CBDT has said that such fictitious liabilities can be in the nature of loans, creditors, advances received, share capital, payables etc. that are disclosed in the audited balance sheet but are fictitious in nature.

The Central Board of Direct Taxes (CBDT) has said that under the Income Disclosure Scheme 2016 where there is a direct link between a fictitious liability and an asset acquired then the amount to be declared shall be the fair market value of the acquired asset as on June 1, 2016.

In a fresh set of clarifications issued, CBDT has said that such fictitious liabilities can be in the nature of loans, creditors, advances received, share capital, payables etc. that are disclosed in the audited balance sheet but are fictitious in nature.

However, where fictitious liabilities cannot be directly linked to acquisition of a particular asset in the balance sheet, then such fictitious liabilities can be disclosed under the scheme as such without linking the same with the investment in any specific asset.

On another issue on whether the amount declared under the scheme for an earlier assessment year can be taken into account to explain the transaction(s) in the assessment proceedings for subsequent assessment year(s), the CBDT has said that as per section 189 of the Finance Act, 2016, any declaration made under the Scheme shall not affect finality of completed assessments.

However, in an assessment proceeding before the Assessing Officer for an assessment year subsequent to the year for which the income is declared under the Scheme, the income declared for an earlier 2 assessment year can be taken into account to explain the transactions provided there is a nexus between the income declared and the transactions of the subsequent assessment year.

The IDS 2016, which started on June 1, provides a four-month window for those who have undisclosed assets to come clean and pay up the tax and penalty of 45 percent and enjoy immunity against prosecution.