CA Aakansha Tuteja & Vedansh Gupta – [2025] 181 taxmann.com 814 (Article)
“Your money may not talk but if it is unexplained the department will make it sing”
1. Introduction
Traditionally, income means any money arising out of known source like business, salary, or investments. But this leaves a gap that what if a person is found with cash, assets or heavy spending that cannot be traced to any source? If the law ignored such cases then the concealed wealth would easily escape taxation. To prevent this, the legislature had introduced “deeming fictions”. The sections 68 to 69D of ITA, 1961 deal with such unexplained income, investments, assets, and expenditure. The logic is simple that – if you have it and cannot explain it, it is taxable. The burden of proof lies entirely on the assessee, and the law imposes higher tax rates on such deemed incomes to discourage evasion.
The Income Tax Act, 2025 makes a wild card entry, assented to by the President on 21st August, 2025, introduced significant changes to such deeming fictions i.e. Section 68 to 69D of the ITA 1961. These provisions have been the most litigative provisions and with the enactment of the new act these provisions have undergone substantial restructuring.
This article is structured as a journey, which will first take you to the relevant provisions under the old law, then providing a comparative overview of the restructuring done, and finally taking through the key changes brought in by the Income-tax Act, 2025.
So let’s start with what these provisions said as per the ITA, 1961:
2. Section 68 (Cash Credits)
Where any sum is found credited in the books and the explanation offered by assessee is not satisfactory in the opinion of the AO, such sum may be charged to income-tax as income of that previous year.
3. Section 69 (Unexplained Investments)
If the assessee has made investments not recorded in the books of account and doesn’t offer satisfactory explanation to AO, the value of investments may be deemed income for that financial year.
4. Section 69A (Unexplained Money)
Unrecorded money, bullion, jewellery, or valuables found in an assessee’s ownership can be taxed as deemed income if the source of acquisition isn’t satisfactorily explained.
5. Section 69B (Investments Not Fully Disclosed)
If actual amount spent on investments, bullion, jewellery, or valuables exceeds the amount recorded in books and the difference can’t be satisfactorily explained, the excess may be treated as deemed income.
6. Section 69C (Unexplained Expenditure)
If an assessee incurs any expenditure but can’t satisfactorily explain the source of such expenditure, such expenditure may be deemed to be income for that financial year.
7. Section 69D (Borrowing or Repayment on Hundi)
Any amount borrowed or repaid on a hundi otherwise than through an account payee cheque is deemed income of the borrower for that financial year.
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