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Know about Unexplained Incomes

KNOW ABOUT UNEXPLAINED INCOMES

“Cash Credits and Unexplained Investments”

Unexplained Incomes are those part of incomes that are not been shown in income tax return and was later found by the assessing officer. Income tax act, 1961 shall charge such unexplained income to tax. In this part we will discuss about Section 68 “Cash Credit” and Section 69 “Unexplained Investment”.

(A) Cash Credit: –

Cash credit refers to any sum found credited in the books of accounts of a taxpayer, for which he offers no explanation about its nature and source or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, may be charged to income-tax as the income of the taxpayer of that year. But for applicability of Section 68 following conditions must be satisfied: –

  • Assesse has maintained “books”
  • There has to be credit of amounts in the books maintained by the taxpayer of a sum during the year.
  • The taxpayer offers no explanation about the nature and source of such credit found in the books or the explanation offered by the taxpayer in the opinion of the Assessing Officer is not satisfactory.

However, in case of the tax payer being a closely held company (or a private company), if the sum so credited consists of share application money, share capital, share premium, or any amount of such type, then whatever explanations given by company shall be deemed to be not satisfactory if following conditions are not satisfied: –

  • That the person, being a resident in whose name such credit is recorded in the books of such company, also offers an explanation about the nature and source of such sum so credited; and
  • That such explanation in the opinion of the Assessing Officer has been found to be satisfactory.

And that above provisions shall not apply in case such share application money, share capital, etc. is recorded in the name of a venture capital fund or a venture capital company as defined in section 10(23FB).

(B) Unexplained Investment: –

By virtue of its name it is been cleared that section 69 deals with those investment that are not been explained by the assesse. Where in a year the taxpayer has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and he offers 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, than the value of the investments may be deemed to be the income of the taxpayer of such year.

Know About Unexplained Incomes

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