1. Key Features of Section 69C
- Objective: Targets unexplained expenseswhere the assessee cannot prove the source of funds.
- Deemed Income: The entire unexplained expenditure is treated as taxable income.
- Burden of Proof: The assessee must justify the source of fundsfor the expense.
- Tax Rate:
- Normal Cases: Taxed at applicable slab rates.
- If linked to undisclosed income: 60% + 25% surcharge + 4% cess = 25%(under Section 115BBE).
2. When Does Section 69C Apply?
- Expenditure Exists(e.g., lavish weddings, foreign trips, luxury purchases).
- No Explanation for Source:
- Assessee cannot provelegitimate income source.
- AO rejectsthe explanation (e.g., claims of loans/gifts without proof).
- Books Not Maintained(or expense not recorded).
3. Common Scenarios & Tax Impact
| SITUATION | EXAMPLE | TAX TREATMENT |
| Luxury Car Purchase | Bought for ₹50L with no income proof | ₹50L added to income |
| Foreign Vacation | Spent ₹20L on Europe trip (no savings trail) | ₹20L taxed |
| High-End Electronics | iPhone bought for ₹1L in cash (no source) | ₹1L added to income |
4. How to Avoid Section 69C Additions?
✔ Maintain Proof of Income Source:
- Bank statementsshowing savings/salary.
- Loan agreements(if financed).
- Gift deeds(if funded by relatives).
✔ Record All Expenses in Books (if maintaining accounts).
✔ Avoid Large Cash Transactions (>₹10,000/day).
5. Penalty & Consequences
- Tax: 77.25% if linked to black money.
- Penalty: 10-200% for concealment.
- Prosecution Risk: If evasion is willful.
