Know in detail Section 68, 69, 69A, 69B, 69C & 69D of Income Tax Act, 1961

Introduction:

The Income Tax Act of 1961 in India encompasses various sections, each addressing specific aspects of taxation and income assessment. In this comprehensive article, we delve into Sections 68, 69, 69A, 69B, 69C, and 69D, which deal with unexplained cash credits, unrecorded investments, unrecorded money, bullion, jewelry, unexplained investments, unexplained expenditures, and hundi loans. Understanding these sections is essential for taxpayers and tax professionals to ensure compliance with tax regulations.

Section 68: Unexplained cash credits:

Where any sum found credited in books of account of the assesse for any previous year and no satisfactory explanation is offered to the Assessing Officer about the nature and source thereof, by the assesse it is liable to be assessed as the income of the previous year.

First proviso to this section, from assessment year 2023-24 and onwards, provides that where the sum so credited consists of loan or borrowings or any such amount, by whatever named called, any explanation offered by such assesse will be deemed to be not satisfactory: unless (1) the person whose name such credit is recorded in the books of such assesse also offer an explanation about the nature and source of such sum credited; and (2) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory.

Second proviso to this section, provides that where the assesse is a company ( other than public company), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called any explanation offered by such assesse company shall be deemed to be not satisfactory, unless the resident person in whose name such credit is recorded in the books of such company also offers an explanation regarding the nature and source of such sum so credited and such explanation in the opinion of the Assessing Officer is found to be satisfactory.

Third proviso to this section provides that provisions of first proviso or second proviso shall not apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in section 10(23FB).

There are certain judgments pertaining to section 68.

• If any amount credited in the books of account of business and assesse is not able to satisfy AO, the same income will be considered as Business Income.

(Laxmichand Baijnath Vs. CIT(1959) 35 ITR 416(SC)

• It is the duty of assesse to prove the capacity of creditor. If the creditor is tax payer there is no necessity to prove his capacity. (Kamal Motors Vs. CIT(2003) 131 Taxman 155 (Raj)
• It is not necessary that mother can give gift to her son without any occasion. Mother can give gift to her son at any time.(CIT vs. Sureshkumar Kakkar (2010) 324 ITR 231 (Delhi).

Section 69: Unrecorded investments:

Under any financial year preceding the assessment year, an assesse has made investments which are not recorded in the books of account, the value of such investments, may be deemed to be the assesse for such financial year if no satisfactory explanation is offered to the Assessing Officer about the nature and source of such investments. Even in cases where the assesse has maintained books of account for a different previous years, such amount is taxable as income of the said financial year.

There are certain judgments pertaining to Section 69:

• To obtain a loan from bank, assesse has shown cost of stock on higher side but real stock was not increased. Books of accounts were audited and no additional stock was found. Hence difference between stock as per books and physical stock,

cannot be considered as unrecorded income. (241 ITR 363, Madras High Court, 236 ITR 340, Jammu and Kashmir High Court)

• ITO vs. Mrs. Dipali Sehgal, (ITAT Delhi) ITA No. 5660/Delhi/2012.

Section 69A: Unrecorded money, bullion, jewellery etc.

Where in any financial year the assesse is found to be the owner of any money, bullion, jewellery or other valuable article which are not recorded in the books of account, if any, maintained by him for any source of income, and the assesse offers no satisfactory explanation to the Assessing Officer about the nature and source of acquisition, the money and the value of such bullion, jewellery or other valuable article may be deemed to be the income of assesse for that financial year.

Judgments pertaining to Section 69A:

• Section 68 says that there is no ownership of assesse which is applicable to the entries in the books of account, no explanation will considered as income while Section 69A says the assets which is in possession of assesse and he is the owner of that assets. (Durga Kamal Rice Mills vs. CIT (2003) 130 Taxman 553(Calcutta)
• Cash found from assesse is the proof of ownership. Assesse was a politician and cash found was of Political party, but president and treasurer has denied, added to the income of assesse. (Sukhram Vs. ACIT(2006) 285 ITR 256(Delhi)

Section 69B: Unexplained Investments:

Where in any financial year, the assesse has made an investment 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 the books of account and the assesse has offered no explanation about such excess amount, the excess amount may be deemed to be the income of the assesse.

Judgments pertaining to Section 69B:

• It is the duty of the department to prove that real asset is more than the assets shown in books. Only on the base of market value no addition is to be made under this section.(Smt. Amarkumari Surana Vs. CIT(1996) 89 Taxman 544 (Raj).
• If the assessing officer have any doubt he may go to Valuation Cell and take their help. Assesse may not accept the valuation Cell report, if he has doubt. Under such circumstances cost mention in books is to be accepted. (CIT vs. Mirut Cement Co Pvt. Ltd. (2006) 150 Taxman 7(Allahabad)

Section 69C: Unexplained Expenditure:

Where an assesse has incurred any expenditure in any financial year and he is unable to offer any satisfactory explanation in respect of the source of such expenditure or part thereof, such unexplained expenditure or part of it, may be deemed to be the income of the assesse for such financial year. Such unexplained expenditure shall not be allowed as a deduction under any head of income.

ITAT Jaipur bench 31DTR 456 Nisraj Real estate.

CIT vs. Bhagwati Developers Pvt. Ltd.(2003) 261 ITR 658 (kolkatta)

Section 69D: Hundi loans and interest thereon obtained or repaid otherwise than through an account payee cheque:

A hundi loan obtained or repaid otherwise than through an account payee cheque drawn on a bank shall be income of the borrower for the previous year in which the amount was borrowed or repaid. This section is not applicable to certain types of Darshani Hundi transections [Vide circular no 221, dated 6.6.1977: 108ITR(St.)10]

Conclusion:

A thorough understanding of Sections 68-69D of the Income Tax Act is vital for both taxpayers and tax authorities. These sections establish guidelines for assessing unexplained credits, investments, assets, expenditures, and hundi loans. Legal precedents and judgments further clarify the application of these sections. Adhering to these provisions and staying updated with relevant case law is essential for compliance and fair taxation in India.