Explore the differences between income tax Sections 68, 69, 69A, 69B, 69C in India, their taxability, and implications. Understand when these sections apply, burden of proof, and tax rates if found guilty. Stay informed about transparency and compliance in financial dealings under Indian income tax law.
In India’s income tax law, Sections 68 to 69D play a vital role in maintaining transparency and accountability related to unexplained finances. These sections are crucial for detecting and penalizing suspicious or unexplained money transactions, investments, and expenditures. The goal is to curb tax evasion and maintain a healthy financial system. This article will delve into the particulars of these sections, including the scenarios when they are applicable, the consequences of non-compliance, the burden of proof, and the associated tax rates.
Sections 68 to 69D: A Closer Look
1. Section 68 – Cash Credits: If unexplained sums are found in a company’s books, or if the explanation provided is not satisfactory, the amount can be considered as deemed income.
2. Section 69 – Unexplained Investments: This relates to unrecorded investments where no satisfactory explanation is given to the Assessing Officer (AO).
3. Section 69A – Unexplained Money: It covers ownership of unrecorded valuable articles, like jewellery, where the source is not satisfactorily explained.
4. Section 69B – Amount of Investment not fully disclosed: Here, the AO may find that the amount invested is greater than the required source of income.
5. Section 69C – Unexplained Expenditure: This section targets unexplained expenditures that may be considered as the deemed income of the assessee.
Implications if AO is not Satisfied: If the AO is unsatisfied with the explanations, they may consider these as deemed income, leading to legal consequences.
Burden of Proof: While the burden of proof in the case of Section 68 lies with the assessee, for Sections 69, 69A, 69B, and 69C, the AO must have conclusive proof.
Tax Rates if Found Guilty: Tax rates include a 60% tax, 25% surcharge, 4% Cess, with no deductions or benefits allowed for the income assessed under these sections.
Chart explaining Difference between section 68, 69, 69A, 69B, 69C and their Taxability
| Particulars | Cash Credits (Section 68) | Unexplained Investments (Section 69) | Unexplained Money (Section 69A) | Amount of Investment not fully disclosed. (Section 69B) | Unexplained Expenditure (Section 69C) |
| When will it apply? | This section applies in two scenarios:
1. When there is a sum found in the books of accounts maintained by the assessee and the assessee doesn’t provide the explanation about the credit to the AO. 2. Where the assessee is a company and the sum credited in the name of share application, share capital, share premium, any explanation provided is not satisfactory. |
This section applies when there are investments made by the assessee, but the investments are not recorded in the books of account (if maintained) of the assessee and the assessee doesn’t offers any explanation about the investment to AO or the explanation given is not satisfactory. | This section applies when the assessee is found to be the owner of jewellery, bullion, money or other valuable article, which assessee have not recorded in the books of accounts (if maintained) and the assessee offers no explanation about the source of cost of acquisition of such articles or the explanation given was not satisfactory to AO. | This section is somewhat similar to section 69A, in which there is investment made in jewellery, bullion, money or another valuable article.
However, in this section the AO finds that the amount invested is greater than the source of income that is required to acquire such an article. |
This section applies when the assessee had incurred any expenditure and he provide no explanation for the source of such expenditure, or the explanation provided by assessee is unsatisfactory in opinion of AO. |
| What will be happen if AO is not satisfied? | The AO can consider the amount of money credited in the books as deemed income of assessee. | The AO can consider the value of such investments as deemed income of the assessee. | The AO can consider the money or value of such article as deemed income of the assessee | The AO can consider the excess amount i.e., the cost of acquisition and the value of article can be considered as income of the assessee. | The AO can consider the amount covered by such expenditure or part thereof as the deemed income of the asseesse. |
| Who will have the Burden of Proof? | In Case of section 68 the burden of proof wholly lies on the shoulders of assessee. However, assessee can also use the details of the persons who credited the said amount and whose name is recorded in the books of the assessee for explaining the source of credits. | However, in the case of Section 69, 69A, 69B and 69C, before invoking any of the sections, the condition precedent to the existence of such investment, article, expenditure etc. etc. must be conclusively established by material and evidence. It means that the AO must have conclusive proof of existence of such investment, article, expenditure etc. etc and must provide it to the assessee. | |||
| Tax rates if found guilty? | The taxability of in case of assessee found guilty under any of the above section is provided in section 115BBE in which the tax is calculated as follows:
1. Income decided by AO under section 68, 69, 69A, 69B, 69C 69D shall be taxable by the rate of 60% + 25% surcharge + 4% Cess. 2. Further no deduction of any type of expenditure will be provided to the assessee in the income assessed under section 68, 69, 69A, 69B, 69C 69D. 3. No benefit of setoff of any loss of previous years and no basic exemption limit benefit will also be provided. |
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Conclusion: Sections 68 to 69D serve as a robust mechanism to monitor and regulate unexplained financial activities within India’s taxation framework. Compliance with these sections is paramount, as they directly impact the credibility and legality of an individual’s or a company’s financial standing. Understanding these provisions, being aware of the applicability, and actively ensuring compliance is crucial for both financial integrity and legal soundness. It demonstrates a commitment to transparency and adherence to the law, reinforcing the importance of ethical financial practices in the Indian economy.
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