Undisclosed Sources of Income and Tax Rate Applicable [Section 68-69D of Income Tax Act,1961]

Undisclosed sources of Income means those income which which are not shown by Assessee in his Income tax return and, not paid the taxes on the same.

The basic objective of income tax department is to bring all the undisclosed sources of income into tax.

Rate of Tax for Undisclosed sources of Income –

The following undisclosed income are chargeable to tax @78% [i.e., 60% plus surcharge @25% plus cess @4% ] as specified in section 115BBE

1.  CASH CREDIT [SECTION 68]

If any sum is credited in the books of account of an assessee maintained for any previous year and the assessee offers no explanation regarding its nature and source or the explanation offered is not satisfactory in the opinion of the Assessing Officer, he may charged such credited sum as Income of that Previous Year.

UNEXPLAINED LOAN OR BORROWING –

Where the sum so credited is loan or borrowing or any such amount, by whatever name called, any explanation offered by the assessee shall not be deemed satisfactory unless –

• the assessee offers explanation about its nature and source of such sum so credited; and
• such explanation is satisfactory in the opinion of the Assessing Officer.

UNEXPLAINED SHARE CAPITAL/PREMIUM –

Any explanation offered by a closely held company in respect of any sum credited as share application money, share capital , share premium shall not deemed to be satisfactory, unless

• the person, being  a resident, in whose name such credit is recorded in the books of such company also explains the nature and the source of such so sum credited and
• such explanation is satisfactory in the opinion of Assessing Officer.

NON-APPLICABILITY TO VENTURE CAPITAL FUND OR VENTURE CAPITAL COMPANY-

These additional conditions would not apply if the person  in whose name the sum is recorded is a Venture Captalal Fund or company registered with SEBI.

2. UNEXPLAINED INVESTMENTS [SECTION 69]

Where in the financial year immediately preceding the assessment year, the assessee has made investment but not recorded in the books and offers no explanation about its nature and source or it is unsatisfactory in the opinion of Assessing Officer, the value of the investment made are taxed as deemed income of such financial year.

3. UNEXPLAINED MONEY [SECTION 69A]

If in any financial year the assessee is found to be the owner of any money, bullion ,jewellery or other valuable article and the same is not recorded in books and offers no explanation about the nature and source of acquisition  of such money or the explanation is not satisfactory, the money may be deemed to be the income of such financial year.

4. AMOUNT OF INVESTMENT ETC., NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNT [SECTION 69B]

Let’s understand through an example-

If the assessee is found to be the owner of say 500gms of gold (market value of which is ₹30000 during the financial year ending 31.3.2024 but he has recorded to have spent ₹20000 in acquiring it , the Assessing officer can add ₹10000 (the difference of the market value of such gold and ₹20000) as the income of the assessee if the assessee offers no satisfactory explanation thereof.

5. UNEXPLAINED EXPENDITURE [SECTION 69C]

Where in any financial year assessee has incurred any expenditure and he offered no explanation about the source of such expenditure or the explanation is unsatisfactory in the opinion of Assessing officer, Assessing officer can treat such unexplained expenditure as the Income of the assessee shall not be allowed as deduction under any head of the Income.

6. AMOUNT BORROWED OR REPAID ON HUNDI [SECTION 69D]

A HUNDI IS PRIMARILY AN UNCONDITIONAL ORDER OR CONTRACT WHICH WARRANTEES A MONETARY PAYMENT AND CAN BE TRANSFEREED BY A VALID NEGOTIATION.

Where any amount is borrowed on a hundi or any amount due thereon is repaid other 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 for the previous year in which the amount was borrowed or repaid .

However, where any amount borrowed or repaid on a hundi has been deemed to the Income of any person, he will not be again liable to be assessed in respect of such amount on repayment of such amount. The amount repaid shall include interest paid on the amount borrowed.