Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D - Section 115BBE - Income Tax - Ready Reckoner - Income Tax

Cash Credit - Tax on income referred to in section 68 Read with Section 115BBE Where any sum is found credited in the books of assessee, it shall be charged to income tax as the income of that PY , if Assessee offers no explanation about the nature and source of such credit, or The explanation offered by him is unsatisfactory in the opinion of AO(Assessing Officer). (1) Sum credited in the nature of loan or borrowing Where assessee claims such sum is in the nature of loan/borrowing, then - The lender must offer an explanation about the nature and source of such amount ; and Such explanation should be satisfactory in the opinion of AO, otherwise, the explanation by assessee shall be deemed unsatisfactory and the amount shall be charged to tax. [ First Proviso of section 68 w.e.f. 01.04.2013] 2) Sum credited in the nature of share application money / share premium / share capital Where the assessee is a company, (not being a company in which the public are substantially interested) and it claims the sum to be in the nature of share application money/ share premium / share capital, then The person ( being a resident ) in whose name such credit is recorded , must offer an explanation about the nature and source of such amount ; and Such explanation should be satisfactory in the opinion of AO, otherwise, the explanation by assessee shall be deemed unsatisfactory and the amount shall be charged to tax. [ Second Proviso of section 68 w.e.f. 01.04.2023 ] 3) Exception - The above proviso 1 2 shall not apply where the person in whose name the sum is credited is a venture capital fund or a venture capital company, (as defined in clause ( 23FB ) of section 10 ). [ Third Proviso of section 68 w.e.f. 01.04.2013 ] Tax and Penalties on such income- Tax u/s 115BBE- Where the total income of an assessee includes income u/s 68 / 69 / 69A / 69B / 69C / 69D , the total income tax payable shall be aggregate of- Income tax @ 60 % on income under the specified sections, and Income tax payable by assessee had his total income being reduced by the amount of income under these specified sections. Earlier, the rate was @30% on such income of undisclosed nature. This rate was changed to @60% w.e.f. 1/4/2017.) No deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee in computing his income under the specified sections. Surcharge - In respect of any income chargeable to tax under section 115BBE(1)(i) of the Income-tax Act, the amount of income-tax computed under this sub-section shall be increased by a surcharge, calculated at the rate of 25% of such income-tax. Penalty u/s 271AAC - Where income of assessee includes income u/s 68 / 69 / 69A / 69B / 69C / 69D , the following officers - Assessing Officer ; or Joint Commissioner (Appeals) ; or Commissioner (Appeals) may (in addition to tax payable under section 115BBE ) impose penalty, @10% of tax payable under section 115BBE on such income. No penalty shall be levied if income under these specified sections is included in return of income u/s 139 and tax has been paid under section 115BBE on or before the end of the relevant PY. If Penalty has been imposed under section 271AAC(1) then Section 270A penalty does not imposed again on the assessee. CASE LAWS- Some of the judgements highlighting the importance and applicability of Section 68 are discussed below. Cases in favour of the Revenue- Cash credit in the nature of gifts - Commissioner of Income-Tax Versus Anil Kumar. - 2007 (3) TMI 223 - DELHI HIGH COURT Share application money received by the assessee company from bogus shareholders - COMMISSIONER OF INCOME TAX, DELHI-V Versus M/s. NR. PORTFOLIO PVT. LTD. - 2012 (12) TMI 762 - DELHI HIGH COURT Cases in favour of the Assessee- High Court rejected addition of income by AO u/s 68 based on non-traceability of creditors - The Commissioner of Income Tax Versus M/s. Orchid Industries Pvt. Ltd. - 2017 (7) TMI 613 - BOMBAY HIGH COURT Addition by AO of cash deposits in bank u/s 68 as unexplained income post-demonetization rejected - Anantpur Kalpana Versus ITO, Ward 1, Koppal. - 2021 (12) TMI 599 - ITAT BANGALORE