not. In Ramdas
Athawale vs Union of India42 , the case of Keshav Singh vs Speaker, Legislative Assembly43was
referred to, in which the judges had unequivocally upheld the judiciary’s power to scrutinise the
actions of the speaker and the houses. It was observed that if the parliamentary procedure is
illegal and unconstitutional, it would be open to scrutiny in a court of law and could be a ground
for interference by courts under Art. 32.
These observations were reiterated in Yogendra Kumar Jaiswal v. State of Bihar44 (2016) 3 SCC
183 and Mohd. Saeed Siddiqui v. State of Uttar Pradesh45 .
40 Raja Ram Pal vs Hon’ble Speaker, Lok Sabha and Others (2007) 3 SCC 184.
42 Ramdas Athawale vs Union of India (2010)4 SCC 1.
43 Keshav Singh vs Speaker, Legislative Assembly AIR 1965 SC 745.
44 Yogendra Kumar Jaiswal v. State of Bihar(2016) 3 SCC 183.
45 Mohd. Saeed Siddiqui v. State of Uttar Pradesh (2014) 11 SCC 415.

PRAYER FOR RELIEF
In light of the facts stated, arguments advanced and authorities cited, the Respondent, humbly
prays before the Hon’ble Court, to be graciously pleased to:
• Uphold the order of the Hon’ble Division Bench of Calcutta High Court.
• To strike down Section 115BBE and Section 271AAC as being arbitrary, unconscionable
and de hors Art. 14 of the constitution.
• To frame guidelines in presence of the vacuum created by the absence of legislation on
the same.
• To formulate mechanisms to prevent the exploitation of assessees by the AO in the
future.
• To formulate guidelines for the AO while assessing the nature and source of income
under sections 68, 69A, 69B, 69C, 69D.
And pass any other order, direction or relief that it may deem fit in the best interests of
justice, equity and good conscience.
For this act of kindness, the Respondent shall duty bound forever pray.

Counsel for the Respondent.

HGV

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BEFORE THE HON’BLE

SUPREME COURT OF INDIA

SPECIAL LEAVE PETITION

Union Of India …………….……………………………………………...……………….….

All India Federation Of Tax Practitioners

UPON SUBMISSION TO THE HON’BLE CHIEF JUSTICE AND HIS COMPANION

JUSTICES OF THE SUPREME COURT OF INDIA

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

Govt., PM. Ors. UOI Anr.

Ed. CIT ITO ITR HDN IT SCC

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

of the Constitution of India.

Article 136 of the Constitution of India reads as:

“136. Special leave to appeal by the Supreme Court. — (1) Notwithstanding

leave to appeal from any judgment, decree, determination, sentence or order in

relating to the Armed Forces.”

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

THE AMENDMENTS MADE POST DEMONETISATION

THE JUDICIAL PROCEEDINGS

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

ISSUE: I: WHETHER THE AMENDED PROVISIONS COULD BE MISUTILISED BY THE

ISSUE: II: WHETHER THE AMENDED PROVISIONS ARE IN CONSONANCE WITH

ISSUE: III: WHETHER THE AMENDED PROVISIONS VIOLATE THE BASIC

ISSUE: IV: WHETHER THE RETROSPECTIVE NATURE OF THE AMENDED

ISSUE: V: WHETHER THE BILL WAS PASSED IN AN UNDEMOCRATIC MANNER.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

[ISSUE I] THAT THE AMENDED PROVISIONS COULD BE MISUTILISED BY THE

[ISSUE II] THAT THE AMENDED PROVISIONS ARE NOT IN CONSONANCE

[ISSUE III] THAT THE AMENDED PROVISIONS VIOLATE THE BASIC

[ISSUE IV] THAT THE RETROSPECTIVE NATURE OF THE AMENDED

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

ISSUE: I: WHETHER THE AMENDED PROVISIONS COULD BE MISUTILISED BY

[1.1] THAT THE AMENDED PROVISIONS LACK GUIDELINES AND CAN BE

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

3 CIT v. Excel Industries 358 ITR 295.

6 CIT v. Baroda Tin 221 ITR 661.

7 Moot proposition, p9.

8 Davinder Singh v/s ACIT 101 TTJ (Asr-ITAT) 505.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

11 B.C. Paul v. CIT [1981] 6 Taxman 170 (Cal.).

12 Avdhesh Kumar Jain v. CIT [1990] 48 Taxman 266 (All.).

13 Jethu Ram Prem Chand [2001] 114 Taxman 219 (Delhi)(Mag.).

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

[1.2.1] Levy of further taxation under section 271AAC is harsh

15 Sarita Aggarwal v. ITO [2015] 373 ITR 586 (Delhi).

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

[1.4] THAT THERE IS SCOPE OF HARASSMENT AS THERE CAN BE DOUBLE

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

[1.5] THAT VOLUNTARY DISCLOSURE IS PERPLEXING IN NATURE

ISSUE: II: WHETHER THE AMENDED SECTIONS ARE IN CONSONANCE WITH

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

principles of statutory interpretation.[2.1] It is also humbly submitted that the scheme of

[2.1] THAT THE STATEMENT OF OBJECT AND REASONS ARE NOT IN

18 K.P. Varghese v Income Tax Officer Ernakulam, AIR 1981 SC 1922.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT

19 Kerala SIDC v. CIT 259 ITR 51 SC.

WRITTEN SUBMISSION ON BEHALF OF THE RESPONDENT