Summary: Sections 69A and 69B of the Income Tax Act, 1961, address unexplained income, investments, and expenditures. Section 69A applies when an assessee possesses unexplained cash, bullion, or other valuable items not recorded in their books of account. Courts have clarified that this provision is valid only when books of account exist. For instance, in CIT vs. Meghjibhai Popatbhai Virani, funds from a family settlement were not treated as unexplained income under Section 69A. Additionally, in Durga Kamal Rice Mills vs. CIT, it was held that Section 68 applies to entries in books, whereas Section 69A concerns possession of unaccounted assets. Section 69B pertains to undisclosed investments. If the actual investment exceeds the amount recorded in the books and the assessee provides no satisfactory explanation, it may be deemed income. However, as highlighted in Smt. Amar Kumara Surana vs. CIT, the tax department must substantiate its claims with evidence, such as valuation reports, and cannot rely solely on market prices. Section 69C relates to unexplained expenditures and is invoked when expenses are not supported by sufficient documentation. These provisions aim to curb tax evasion while emphasizing the need for robust evidence before making additions to income.
Section 69A: Unexplained money etc.
Where in any financial year the assesse is found to be the owner of any money, bullion, gold, jewellery or other valuable article and such money, bullion, gold, jewellery or other valuable article is not reordered in the books of account, if any maintained by him for any source of income, and the assesse offers no explanation about the nature and source of acquisition of the money, bullion, gold, jewellery or other valuable article, or the explanation offered by him is not, in the, opinion of assessing officer, satisfactory, the money and the value of the bullion, gold, jewellery or other valuable articles may be deemed to be the income of the assesse for such financial year.
Here in this section the words, not reordered in the books of account, if any maintained by him. The question arise in the mind that whether to maintained books of account is compulsory?
That means, assessing officer can ask for explanation, only when the books of account are maintain and money, bullion, gold, jewellery or other valuable article are not recorded in the books. That means when books of account not maintain and officer find these valuable things, he has no power to consider it as deemed to be the income of assesse.
In the case of 294 ITR 78 Punjab and Haryana High Court it has been held that Section 69A is not applicable when only few papers are found, where in nothing has been mention about the ownership of any valuable articles.
In the case of Commissioner of Income tax Vs. Meghjibhai Popatbhai Virani Tax Appeal No 45 of 2013 Assessee has received certain amount on the sale of land and as a family settlement he has received the amount, for which document pertain to family settlement found, hence under section 69A we cannot considered it as unexplained.
Durga Kamal Rice Mills Vs. Commissioner of Income Tax(2003) 130 Taxman 553 (Kolkata)
In this case they have explain the difference between section 68 and 69A. Under Section 68, there is no condition that any amount mentioned in books of account is belong to the assesse, while Section 69A is applicable to the amount which is in possession of the assesse.
Possession of cash and ownership is the proof. During search at the office of political party, cash available is belong to party, but President and treasurer denied. Tribunal have added the amount to the income of party. Sukhram Vs. Assistant Commissioner of Income tax (2006) 285 ITR 256 (Delhi).
Assesse was running a firm, wherein they have collected deposit from the public, but there was no proof of registration of firm. They are also not able to prove the source of deposit. Hence the amount was added to the income of assesse. Commissioner of Income tax Vs. K. Chinnathamban (2007) 162 Taxman459/292 ITR 682(SC)
Section 69B: Amount of Investments, etc. not fully disclosed in books of account.
Where in any financial the assesse has made an investments or is found to be the owner of any bullion, gold, jewellery or other valuable article, and the assessing officer finds that the amount expended on making such investments or in acquiring such bullion, gold, jewellery or other valuable articles by the assesse exceeds the amount recorded in this behalf in the books of account, by any source of income, and the assesse offer no explanation, in opinion of the assessing officer, may be deemed to be the income of assesse.
Smt. Amar kumara surana Vs. Commissioner of Income tax (1996) 89 Taxman 544(Rajasthan).
The investment shown in books of account was less than the real investment. This is the duty of income tax department to prove it. On the base of market piece department cannot make an addition u/s 69B. The investment in purchase of a land was more than the investment shown in books of account, but it is to be prove by the department, hence they cannot make an addition u/s 69B.
Commissioner of Income Tax vs. Mirut Cement Co. Pvt. Ltd.(2006) 150 Taxman-7 (Allahabad)
If there is any doubt about the cost of construction of property, department should refer the matter to Valuation Cell, and their report will considered as proof. The report of Valuation Cell may be arguable by the assesse.
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