Unexplained Cash Credits, Investments, Money, etc. [Section 68 to 69D]

Under the Income Tax Act, 1961, certain transactions or scenarios are treated as “deemed profits” and taxed under “Profits and Gains of Business or Profession” (PGBP), even if they do not strictly qualify as business income. These provisions prevent tax evasion by bringing unexplained or artificially reduced income into the tax net.

A. Unexplained Cash Credits (Section 68)

• Applicability: Any unexplained sum credited in books (e.g., unsecured loans, gifts).
• Tax Treatment:
  • Treated as business incomeif books are maintained for business.
  • Tax rate: 25%(under Section 115BBE) if source remains unexplained.

B. Unexplained Investments (Section 69)

• Applicability: Investments (property, gold, shares) not recorded in books.
• Tax Treatment:
  • Market value deemed as business income.
  • Tax rate: 25%if source not proved.

C. Unexplained Money (Section 69A)

• Applicability: Cash/jewellery/assets found but not explained.
• Tax Treatment:
  • Full value added to business income.
  • Tax rate: 25%.

D. Undisclosed Investment Value (Section 69B)

• Applicability: Difference between actual cost and recorded value (e.g., property bought for ₹1Cr but books show ₹70L).
• Tax Treatment:
  • ₹30L(difference) taxed as business income.

E. Unexplained Expenditure (Section 69C)

• Applicability: Lavish expenses (e.g., foreign trips, luxury cars) with no income source.
• Tax Treatment:
  • Entire expense deemed as income.
  • Tax rate: 25%if linked to undisclosed income.

F. Hundi Transactions (Section 69D)

• Applicability: Cash borrowings/repayments via hundi (without banking channels).
• Tax Treatment:
  • Entire amount deemed incomeof borrower/repayer.

G. Speculative/Fictitious Transactions (Section 43(5))

• Applicability: Artificial losses from speculative trades.
• Tax Treatment:
  • Losses disallowed; profits taxed as business income.

H. Tax Rates & Penalties

I. How to Avoid Deemed Profit Additions?

✔ Maintain Proper Books: Record all transactions with supporting documents.

✔ Explain Sources: For cash credits, investments, or expenses, provide:

• Bank statements
• Loan agreements
• Gift deeds(if applicable)

✔ Use Banking Channels: Avoid cash transactions > ₹10,000.