# Undisclosed / Unexplained Sources of Income (Sections 68 to 69D)

These provisions allow the Assessing Officer (A.O.) to treat unexplained credits, investments, money, and expenditure as deemed income. The common theme: if the assessee cannot satisfactorily explain the nature and source, the amount is taxed.

## The six provisions

Section	What is unexplained	Key point
68	Cash credits in books	Sum credited with no satisfactory explanation → income of that PY
69	Unexplained investments not recorded in books	Value taxed as deemed income
69A	Unexplained money, bullion, jewellery, valuables the assessee owns but are not recorded	Value deemed income
69B	Investments/valuables where amount spent exceeds amount recorded	Only the excess is taxed
69C	Unexplained expenditure	Taxed as income and not allowed as a deduction under any head
69D	Hundi borrowing/repayment not through account-payee cheque	Deemed income in year of borrowing/repayment

## Section 68 — special explanation rules

Loan / borrowing credited: the explanation must also come from the person in whose name the credit stands, and must satisfy the A.O.
Share capital / premium of a closely held company: explanation for share application money / capital / premium must also be given by the person in whose name it stands.
Exception: Section 68 does not apply where the sum is credited in the name of a Venture Capital Fund / Company registered with SEBI.

## Section 69D — Hundi (avoid double taxation)

Amount borrowed on a hundi or repaid otherwise than by account-payee cheque → deemed income.
If already taxed on borrowing, it is not taxed again on repayment.
The amount repaid includes the interest component.

## Memory hook

68 = Credits, 69 = Investments, 69A = Assets owned, 69B = the 'Bit extra' (excess), 69C = Costs/expenditure, 69D = Debt on hundi.

> All these unexplained amounts are taxed at the special punitive rate under Section 115BBE (60% + 25% surcharge + cess → effective 78%), with no deductions, no basic exemption, and no set-off of losses.

Worked example

### Example 1

Example (Section 69B – excess investment): An assessee owns 300 grams of gold actually valued at ₹25,000 but records the cost in his books as only ₹15,000. With no satisfactory explanation, the A.O. can add the excess of ₹10,000 (₹25,000 − ₹15,000) as deemed income.

### Example 2

Example (Section 68 – share premium): A closely held company receives ₹50 lakh as share premium. The shareholder in whose name the credit stands cannot satisfactorily explain his source of funds. The A.O. may treat the ₹50 lakh as the company's income under Section 68 — unless the contributor is a SEBI-registered Venture Capital Fund/Company.

### Example 3

Example (Section 69D – hundi): Mr. X borrows ₹2,00,000 on a hundi in cash (not by account-payee cheque). The ₹2,00,000 is deemed his income in the year of borrowing. When he later repays ₹2,20,000 (including ₹20,000 interest) again in cash, it is not taxed again because it was already taxed at the borrowing stage.

⚠️ Common exam mistakes

Forgetting that under Section 68 for loans and for share capital/premium of closely held companies, the explanation must also come from the person in whose name the credit stands — not just the assessee.
Taxing the full investment under Section 69B instead of only the excess over the recorded amount.
Allowing unexplained expenditure (Section 69C) as a deduction — it is expressly disallowed under any head.
Taxing a hundi amount twice — once on borrowing and again on repayment. If taxed on borrowing it is not taxed again on repayment (Section 69D).
Overlooking that all of 68–69D are taxed at the harsh Section 115BBE rate (effective 78%) with no set-off of losses and no basic exemption.

Reference: Sections 68, 69, 69A, 69B, 69C, 69D — Income-tax Act, 1961

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Undisclosed sources of income (Sections 68, 69, 69A, 69B, 69C, 69D)

Worked example

⚠️ Common exam mistakes