# Income from Undisclosed Sources [Sections 68 – 69D]

These "deeming" provisions empower the Assessing Officer to bring unexplained amounts to tax when the assessee fails to give a satisfactory explanation. The common thread: unexplained + unsatisfactory explanation → deemed income.

## Section 68 — Cash Credits

If any sum is credited in the books and the assessee offers no satisfactory explanation about its nature and source, it is deemed income of that previous year.

Loan/borrowing credited: explanation must also be given by the person in whose name the credit stands and be satisfactory to the AO.
Share capital/premium of a closely-held company: the explanation for share application money / share capital / share premium must also come from the person in whose name it is credited and satisfy the AO.
Carve-out: does not apply where the sum is credited in the name of a Venture Capital Fund / Venture Capital Company registered with SEBI.

## Section 69 — Unexplained Investments

Investments not recorded in the books, with no satisfactory explanation → value taxed as deemed income of the financial year.

## Section 69A — Unexplained Money, Bullion, etc.

Assessee found to own money, bullion, jewellery or other valuable articles not recorded in the books, with no satisfactory explanation of acquisition → value deemed income.

## Section 69B — Investments/Assets Not Fully Disclosed

Where the amount actually spent exceeds the amount recorded in the books for an investment/bullion/jewellery, and there is no satisfactory explanation → the excess is deemed income.

## Section 69C — Unexplained Expenditure

Expenditure incurred with no satisfactory explanation of its source → treated as deemed income.

Additionally: such expenditure is NOT allowed as a deduction under any head.

## Section 69D — Amount Borrowed/Repaid on Hundi

Amount borrowed on a hundi, or repaid (including interest) otherwise than by an account-payee cheque, is deemed income of the year of borrowing/repayment.

Anti-double-taxation: if the amount was already taxed on borrowing, it is not taxed again on repayment.

## Quick reference

Section	Covers	Special feature
68	Cash credits in books	VCF/VCC carve-out; source-of-source for loans & share capital
69	Unrecorded investments	Deemed income
69A	Unrecorded money/bullion/jewellery owned	Deemed income
69B	Spend exceeds recorded amount	Only the EXCESS is taxed
69C	Unexplained expenditure	Also disallowed as deduction
69D	Hundi borrowing/repayment not by A/c-payee cheque	No double tax on borrow + repay

Worked example

### Example 1

Q. An assessee owns 300 grams of gold whose value is ₹25,000, but the books record its cost at only ₹15,000. No satisfactory explanation is given. What can the AO do?

A. Under Section 69B, the excess of ₹10,000 (₹25,000 − ₹15,000) can be added as deemed income, since the amount spent exceeds the amount recorded and is unexplained.

### Example 2

Q. A trader incurs ₹2,00,000 of expenditure and cannot satisfactorily explain its source. What are the consequences?

A. Under Section 69C, the ₹2,00,000 is treated as deemed income, and additionally it is not allowed as a deduction under any head — a double hit.

### Example 3

Q. A person borrows ₹5,00,000 on a hundi in cash (not by account-payee cheque). It was deemed his income on borrowing under Section 69D. Later he repays it in cash. Is the repayment taxed again?

A. No. Section 69D specifically provides that if the amount was already taxed on borrowing, it will not be assessed again on repayment (the repaid amount includes the interest component).

⚠️ Common exam mistakes

Under Section 69B, taxing the full value instead of only the EXCESS of actual spend over the recorded amount.
Forgetting that under Section 69C the unexplained expenditure is BOTH deemed income AND disallowed as a deduction.
Allowing the Section 68 share-capital/premium scrutiny to apply to all companies — the source-of-source rule for share capital/premium applies to CLOSELY-HELD companies, and there is a carve-out for SEBI-registered VCF/VCC.
Taxing a hundi amount twice under Section 69D — if taxed on borrowing it is not taxed again on repayment.
Forgetting that for cash credits by way of loan/borrowing, the person in whose name the credit stands must also satisfactorily explain the source.

Bare-Act text Sections 68, 69, 69A, 69B, 69C and 69D · Income-tax Act, 1961 · click to expand

Section 68: where any sum is found credited in the books of an assessee and the assessee offers no explanation about its nature and source, or the explanation is not satisfactory, the sum may be charged to income-tax as income of that previous year; in the case of a loan/borrowing or share application money/share capital/share premium of a closely held company, the explanation of the person in whose name the credit stands must also be satisfactory (subject to a carve-out for SEBI-registered venture capital funds/companies). Section 69: unexplained investments. Section 69A: unexplained money, bullion, jewellery or other valuable article. Section 69B: amount of investments etc. not fully disclosed in books (excess deemed income). Section 69C: unexplained expenditure, which shall not be allowed as a deduction under any head. Section 69D: amount borrowed or repaid on hundi otherwise than through an account payee cheque is deemed income, with no double taxation on borrowing and repayment.

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Undisclosed Sources of Income [Sections 68 to 69D]

Worked example

⚠️ Common exam mistakes