As per section 68 of the Income Tax Act, any sum found credited in the books of a taxpayer, for which he does not explain the nature and source or the explanation provided by him is not satisfactory by the Assessing Officer is termed as ‘Cash Credit‘.

Tax Treatment of Cash Credit

Other provisions to be kept in mind with regards to Cash Credit

Section Brief overview
69 (Unexplained Investments) If the taxpayer has made investments which are not recorded in the books of accounts, maintained by him for any source of income, and he offers no explanation offered by him is not, satisfactory to the Assessing Officer then the value of such investments may be deemed to be the income for the taxpayer of such year.
69A (unexplained money, etc.) If the taxpayer is found to be the owner of any money, jewelry, or valuable articles and the same is not recorded in the books of account maintained by him for any source of income, and either the taxpayer doesn’t have any explanation or the explanation provided is not satisfactory to the Assessing Officer, then the money and the amount of such valuable articles may be deemed to be the income of the taxpayer for such year.
69B (Amount of investments, etc., not fully disclosed in the books of accounts) If the taxpayer has made any investments or is found to be the owner of any valuable article, and the Assessing Officer finds that the amount spend on such investment or in acquiring such valuable article exceeds the amount recorded in the books of account and the taxpayer doesn’t have any explanation or the explanation provided is not satisfactory to the Assessing Officer, then the excess amount may be considered as deemed income.
69C (Unexplained expenditure, etc.) If the taxpayer has incurred any expenditure and he has no explanation about the source of such expenditure or the explanation provided is not satisfactory to the Assessing Officer, then such expense will be considered as deemed income of the taxpayer.

Such income, shall not be allowed as deduction under any head of income.

69D (Amount borrowed or repaid on hundi) If the taxpayer borrowed or re-paid any amount on hundi to any person apart from the account-payee cheque. Then such amount will be treated as the income of the taxpayer.

As per the section 115BBE, income-tax shall be 60%, if the total income of an assessee includes;

  • Income referred u/s 68, 69, 69A, 69B, 69C, or 69D; or
  • Income included by Assessing Officer in section 68, 69, 69A, 69B, 69C, or 69D, if such income is not covered above.

A surcharge of 25%, 6% penalty will be added to the income tax rate of 60% making the total final rate 83.25% (including cess). The Penalty of 6% will not be levied if the income is included and tax has been paid on or before the end of the previous year.

The assessee will not be allowed for any deduction of expenditure or set-off of any loss in computing the income u/s 115BBE(1)(a).

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Company: Pooja Jiwrajka & Associates
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