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Taxation of Cash Credits, Unexplained Money, Unexplained Investments etc. covered under Section 68, 69, 69A, 69B, 69C & 69D

1.   Taxation of Cash Credits in the Books [Section 68]

Where any sum is found credited in the books of an assessee, maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year and to be Taxed @ 60%. .

Expenditure or Allowance or Set Off of any Loss not to be Allowed from abovesaid Incomes.

It may be noted that if section 68 has been made applicable, the assessee shall, besides liable for income-tax be liable to a penalty for concealment of income under section 271(1)(c), which shall not be less than and more than three times of the tax sought to be evaded.

Conditions to be satisfied for applicability of Section 68

Section 68 comes into operation only when the following two conditions are satisfied:

(i)            the assessee maintains account books; and

(ii)           a credit entry occurs in such books.

 

Important Notes :

1.            The section does not make any distinction between commercial loans and non-commercial loans or between amounts credited to an account of a third party and those credited to the assessee's own capital account.

2.            The expression 'books of the assessee' appearing in section 68 refers to the assessee whose books show the credit entry, and that such books have to be the books of the assessee himself and not of any other assessee.

3.            Where assessee failed to produce relevant documents and confirmation in respect of loan taken from various parties, mere fact that he did not maintain proper books of account could not be accepted as a valid plea and, thus, amount in question was to be added to assessee's taxable income under section 68.

4.            Where such credits occur, the section enacts that the assessee should explain to the Assessing Officer satisfactorily the nature and source of the sum so credited, and establish that the sum in question is not his income. If he does not offer any explanation, such sum may be included in the total income of the assessee.

5.            Where assessee claimed that he withdrew certain amount from his bank account for construction of a building and surplus money, when not required, was redeposited, in same bank account, since assessee failed to produce any bills/vouchers relating to construction, and justify substantial cash withdrawals for meeting construction cost and re-deposits when money was not required, additions under section 68 in respect of amount redeposited was justified.

6.            Where Assessing Officer made addition to assessee's income in respect of unconfirmed trade creditors and expenses, in view of fact that assessment order did not refer to and elucidate whether or not assessee had produced invoices, Bills , manner and mode of payment to trade creditors and, moreover, details and nature of expenses incurred were not elucidated, impugned addition was to be deleted.

2.   Taxation of Unexplained Investments [Section 69]

Where in ani financial year immediately preceding the assessment year. the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year and to be Taxed @ 60%. .

Expenditure or Allowance or Set Off of any Loss not to be Allowed from abovesaid Incomes.

3.   Taxation of Unexplained Money, etc. [Section 69A]

Where in any financial year, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the accounts, if any maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable articles may be deemed to be the income of the asses see for such financial year and to be Taxed @ 60%. .

Expenditure or Allowance or Set Off of any Loss not to be Allowed from abovesaid Incomes.

4.   Taxation of Amount of Investments. not fully Disclosed in Books of Account [Section 69B]

Where in any financial year. the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year and to be Taxed @ 60%. .

Expenditure or Allowance or Set Off of any Loss not to be Allowed from abovesaid Incomes.

5.   Taxation of Unexplained Expenditure, etc. [Section 69C]

Where in any financial year, an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year and to be Taxed @ 60%. .

Expenditure or Allowance or Set Off of any Loss not to be Allowed from abovesaid Incomes.

Further, notwithstanding anything contained in any other provision of the Income-tax Act, such unexplained expenditure which is deemed to be the income of the assessee, shall not be allowed as a deduction under any head of income (Proviso to section 69C).

6.   Taxation of Amount Borrowed or Repaid on Hundi [Section 69D]

Where any amount is borrowed on a hundi from, or any amount due thereon is repaid to, any person otherwise than through an account payee cheque drawn on a bank, the amount so borrowed or repaid shall be deemed to be the income of the person borrowing or repaying the amount aforesaid for the previous year, in which the amount was borrowed or repaid, as the case may be and to be Taxed @ 60%. .

Expenditure or Allowance or Set Off of any Loss not to be Allowed from abovesaid Incomes.

Provided that, if in any case any amount borrowed on a hundi has been deemed under the provisions of this Section to be the income of any person, such person shall not be liable to be assessed again in respect of such amount under the provisions of this Section on repayment of such amount.

Explanation: For the purposes of this Section, the amount repaid shall include the amount of interest paid on the amount borrowed.

 

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