Taxation of Unexplained Incomes

To start, the term "unexplained income" refers to any income for which the assessee cannot offer a satisfactory explanation of its type or origin or the evaluating officer does not accept the assessee's answer. Sections 68, 69, 69A, 69B, 69C, and 69D of the Income-tax Act of 1961 (the Act) broadly speaking deal with the concept of "unexplained income."

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Section 68 deals with Cash Credits

When a sum is discovered credited in an assessee's books kept for a prior year and the assessee fails to explain the nature and source of the sum, or his explanation is deemed unsatisfactory by the assessing officer, the assessee may be required to pay income tax on the amount as if it were the assessee's income for the prior year.

Section 69 deals with Unexplained investments

If the taxpayer made investments in the financial year prior to the evaluation year that is not recorded in the books of account, if any, maintained by him for any means of revenue, and the taxpayer provides no explanation regarding the nature and source of the investments or his explanation is not, in the Evaluating Officer's opinion, satisfactory, the value of the investments may be deemed to be the assessee of such source of income.

Section 69A deals with Unexplained money, etc.

When the assessee is discovered to be the owner of money, bullion, jewellery, or another valuable item during a given fiscal year and the money, bullion, jewellery, or valuable item is not noted in the books of accounts if any, he keeps for any source of revenue, and if the assessee does not provide an explanation for the origin and source of the money, bullion, jewellery, or other expensive item's acquisition or if the assessor does not find the assessee's answer to be adequate, then the amount of money, as well as the bullion, jewellery, or other precious item's value, may be considered the assessee's income for that particular financial year. To-the-point information on what is 80g.

Section 69B deals with the Amount of investments, etc.

If the assessee made investments during any financial year or was discovered to be the owner of any bullion, jewellery, or another expensive item, and the assessing officer discovers that the sum spent on making such investments or buying such bullion, jewellery, or other precious items exceeds the sum reported in this regard in the assessee's books of accounts kept for any source of income, when the assessee does not explain the extra amount or his explanation is judged unsatisfactory by the Assessing Officer, the excess amount may be considered the assessee's income for that financial year.

Section 69C deals with Unexplained expenditures, etc.

When an assessee incurs expenses during a financial year and does not provide an explanation for the source of all or part of those expenses, or if he does, the Assessing Officer does not find that explanation adequate, the amount covered by those expenses, as appropriate, may be deemed to be the assessee's income for that financial year.

Section 69D deals with Amount borrowed or repaid on hundi

When any amount borrowed on a hundi from, or any payment amount thereon is paid back to, any person other than through an account payee check drawn on such a bank, the amount so borrowed or paid back shall be considered to be the borrower's or repayer's income for the prior year in which the amount was borrowed, as the case may be. Get tax benefits under section 80g.