It is advisable to all the tax payers that be care full while filing your return of Income. You have to verify all your investments, expenses, debtors which is mention in your books of account. If you are not able to explain any investment or expenses mentioned in your books of account, when explanation asked by assessing officer and if he is not satisfy with your explanation, section 69 to 69C will be applicable, and unexplained investment and expenditure will considered as Deemed Income and adding to your income, liable to tax at Maximum marginal Rate i. e. 30% plus education cess and surcharge.

Under Section 69, the value of unexplained investment will considered as deemed income.

As per section 69, of the Income Tax Act,

Where in the financial year immediately preceding the assessment year the assesse has made investments which are not recorded in the books of account, if any,  maintained by him for any source of income, and the assesse offer no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assesse of such financial year.

Hence during any financial year what has been mentioned in the books of account as Investment, assessee is required to give the source of that Investment. During the course of hearing of any financial year, when Assessing Officer ask for the explanation about the source of the investment, assesse is bound to give details of investment. If assesse is not able to give explanation or explanation given by assesse is not satisfying the Assessing Officer, this investment will considered as Unexplained Investments which will be considered as deemed income of the assesse.   

Section 69A, Where in any financial year the assesse is found to be the owner of any money, bullion, jewelry or other valuable article and such money, bullion, jewellery or valuable article is not recorded 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 the acquisition of the money, bullion, jwelery or other valuable articles, or the explanation offered by him is not, in the opinion of Assessing Officer, satisfactory, the money and the value of bullion, jwelery or other valuable article may be deemed to be the income of the assesse for such financial year.

During the course of search or survey any unexplained money, gold and silver ornaments, any other valuable items are also liable to tax at maximum marginal rate of 30%, plus education cess and surcharge.

Unexplained Investment and Expenditure attracts 84 Percent Tax Rate

Section 69B. Amount of Investments, etc., not fully disclosed in books of account.

Where in any financial year the assesse has made investments or is found to be the owner of any bullion, jwellery or other valuable article, and the Assessing Officer found that the amount expended on making such investments or in acquiring such bullion, jwellery or other valuable article exceed the amount recorded in this behalf in the books of account maintain by the assesse for any source of income, and the assesse offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assesse for such financial year.

Sometime the assesse have not fully disclosed the amount of investments in books of account. In such a case, during the course assessment, assessing officer find that the value of particular ornaments or bullion or jwellery is exceed the value, which is mention in books and on enquiry, he find that the valuation in books of account is at lower rate, he may inquire and if he find correct valuation which is higher than book value, he may add the difference as deemed income.

Section 69C Unexplained expenditure, etc.

Where in any financial year an assesse has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of assessing officer, satisfactory, the amount covered by such expenditure or part there of, as the case may be , may be deemed to be the of the income of the assesse for such financial year.

Any expenditure debited by an assesse in the books of account and assesse is failed to provide explanation or explanation given by the assesse is not accepted by the assessing officer, or part of expenditure is not accepted, the same amount is to be considered as deemed income for that financial year.

Section 115BBE provide Tax on income referred to in above sections, 69 or section 69A, or section 69B or Section 69C of the Income Tax Act, 1961, is applicable from Asst.Yr. 2017-18 as under:

    • The amount of income tax calculated on the income considered as deemed income at the rate of Sixty per cent.
    • On tax of sixty per cent 25 per cent surcharge that means effective tax will be 15 per cent.
    • Over and above seventy five per cent 3 per cent education cess that means 2.25 per cent.
    • From assessment year 2019-20 4 per cent Health and Education cess that means 78 per cent.

On total 78 per cent as per section 271AAC 6 per cent penalty, which makes 84 per cent.

Calculation is as under:

Income Tax 60 per cent
Surcharge 25 per cent on 60 per cent  15 per cent
Education and health Cess 4 per cent on
75 per cent 3 per cent
Penalty u/s 271AAC 6 per cent
per cent
TOTAL 84 per cent

————–

Certain Judgments in favor of Assesse:

Commissioner of Income tax Vs. Ratanlal Vyaparilal Jain 235CTR568 (Guj)

As per circular of CBDT NO 1916 asessee can have certain grams of ornament with married woman, man and unmarried woman.

Piyushkumar O. Desai Vs. Commissioner of Income Tax 247 ITR 564 (guj.)

Income tax Officer Vs. Bharat A. Mehta 60 taxman.com31( Guj.)   

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