GUJARAT NATIONAL LAW UNIVERSITY

SEMESTER VII/BATCH
2018-2023

LAW OF TAXATION – I

CONTINUOUS INTERNAL EVALUATION

ANALYSIS OF PROVISION

ANALYSIS OF SECTION 69 & 69C

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 ANALYSIS OF SECTION 69 AND 69C

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ACKNOWLEDGEMENT

We thank all those who directly and indirectly helped in the completion of this case analysis.
We are grateful to our supervisor, Mr Soham Bajpai and Mr. Satya Ranjan Mishra Assistant
Professor of Law, GNLU who entrusted us with this Case Analysis and gave me adequate
support to complete the same in a convenient time frame.

We are deeply indebted to our renowned university for providing us with all the required
sources to complete this paper with no hassles. Without the help of the remote access and
other online sources provided by the university, this submission would not attain the current
quality.

We are also thankful to all my fellow students whose competition and productive ideas, have
provided an impetus to the progress of our Case Analysis.

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 ANALYSIS OF SECTION 69 AND 69C

DECLARATION
We, Aiyushi Mehrotra [18B155] and Arzoo Prakash [18B184], hereby declare that this Case
Analysis is our original and autonomous work. The following analysis has not been submitted
elsewhere for evaluation and/or publication. All sources and aids used have been cited as
footnotes and referenced towards the end according to the 20th Ed. Blue Book Citation. Any
error/discrepancy is purely coincidental and unintentional.

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 ANALYSIS OF SECTION 69 AND 69C

TABLE OF CONTENTS

I. INTRODUCTION……………………………………………………………………5
II. SECTION 69: ANALYSING ITS APPLICABLITY AND JUDICIAL
INTERPRETATION……………………………………………………..………….6
III. SECTION 69C………………………………………………………………………11
A. Explanation………………………………………..............................................................11
B. Case Laws………………....................................................................................................14
C. Analysis……………...........................................................................................................16

III. CONCLUSION SECTION 69 V. 69C ........................................................................18

4
 ANALYSIS OF SECTION 69 AND 69C

I. INTRODUCTION
Unexplained Investment and Unexplained Expenditure are covered under sections 69 and
69C of the Income Tax Act of 1961, respectively.

The value of the investments may be deemed to be the income if the assessee made
investments in the financial year immediately preceding the assessment year that were not
recorded in the assessee's books of account, if any, for any source of income and the assessee
offers no explanation about the nature and source of the investments or the assessee's
explanation is not, in the opinion of the Assessing Officer, satisfactory.

Section 69C, on the other hand, provides that where an assessee incurs any expenditure in a
financial year and provides no explanation about the source of such expenditure or part
thereof, or the explanation, if any, provided by him is not, in the opinion of the Assessing
Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may
be, may be deemed to be the assessee's income for that financial year: Provided, however,
that the amount covered by such expenditure or part.

In this paper, the authors seeks to thoroughly analyse these provisions of the Income Tax Axt,
1961, and draw a comparison between the two in order to better understand the law.

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 ANALYSIS OF SECTION 69 AND 69C

II. SECTION 69: ANALYSING ITS APPLICABLITY AND JUDICIAL

INTERPRETATION

Section 69 of the Income Tax Act, 19611 talks about Unexplained investments and reads as:

“Where in the financial year immediately preceding the assessment year the assessee has
made investments which are not recorded in the books of account, if any, maintained by him
for any source of income, and the assessee offers no explanation about the nature and source
of the investments or the explanation offered by him is not, in the opinion of the Assessing
Officer, satisfactory, the value of the investments may be deemed to be the income of the
assessee of such financial year.”

For attracting this section, certain factors need to be kept in mind:

i. The value of an unexplained investment not recorded in the assessee’s books of

account may be assessed as income.2
ii. For the same, financial year in which the investment is made may be taken as the
previous year3; and
iii. The assessment must be regardless of whether income sufficiently large to match the
investment could possibly have been earned during the period between the
commencement of the relevant financial year and the date of the investment. 4

Interestingly, one of the main features that distinguishes the application of this Section over
that of Section 685 is that under Section 69, there should not be an entry into the books of
account, whereas, under Section 68, there must be a credit entry in the books of account. 6 It
has also been held in the case of CIT v Jauharimel Goel (2006)7 that in cases where the
amount deposited in the name of the daughter is treated as amount belonging to the assessee
and deposits made by the assessee, then the same would attract the application of Section 69
over Section 68.

1
Income Tax Act, 1961, § 69.
2
CIT v. Noorjahan, 237 ITR 570 (SC).
3
Ram Swarup v. CIT, 192 ITR 537.
4
ARVIND P DATTAR, LAW & PRACTICE OF INCOME TAX (11th ed. 2020).
5
Income Tax Act, 1961, § 68.
6
CIT v. Shiv Shakti, 229 ITR 505.
7
CIT v. Jauharimel Goel, 296 ITR 263.

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 ANALYSIS OF SECTION 69 AND 69C

On similar lines, this Section also differs from Section 69B, wherein the assessee must have
maintained books of accounts. However, under Section 69, there is no such requirement, as
was held in the cases of Prakash v CIT8 and DM Engineering v CIT9.

In the case of Aurobindo Sanitary Stores v CIT 10, it was held that for the application of
Section 69, the assessing officer must first be satisfied that the investments are found to have
not been recorded in the books and that there is either no explanation or an unsatisfactory
explanation for the same. The same principle was reiterated by the court in the case of
Ushakant Patel v CIT11. However, this distinction of the investment actually NOT being on
record in the books of account without any satisfactory explanation for the same seems to
have been misinterpreted by some courts, thus applying this Section even in the cases where
an investment is recorded in the book of accounts but is not explained properly. Such was the
situation in the cases of CIT v Parmeshwar Bhora12 and Rajendra Prasad Subhash Chand v
Union of India13, wherein the assessing officer invoked this section after scrutinizing the
method of accounting where the investment was recorded in the book of accounts.

It is noteworthy at this point, that for the application of Section 69, book of accounts need
not be necessarily and expressly rejected by the assessing officer 14 and neither can the
assessing officer mechanically reject the assessee’s explanation as to the investment 15. It was
held in the case of CIT v Rajesh Kumar16, that a reasonable opportunity must be given to the
assessee to explain the transaction before the amount of unexplained investment is included
in the total income of the assessee. Further, it was held by the court in the case of Upasana v
CIT17 read with Section 68, that the explanation for the investment must not be called for
later than what should have been the case, as the period of time after which an assessee is
called upon to explain the transaction is a relevant factor while considering the adequacy of
the evidence. Moreover, the department cannot invoke this section on a mere delay in
making an entry in the books of account, as has been held in the case of Farkamal v CIT18.
8
Prakash v. CIT, 148 ITR 474.
9
DM Engineering v. CIT, 289 ITR 517.
10
Aurobindo Sanitary Stores v. CIT, 276 ITR 549.
11
Ushakant Patel v. CIT, 282 ITR 553.
12
CIT v. Parmeshwar Bhora, 267 ITR 698.
13
Rajendra Prasad Subhash Chand v. Union of India, (2001) 237 CTR 382 (Raj).
14
Unit Const v. JCIT, 260 ITR 189.
15
Swapna Rani Sarkar v. CIT, 320 ITR 70.
16
CIT v. Rajesh Kumar, 308 ITR 27
17
Upasana v. CIT, 229 ITR 220
18
Farkamal v. CIT, 296 ITR 585.

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 ANALYSIS OF SECTION 69 AND 69C

However, the department may rely on an admission made by an assessee in a note right
before surgery, which although is not a dying declaration, but can still be treated as an
admission under Section 1719 & Section 1820 of the Evidence Act, 1872.21

Further, Section 139(4A) of the Income Tax Act, 1961 22, which empowers an assessing
officer to presume that anything found in the searched premises belongs to the occupant of
such premise, is relied on by the department in some cases which is subsequently upheld by
the court23. However, some courts have taken a contrary view with respect to the application
of Section 139(4A) for drawing a presumption during regular assessment proceeding under
Section 69 24, which is criticised to be an incorrect view in this regard, relying on the plain
reading of Section 139(4A).
Similar to the view as to the application of Section 139(4A), is the conflicting view of
Section 69 being applicable in cases of discrepancies in the value of stocks. This Section was
held applicable in the case where the difference between the value of stock declared to the
bank and the value of stock recorded in the assessee’s book of accounts. 25 However, a
contrary view was taken in this regard in the case of Milan Trading v CIT26.

Other areas of application of this Section include cases wherein there are secret business
dealings of the assessee involving unexplained investments27, where the sales of a commodity
are in excess of the quantity recorded in the assessee’s book of accounts as purchased by
him28, where there are purchases of immovable property where the amount paid is greater
than the declared sale consideration 29 and also where additions in a firm’s partners’ accounts
were deleted on appeal30. However, it has been held in the case of CIT v Savitri Devi Shukla
(No. 2)31 and thereafter reiterated in the case of CIT v Rajeev Shukla32 that Section 69 cannot

19
The Indian Evidence Act, 1872, § 17, No. 1, Acts of Parliament, 1961 (India).
20
The Indian Evidence Act, 1872, § 18, No. 1, Acts of Parliament, 1961 (India).
21
ARVIND P DATTAR, LAW & PRACTICE OF INCOME TAX (11th ed. 2020).
22
The Income Tax Act, 1961, § 139(4A), No. 43, Acts of Parliament, 1961 (India).
23
Ramilaben Ratilal Shah v. CIT, 282 ITR 176.
24
CIT v. Ved Prakash Choudhary, 305 ITR 245.
25
BT Steels v. CIT, 328 ITR 471.
26
Milan Trading v. CIT, 224 ITR 325.
27
Himmatram v. CIT, 161 ITR 7.
28
CIT v. Sanjay Chhabra, 336 ITR 71.
29
CIT v. TO Abraham, 347 ITR 378.
30
Badri Prasad v. CIT, 219 ITR 441.
31
CIT v. Savitri Devi Shukla (No. 2), 296 ITR 737.
32
CIT v. Rajeev Shukla, 296 ITR 743.

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 ANALYSIS OF SECTION 69 AND 69C

be invoked by the assessing officer to tax overseas remittances covered under the Foreign
Exchange Bonds (Immunities and Exemptions) Act, 199133.

The burden of proving the source of the unexplained investment in the book of accounts is
initially on the assessee which must be discharged by giving a credible explanation. 34 In cases
where the assessee is able to produce a credible explanation as to the investment and the same
is found to be satisfactory, no additions can be made to his income, as was held in the case of
CIT v Lalit Kumar Goel35. Similarly, in CIT v K Manickam36, it was held that where
accounts are properly maintained and supported with credible evidence, then even if the
valuation by the department’s valuer is higher, or where higher value is adopted for stamp
duty37, no addition can be made. However, by the insertion of Section 142A by the Finance
(No. 2) Act, 200438 with a retrospective effect, the Supreme Court’s decision in the case of
Amiya Bala Paul v CIT39 has been effectively defeated, as the same provides for assessing
officer’s jurisdiction to make a reference where valuation is relevant. Further, the fact that the
assessee’s explanation has been rejected is not a ground for penalty proceedings to be
initiated automatically.40

In a case challenging the constitutional validity of Section 69, it was observed by the
Supreme Court that entry 82 in the Union List authorises not just the imposition of tax, but
also law that prevents tax evasion. (Ashoka v CIT 209 ITR 679)41

Section 69 is a means of control in the revenue department's disposal for detecting tax
evasion in the form of unauthorised investments made by the assessee that are not
documented in his books of accounts, if any. Section 69 also empowers the AO to regard the
value of investments as the assessee's income if the assessee fails to provide an explanation or
his explanation is unsatisfactory.

33
The Foreign Exchange Bonds (Immunities and Exemptions) Act, 1991, No. 41, Acts of Parliament, 1991
(India).
34
Technical Glass Industries v. CIT, 281 ITR 61.
35
CIT v. Lalit Kumar Goel, 303 ITR 466.
36
CIT v. K Manickam, 258 ITR 175.
37
Dinesh v. ITO, 193 ITR 770.
38
The Finance Act, 2004, No. 2, Acts of Parliament, 2004 (India).
39
Amiya Bala Paul v. CIT, AIR 2003 SC 2702.
40
Kalyanam S.V. v ITO, 327 ITR 477.
41
Ashoka v. CIT, 209 ITR 679.

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 ANALYSIS OF SECTION 69 AND 69C

Section 69 has no guidance on the scope and duration of the discretionary power granted to
AO in the case of recognising an investment as income that is unexplained or inadequately
explained by the investor-assessee. As a result, the Assessing Officer is required to consider
the plausible explanation provided to him, as well as the evidences presented before him,
concerning the type and source of investment, and he cannot make the addition based solely
on assumptions, speculations, or without any corroborating evidence. (Ashok Kumar Rastogi
v CIT, 1991).42

II. SECTION 69C

42
Ashok Kumar Rastogi v CIT, 100 CTR 204.

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 ANALYSIS OF SECTION 69 AND 69C

Section 69C.43

Where in any financial year an assessee has incurred any expenditure and he offers no
explanation about the source of such expenditure or part thereof, or the explanation, if any,
offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount
covered by such expenditure or part thereof, as the case may be, may be deemed to be the
income of the assessee for such financial year :

Provided  that, notwithstanding anything contained in any other provision of this Act, such
unexplained expenditure which is deemed to be the income of the assessee shall not be
allowed as a deduction under any head of income.

A. EXPLANATION

If the assessee ch00ses presumptive taxati0n, it cann0t deduct any expenses, including
depreciati0n. The Assessing 0fficer (AO) is n0t auth0rised t0 put back the m0ney as
unexplained expenditure because n0 deducti0n is all0wed. It sh0uld be n0ted that secti0n 69C
0f the Act expressly states that if an assessee fails t 0 explain the s0urce 0f a particular
expenditure incurred during the year, the expenditure may be regarded t 0 represent the
assessee's inc0me.

T0 grasp this n0ti0n, c0nsider the f0ll0wing clauses 0f secti0n 44AD (1):

“44AD (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the
case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of
the total turnover or gross receipts of the assessee in the previous year on account of such
business or, as the case may be, a sum higher than the aforesaid sum claimed to have been
earned by the eligible assessee, shall be deemed to be the profits and gains of such business
chargeable to tax under the head “Profits and gains of business or profession”.44

(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes
of sub-section (1), be deemed to have been already given full effect to and no further
deduction under those sections shall be allowed :”45
43
Income Tax Act, 1961, § 69C.
44
Income Tax Act, 1961, § 44AD cl. 1.

45
Income Tax Act, 1961, § 44AD cl. 2.

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 ANALYSIS OF SECTION 69 AND 69C

The terms 0f the preceding secti0n are extremely clear in that, in the event 0f a qualifying
business based 0n gr0ss receipts/t0tal turn0ver, the inc0me under the heading "pr0fits and
gains 0f business" shall be regarded t0 be @ 8% 0r any greater am0unt. The first significant
phrase here is 'c0nsidered t0 be,' which establishes that while there is n0 revenue t0 the
am0unt 0f such percentage, inc0me is deemed t0 that degree. It is undeniable that the term
"deemed" den0tes the assumpti0n 0f the presence 0f s0mething that d0es n0t exist. As a
result, it is evident that, while inc 0me 0f 8% 0r m0re may be c0nsidered inc0me f0r the
purp0ses 0f levying inc0me tax, it is n0t the assessee's real inc0me. This is als0 the intenti0n
0f all presumptive taxati0n measures.

C0ming t0 the argument 0f the revenue that the additi0n has been made under secti 0n 69C,
0n which there is n0 bar under secti0n 44AD, 0ne is quite in agreement with the same. The
0nly fetter pr0vided under secti0n 44AD are the applicability 0f pr0visi0ns 0f secti0ns 30 t0
38 0f the Act.

The crucial w0rds in secti0n 69C f0r the purp0ses 0f present appeal are ‘any financial year an
assessee has incurred any expenditure’. But can 0ne say 0n the facts and circumstances 0f the
present case that the assessee has ‘incurred’ any expenses. Fr 0m an analysis 0f secti0n 44AD
it has already been held that the assessee had n 0t incurred the expenses t0 the extent 0f 92 per
cent 0f the gr0ss receipts.

Since the scheme of presumptive taxation has been formed in order to avoid the long drawn
process of assessment in cases of small traders or in cases of those businesses where the
incomes are almost of static quantum of all the businesses, the Assessing Officer could have
made the addition under section 69C, once he had carved out the case out of the glitches of
the provisions of section 44AD. No such exercise has been done by the Assessing Officer in
this case.

This issue has been explained very well in the following cases.

NandLal Popli Vs. DCIT46

The assessee was a civil contractor. He had declared its profits under section 44AD at the rate
of 8 per cent against the gross receipts.During assessment proceedings, the assessee explained
that he had made payments from the bank account on various dates which were not reflected
in the cash flow statement. Since no documentary evidence was filed to prove that those
46
NandLalPopli Vs. DCIT (2016) 160 ITD 413 (ChdTrib).

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 ANALYSIS OF SECTION 69 AND 69C

payments were towards contract work, the Assessing Officer made addition of said amount to
assessee’s income under section 69C.The Commissioner (Appeals) confirmed said addition.
On second appeal it was held, the provisions of section 44AD are quite unambiguous to the
effect that in case of an eligible business based on the gross receipts/total turnover, the
income under the head ‘profits & gains of business’ shall be deemed to be at the rate of 8 per
cent or any higher amount.

When it comes to the revenue's contention that the addition was made under section 69C, on
which there is no bar under section 44AD, one cannot disagree. The sole restriction imposed
by section 44AD is the application of the Act's sections 30 to 38.

For the purposes of this appeal, the key terms in section 69C are 'any financial year in which
an assessee has incurred any expenditure.' But can one argue that the assessee has 'incurred'
any expenditures based on the facts and circumstances of this case? Based on an examination
of section 44AD, it has already been determined that the assessee did not incur costs totaling
92 percent of gross revenues. As a result, the requirements of section 69C cannot be applied
in this circumstance. Demanding that the assessee prove expenditures totaling 92 percent of
gross revenues to the satisfaction of the Assessing Officer would likewise contradict the
objective of presumptive taxation under section 44AD or another similar provision.

B. CASE LAWS

The Jaipur Bench of ITAT ruling in Nisraj Real Estate v. Assistant Commissioner of
Income Tax47 Held that unverified purchases made by assessee could not be construed as

47
Nisraj Real Estate v. Assistant Commissioner of Income Tax 31 DTR 456- Nisraj Real Estate.

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 ANALYSIS OF SECTION 69 AND 69C

unexplained cost u/s 69C and that no addition could be made thereto u/s 69C proviso – as
once sales were made by assessee, purchases were clearly made.

The answer to the question of addition is contingent on an acceptable explanation of the

source - Section 69C deals with unexplained spending sources. If it appears from records that
there was spending, it will be presumed to represent the assessee's income for that financial
year unless the source is clearly explained. The question depends on the satisfactory
explanation of the source. – CIT v. Bhagwati Developers Pvt. Ltd.48

In the case of CIT v. C.L. Khatri it was held, estimation of household expenditure in a given
year cannot be made on the basis of income from previous years – If the search reveals that
any expenditure is found to be false, appropriate additions can be made, but only in relation
to the income related to the false claim of expenditure revealed by material unearthed during
the search. There is no reason to believe that the expenditures made during a certain
month/year will likewise be incurred over the next 10 years. The amount of money spent on a
monthly basis by a household might vary depending on a number of factors, one of which is
income. In the absence of any other evidence, estimating household expenditure in a given
year using the income of a future year (that is, 5 to 10 years hence) would be arbitrary and
unlawful49

Invocation of Powers under Section 142A 50, in the case of CIT v. Aar Pee Apartments Pvt. 51
the court held, The Assessing Officer could not use his authority under section 142A to
satisfy himself regarding supposed inexplicable expenditure under section 69C.

Addition u/s 69C on basis of statement of third party without providing opportunity of cross-
examination to assessee was invalid in Bhatia Diamonds Pvt. Ltd. Vs ITO (ITAT Delhi).
52
Addition of bogus share capital u/s 68 and bogus purchases u/s 69 cannot be made in
absence of incriminating material with Assessing Officer as in stated Agson Global Pvt. Ltd
Vs ACIT (ITAT Delhi).53Addition only for difference of GP on Normal & Bogus

48
CIT v. Bhagwati Developers Pvt. Ltd. [2003] 261 ITR 658 (Cal.).
49
CIT v. C.L. Khatri [2005] 147 Taxman 652 (MP).
50
Income Tax Act, 1961, § 142A.
51
CIT v. Aar Pee Apartments Pvt. Ltd. [2009] 319 ITR 276.
52
Bhatia Diamonds Pvt. Ltd. v. ITO 2821 Del 2018.
53
Agson Global Pvt. Ltd v. ACIT ( 2019) 76 ITR 504 Del.

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 ANALYSIS OF SECTION 69 AND 69C

Purchase Hemant M Mehta HUF Vs A.C.I.T,54 For some bogus purchases Entire purchases
can’t be added to income as stated in Sonal Parekh Vs ITO55.

C. ANALYSIS

If an assessee incurs any expenditure during a financial year and gives n 0 explanati0n ab0ut
the s0urce 0f such expenditure 0r part there0f, 0r if the explanati0n he gives is n0t
satisfact0ry in the Assessing 0fficer's 0pini0n, the am0unt c0vered by such expenditure 0r

54
Hemant M Mehta HUF v. A.C.I.T ITA 6483 Mum 2018.
55
Sonal Parekh v. ITO ITA 93 AHD 2017.

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 ANALYSIS OF SECTION 69 AND 69C

part there0f, as the case may be, may be deemed t 0 be the assessee's inc0me f0r that financial
year. The pr0vis0 t0 secti0n 69C states that such unexplained expenditure that is judged t 0
c0nstitute the assessee's inc0me will n0t be permitted as a deducti0n under any head 0f
inc0me, despite anything else in the Act. When spending is regarded t 0 c0nstitute the
assessee's inc0me, n0 all0wance f0r it may be claimed as business expense, acc0rding t0 the
pr0vis0 t0 Secti0n 69C. It can be used in the f0ll0wing situati0ns, acc0rding t0 vari0us c0urt
statements and interpretati0ns 0f secti0n 69C. The Assessing 0fficer bears the burden 0f
evidence in pr0ving the f0ll0wing c0nditi0ns:

1. He must sh0w, by pr00f 0n file, that specific expenses were incurred by the assessee
and n0t by anyb0dy else, as well as the am 0unt spent. He cann0t estimate such c0sts
with0ut any pr00f 0n file since it w0uld be based 0nly 0n guessw0rk, speculati0n, and
supp0siti0n, which is n0t permitted.
2. The Assessing 0fficer must determine the financial year, including dates, during
which the assessee incurs such expenses.
3. If the assessee has pr0vided a credible explanati0n f0r the s0urce 0f such expenditure,
the Assessing 0fficer cann0t simply dismiss it with0ut any supp0rting pr00f. The
expressi0n "in the view 0f the Assessing 0fficer" d0es n0t signify the Assessing
Officer's subjective 0pini0n; he must establish that a specific am0unt 0f expenditure
was actually incurred by the relevant assessee, and he cann 0t state that his explanati0n
is adequate.
4. As a result, in 0rder t0 apply secti0n 69C, the Assessing 0fficer must pr0ve the
circumstances precedent as t0 the presence 0f expenditure 0r underestimate 0f that
expenditure, using evidence and/0r material 0n rec0rd t0 substantiate such increase.

The recent judgement 0f the B0mbay Tribunal in the matter 0f ACIT vs. Vikram Vijay
Mehta56 has reaffirmed the 0pini0n that the additi0n in an acti0n u/s 132 cann0t simply be
f0rmed by entries disc0vered in the p0cket diary. The AO must request an explanation for
these entries, and if a persuasive answer is provided, the additions will not be upheld and will
be erased during the appeals process. The assessee's freight expenses are acceptable, hence
the ad hoc disallowance cannot be justified. When a persuasive explanation is offered for key
entries in the pocket diary, the addition of all entries is not warranted, and the addition will be
limited to the entries that are unexplained.
56
ACIT vs. Vikram Vijay Mehta ITA 5049 Mum 2018.

16
 ANALYSIS OF SECTION 69 AND 69C

Presence of expenditure
w.r.t. Section 69C

Cannot estimate such costs

without any proof

Burden of proof
(Assessing Officer)
Determine expenses Cannot dismiss without
reason

III. CONCLUSION : SECTION 69 V. 69C

The terms used in cases falling under sections 69, 69A, 69B, and 69C reveal that before any
of these provisions may be invoked, the presence of an investment, expenditure, or other
condition must be decisively proven by material on record/evidence. The amount calculated
under the preceding sections is taxable in the Financial Year in which it is credited (Section
68), invested (Section 69, 69A, 69B), or incurred (Section 69, 69A, 69B) (Section 69C).

17
 ANALYSIS OF SECTION 69 AND 69C

Particulars Section 69 Section 69C

Bare reading of the Where in the financial Where in any financial
Section year immediately year an assessee has
preceding the assessment incurred anyexpenditure
year the assessee has andhe offers no
made investments which explanation about the
are not recorded in the source of such expenditure
books of account, if any, or part thereof, orthe
maintained by him for explanation, if any,
any source of income, and offered by him is not, in
the assessee offers no the opinion of the
explanation about the Assessing Officer,
nature and source of the satisfactory, the amount
investments or the covered by such
explanation offered by expenditure or part
him is not, in the opinion thereof, as the case may
of the Assessing Officer, be, may be deemed to be
satisfactory, the value of the income of the assessee
the investments maybe for such financial
deemed to be the income year.Provided that,
of the assessee of such notwithstanding anything
financial year. contained in any other
provision of this Act, such
unexplained expenditure
which is deemed to be the
income of the assessee
shall not be allowed as a
deduction under any head
of income.
Book of Accounts Not Compulsory Not Compulsory
Assessing Officer Assessing officer can ask Assessing Officer can ask
for explanation only if for the source of “incurred
investment is not expenditure”
recorded in the Book of
Accounts

Common Points
 The word used in the Sections is ‘maybe’, hence it is discretionary in nature.
 These provision ought not to lead too double taxation
 Final failure is for not specifying source of income
 Demanding is for the years of finding.

18