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]

Section 115BBE has been introduced with effect from 01.04.2013 (i.e. from Assessment year 2013-14) with an intention to tackle with people who shows their black income as white by paying less tax. Therefore any income for which assessee would not be able to explain the source, now will be taxed at 60% (30% upto Assessment year 2016-17).

The “White Paper on Black Money” presented in the Parliament on 16.05.2012 was, inter alia, concerned with the laundering of unaccounted money by taking advantage of basic exemption limit. The above stated position of taxing income of the nature referred to in the specified sections at the normal  rate/applicable rate of income-tax applicable on total income of the assessee has been changed with effect from 01.04.2013 by the Finance Act, 2012 as a result of introduction of section 115BBE dealing with a special rate of tax applicable to income of the nature referred to in sections 68, 69, 69A, 69B, 69C and 69D.

Speech of FM and Explanatory Memorandum for introduction of section 115BBE

The Finance Minister, in his speech, while introducing the Finance Bill, 2012 on 16.03.2012, said: “I propose a series of measures to deter the generation and use of unaccounted money. To this end, I propose ......................Taxation of unexplained money, credits, investments, expenditures, etc., at the highest rate of 30 per cent irrespective of the slab of income”.

 

Background

Certain unexplained cash credit, investment, expenditure, etc., are deemed as income under Section 68, Section 69, Section 69A, Section 69B, Section 69C and Section 69D of the Act and were earlier subjected to tax as per the tax rate applicable to the taxpayer. As a consequence, in case of individuals, HUF, etc., no tax was levied up to the basic exemption limit and even if such income was higher than basic exemption limit, it could be levied at the lower slab rate.

Object, purpose and amendments of section 115BBE

In order to curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit, it is proposed to tax the unexplained credits, money, investment, expenditure, etc., which has been deemed as income under section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of 30% (60% - with effect from assessment year 2017-18) plus surcharge and Health & Education cess as applicable. It is also proposed to provide that no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing deemed income under the said sections. This amendment will take effect from 01.04.2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.

Thus, section 115BBE is designed to impose greater tax burden on the assessees who fail to explain the “nature and source” of their income, investments, expenses, etc. However, substantive law dealing with provisions of sections 68, 69, 69A, 69B, 69C and 69D is unchanged.

Text of section 115BBE

 ^[1][115BBE. Tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D

  ^[2][(1) Where the total income of an assessee,—

(a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or

(b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of—

(i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and

(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).]

(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance ^[3][or set off of any loss] shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a)  ^[4][and clause (b)] of sub-section (1).]

 

KEY NOTE

1. Inserted by the Finance Act, 2012, with effect from 01.04.1913.

2. Substituted by the Taxation Laws (Second Amendment) Act, 2016, with effect from 01.04.2017. Prior to its substitution, sub-section (1) read as under:

“(1) Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income-tax payable shall be the aggregate of—

(a) the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty per cent; and

(b) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a).”

3. Inserted by the Finance Act, 2016, with effect from 01.04.2017.

4. Inserted by the Finance Act, 2018, with retrospective effect from 01.04.2017.

 

If the Assessing Officer detects cash credits, unexplained investments, unexplained expenditure etc., the source for which is not satisfactorily explained by the assessee to him, there are various provisions in the Income Tax Act which empower the assessing officer to charge tax on such amount. Comparison between section 68, section 69, section 69A, section 69B and section 69C:—

     

Particulars	Section 68	Section 69	Section 69A	Section 69B	Section 69C
Plain reading	Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and	Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of	Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion,	Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing	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,
	source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.	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	jewellery or valuable article is 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 acquisition of the money, bullion, jewellery or  other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.	Officer finds that the Amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing  Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.	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 enexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.
Maintenance of Books of Accounts	Compulsory	Not Compulsory as the word“if any” is used	Not Compulsory as the word “if any” is used.	Compulsory	Not Compulsory
Explanation to Assessing Officer	Assessing Officer can ask for explanation only when the sum is credited in the Books of Accounts.	Assessing  Officer can ask for explanation only if investment is not recorded in the Books of Accounts.	Assessing Officer can ask for explanation only only if money, bullion, jewellery or any other valuable article	Assessing Officer can ask for explanation only if the investment, money, bullion, jewellery or any other valuable article is is not recorded in the Books of Accounts.	Assessing Officer can ask for the source of  “incurred expenditure”. recorded in the Books of Accounts and the value recorded is less than the amount spent in acquiring.

 

Overview of Sections 68, 69, 69A, 69B, 69C and 69D

Sr. No.	Section	Nature of addition	What can be taxed	Year in which taxable
1.	68	Unexplained Cash credits	(a) Unexplained loans (b) Unexplained Gifts, received (from residents as well as from non-residents) (c) Share Capital including share application money, share premium, etc.	Previous year in which amount credited in books of account
2.	69	Unexplained investments	Unexplained investments not recorded in books of account maintained	Previous year in which amount invested
3.	69A	Unexplained money, etc.	Unexplained money, bullion, jewellery or valuable article	Previous year in which assessee is found in possession of money, bullion, jewellery or valuable article
4.	69B	Amount of investments, etc. not fully disclosed in books of account	Investments, money, bullion, jewellery or other article not fully disclosed in books maintained	Previous year in which investment made or bullion, jewellery or other article is found in possession
5.	69C	Unexplained expenditure	Expenditure incurred out of unknown sources	The year in which expenditure is incurred
6.	69D	Amount borrowed or repaid on hundi	Amount borrowed or repaid otherwise than by an account payee cheque	Amount borrowed or repaid otherwise than by an account payee cheque. If addition is made of amount borrowed, same amount cannot be added when repaid (Refer CBDT’s Circular No. 204, dated 24.07.1976)

 

Consequences of section 115BBE

No basic exemption allowed while calculating tax at special rate under section 115BBE

No basic exemption is provided for while calculating the tax liability under the provisions of section 115BBE. In the Memorandum explaining the Finance Bill, 2012, the Legislature had made it clear that it desired to curb the practice of laundering of unaccounted money by taking advantage of the basic exemption limit. So, no basic exemption is allowed while calculating tax at special rate under section 115BBE.

Restriction on deductions under Chapter VI-A

Section 115BBE(2) restricts deduction in respect of any expenditure allowable to the assessee under any provision of the Act. As per Section 115BBE(2). Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing his income referred to in section 115BBE(1)(a).

Impact of section 115BBE in cases of persons having income from profession

The expression “sum credited” is wide enough to include receipts from a profession. So, in case of all sums credited/received as professional receipts, the assessee would be dutybound to explain the nature and source thereof, failing which no deduction will be allowed for expenses incurred for carrying out the profession.

Applicability of section 115BBE

(i) This Section is applicable where assessee’s income is recorded in books but has not been offered to tax and the assessee fails to prove the nature and source to the satisfaction of the Assessing Officer.

(ii) This section is also applicable to the assessee who is not required to maintain books of accounts but is found to have made unexplained investment, unexplained expenditure or he is found to be in possession of money, bullion, jewellery or other valuable articles.

(iii) Where an assessee voluntarily shows income in his return but he is unable to prove the source of such income to the satisfaction of the Assessing Officer, such income could be held to be liable under section 115BBE.

(iv) The provision of section 115BBE can be applied in the following circumstances:—

(a) Claiming exempt income from any source which the assessee fails to substantiate to the satisfaction of the Assessing Officer.

(b) Claiming income from agricultural operations which the assessee fails to substantiate to the satisfaction of the Assessing Officer.

(v) The provision of section 68 will be attracted to the credits in the books of account on account of cash sales. Such cash sales may be treated as unexplained income chargeable to tax under section 68 read with section 115BBE, if the names and addresses of the buyers are not mentioned in the cash memo.

Rate of Tax : Section 115BBE

The Finance Act, 2012, inserted section 115BBE with effect from 01.04.2013, which provides that in case total income of an assessee includes an income chargeable under sections 68, 69, 69A, 69B, 69C or 69D, the income would be chargeable @ 30% without there being any benefit of slab rate which would have been otherwise available to such assessee. This amendment was brought to ensure that the undisclosed income is chargeable to tax @ 30% and the assessees should not be able to take advantage of the basic exemption limit or lower slab of the rate of tax applicable to assessees.

This section was further substituted by the Taxation Laws (Second Amendment) Act, 2016 with effect from 01.04.2017 wherein rate of tax was increased from 30% to 60%. The amended section further provides that the section would apply irrespective of fact, whether the income is disclosed by the assessee in its return of income under sections 68 to 69D or the Assessing Officer makes such an addition.

Total tax in the cases covered under section 115BBE:

 

S. No.		For Assessment year 2013-14 to 2016-17	From assessment year 2017-18
1.	Tax on income under section 115BBE	30%	60%
2.	Surcharge	25% of such tax (i.e. 15% of such income)	25% of such tax (i.e. 15% of such income)
3.	In case where income not included in return filed under section 139 penalty under section 271AAC		10% of such tax
4.	Cess	3% of tax & surcharge	Health and Education cess @ 4% of tax & surcharge (i.e. 1+2) [3% upto assessment year 2018-19)

PROVISIONS ILLUSTRATED - 1

For Instance, income of Rs.10,00,000/- is determined by the Ld. Assessing Officer after making addition under sections 68-69D of the Act. The liability of tax and penalty would arise as under:

(i)	Tax @ 60% [as per section 115BBE]	6,00,000/-	60%
(ii)	Surcharge @ 25% of Tax payable [7th Proviso to Section 2(9) of Finance Act, 2016 as Inserted by the Taxation Laws (Second Amendment) Act, 2016, with effect from 15.12.2016]	1,50,000/-
(iii)	(60 + 15) = 75	7,50,000/-	75%
(iv)	Health and Education cess @4% of Tax and Surcharge	30,000/-
(v)	Total [(iii) + (iv)]	7,80,000/-	78%
	Penalty under section 271AAC [10% of tax-payable under section 115BBE, i.e., 10% of 60% of (i)]	60,000/-
	Total	8,40,000/-	84%

PROVISIONS ILLUSTRATED - 2

S. No.	Income under section 115BBE – Rs. 10,00,000	If the person voluntarily declares the unaccounted income in his/her return of income	If the person does not voluntarily declare the unaccounted income in his/her return of income
1.	Tax @ 60%	6,00,000	6,00,000
2.	Surcharge @ 25% of tax	1,50,000	1,50,000
3.	Penalty under section 271AAC @ 10%	—	60,000
4.	Health & Education Cess @ 4%	30,000	30,000
5.		7,80,000	8,40,000

 

PROVISIONS ILLUSTRATED - 3

S. No.	Particulars	Tax impact
		Upto assessment year 2012-13	For assessment years 2013-14 to 2016-17	From assessment year 2017- 18
(i)	Unexplained items deemed as income under section 68, etc.	1,50,000	1,50,000	1,50,000
(ii)	Other income	50,000	50,000	50,000
(iii)	Total income	2,00,000	2,00,000	2,00,000
(iv)	Tax on unexplained income (30%/60% w.e.f. A.Y. 2017-18 of (i))	Nil	45,000	90,000
(v)	Tax on other income	Nil	Nil	Nil
(vi)	Tax on total income [(iv) + (v)]	Nil	45,000	90,000

Applicability of section 115BBE in survey cases

The total tax in these cases covered under section 115BBE is worked out as under:—

1	Tax on income under section 115BBE	60%
2	Surcharge	25% of such tax
3	In case where income not included in return filed under section 139, Penalty under section 271AAC	10% of such tax
	This is further subject to Health & Education cess as applicable

 

CBDT’s Circular No. 11/2019, dated the 19th of June, 2019

Subject: Clarification regarding non-allowability of set-off of losses against the deemed income under section 115BBE of the Income-tax Act, 1961 prior to assessment-year 2017-18—Reg.

With effect from 01.04.2017, sub-section (2) of section 115BBE of the Income-tax Act, 1961 (Act) provides that where total income of an assessee includes any income referred to in section(s) 68/69/69A/69B/ 69C/69D of the Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provisions of the Act in computing the income referred to in section 115BBE(1) of the Act.

2. In this regard, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that in assessments prior to assessment year 2017-18, while some of the Assessing Officers have allowed set off of losses against the additions made by them under Section(s) 68/69/69A/69B/ 69C/69D, in some cases, set off of losses against the additions made under Section 115BBE(1) of the Act have not been allowed. As the amendment inserting the words ‘or set off of any loss’ is applicable with effect from 1st of April, 2017 and applies from assessment year 2017-18 onwards, conflicting views have been taken by the Assessing Officers in assessments for years prior to assessment year 2017-18. The matter has been referred to the Board so that a consistent approach is adopted by the Assessing Officers while applying provision of section 115BBE in assessments for period prior to the assessment year 2017-18.

3. The Board has examined the matter. The Circular No. 3/2017 of the Board dated 20th January, 2017 which contains Explanatory notes to the provisions of the Finance Act, 2016, at para 46.2, regarding amendment made in section 115BBE(2) of the Act mentions that currently there is uncertainty on the issue of set-off of losses against income referred to in section 115BBE. It also further mentions that the pre-amended provision of section 115BBE of the Act did not convey the intention that losses shall not be allowed to be set-off against income referred to in section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016.

4. Thus keeping the legislative intent behind amendment in section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of  interpretation, the Board is of the view that since the term ‘or set off of any loss’ was specifically inserted only vide the Finance Act, 2016, w.e.f. 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under section 115BBE of the Act till the assessment year 2016-17.

5. The contents of this Circular may be circulated widely for information of all stakeholders and departmental officers. The pending assessments and litigations on this issue may be handled accordingly.

Section 115BBE being machinery provision has to be interpreted liberally

The Income Tax Act is a self contained code consists of both charging and machinery sections. Charging sections are those sections by which liability is created or fixed. Machinery sections are those sections which ensures quantification, imposition and collection of tax created by the ‘charging sections’. Thus ‘Machinery Provisions’ are basically subordinates to the charging section.

On applying the above principles section 115BBE is categorized as ‘machinery provision’ which is subordinate to the charging section 68 and section 69 family. There is a very practical rule in the interpretation of taxing Statutes that ‘charging provisions’ are interpreted strictly while the ‘machinery provisions’ are interpreted liberally. The above criteria of interpretation of the ‘Statute’ is supported by several judicial precedents.

The Hon’ble Supreme Court in the case of J.K.Synthetics Ltd v. The CTO, held that “It is well-known that when a statute levies a tax it does so by inserting a charging section by which a liability is created or fixed and then proceeds to provide the machinery to make the liability effective. It, therefore, provides the machinery for the assessment of the liability already fixed by the charging section, and then provides the mode for the recovery and collection of tax, including penal provisions meant to deal with defaulters. … Ordinarily the charging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same. (Whitney v. Commissioners of Inland Revenue 1926 A C 37, CIT v. Mahaliram Ramjidas (1940) 8 ITR 442 (PC), Indian United Mills Ltd. v. Commissioner of Excess Profits Tax, Bombay, (1995) 27 ITR 20 (SC) and Gursahai Saigal v. CIT, Punjab, [1963] 48 ITR 1 (SC).”—[J.K. Synthetics Ltd. v. The Commercial Tax Officer (1994) 1994 taxmann.com 370 (SC)]

The Hon’ble Supreme Court in the case of Gursahai Saigal v. CIT held that those sections which impose the charge or levy should be strictly construed; but those which deal merely with the machinery of assessment and collection should not be subjected to a rigorous construction but should be construed in a way that makes the machinery workable.”—[Gurshai Saigal v. CIT (1963) 48 ITR 1 (SC)]

The Hon’ble Supreme Court in the case of ‘India United Mills Ltd. v. CEPT’ applied the principles laid down by the Privy Council in the case of ‘CIT v. Mahaliram Ramjidas (1940) 8 ITR 442 (PC)’ held that “Ordinarily, the charging section which fixes liability is strictly construed but the rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provision must, no doubt, be so construed as would effectuate the object and purpose of the Statute and not to defeat the same.”— [India United Mills Ltd. v. CEPT (1955) 27 ITR 20 (SC)]

Undisclosed income surrendered during search and seizure proceedings was derived from regular business activities, it was liable to be taxed at normal rate instead of tax rate stipulated under section 115BBE

Assessee during search and seizure action surrendered undisclosed income on account of excess stock and excess cash which was not entered in regular books of account. Assessing Officer was of view that undisclosed income falls within ambit of section 69A and, therefore, is liable to be taxed at special rate within meaning of section 115BBE. On appeal, Commissioner (Appeals) allowed appeal of assessee and held that undisclosed income so surrendered was derived from regular business activities, therefore, it was liable to be taxed at normal rate instead of under provisions stated under section 115BBE. On second appeal, Tribunal dismissed appeal of revenue. Since Tribunal had dealt with all grounds raised by assessee in order impugned and had passed a well reasoned and speaking order taking into consideration all material available on record, interference with concurrent findings of Commissioner (Appeals) as well as Tribunal therewith was not warranted. [In favour of assessee] (Related Assessment year : 2017-18) – [PCIT v. Krishna Kumar Verma (2024) 161 taxmann.com 44 (MP)]

Unaccounted receipts found during survey at hospital to be taxed as business income under section 28; section 68 was not applicable

Assessee-company ran a hospital. Competent Authority carried out survey under section 133A at business premises of assessee and found that loose papers reflected certain unaccounted receipts in name of doctors. Director of company accepted that alleged receipts were unaccounted and offered same for taxation as part of profit or gain of business of hospital. Assessee thereafter filed revised return and disclosed unaccounted receipts as offered during survey as part of profit or gain of business of hospital. Assessing Officer held that unaccounted receipts were an unaccounted income of assessee and added same to assessee's income by invoking provisions of section 68 and taxed same under section 115BBE. Since assessee had already disclosed unaccounted receipts offered during course of survey in revised return filed, there was no reason to add same again in assessee’s income invoking provisions of section 68 and brought them to tax under section 115BBE. As unaccounted receipts were relating to business operations of assessee's hospital, they were taxable as business income under section 28; section 68 read with section 115BBE was not applicable. [In favour of assessee] (Related Assessment year : 2013-14) - [ACIT v. Surat Life Care (P) Ltd. (2024) 160 taxmann.com 239 (ITAT Surat)]

Surrendered amount derived from business operations could not be brought to tax under deeming provisions of section 69B read with section 11BBE

Undisclosed investment - (Excess stock) - Assessee-firm was engaged in business of manufacturing of wearing apparels. During course of survey, assessee had surrendered certain amount to cover up discrepancies. Assessing Officer treated surrendered amount as excess stock under section 69B read with provisions of section 115BBE. It was found that stock physically found had been valued and then, compared with value of stock so recorded in books of accounts and difference in value of stock so found belonging to firm had been offered to tax. Revenue had not pointed out that excess stock had any nexus with any other receipts other than business being carried on by assessee. Further, in surrender letter, the assessee had stated that during course of survey operations, certain discrepancy out of excess stock of Rs 50 lakhs had been found and to avoid litigation, he had offered additional business income of Rs 50 lakhs out of excess stock found out of their normal business income over and above normal business income - Assessee had provided necessary explanation about nature and source of such unrecorded transactions and necessary nexus with assessee's business has been established. There was no physical distinction between accounted stock and unaccounted stock. On facts, income surrendered by assessee during survey was from business operations and, thus, should be treated as business income. Therefore, same could not be brought to tax under deeming provisions of section 69B read with section 11BBE and normal tax rate should be applied. [In favour of assessee] (Related Assessment year : 2019-20) – [Montu Shallu Knitwears v. DCIT(C), Ludhiana (2024) 159 taxmann.com 677 (ITAT Chandigarh)]

Assessee claimed that entire amount of excess cash found from business premises was generated from undisclosed sale of medicine, since revenue was unable to show any other sources related to excess cash, excess cash was from business of assessee and, thus, application of section 115BBE on amount of excess cash was bad in law

The assessee was a trader of medicines and other allied product. A survey was conducted under section 133A at premises of assessee. During survey proceedings, statement of assessee was recorded. Assessee surrendered certain amount out of which certain amount was related to excess stock found during survey and certain amount was related to excess cash found from business premises of assessee. In books, assessee declared lesser cash on date of survey. Assessing Officer added difference in cash found during survey to total income under section 69A and tax was levied on said amount under section 115BBE(2). It was noted that during statement recorded in survey, assessee declared that entire amount of excess cash was generated from undisclosed sale of medicine. Since revenue was unable to show any other sources related to excess cash, source of excess cash was from business and thus, application of section 115BBE was bad in law. Thus, assessee was to be assessed under normal rate of tax. [In favour of assessee] (Related Assessment year : 2018-19) – [Tejpal Singh v. ACIT (2024) 158 taxmann.com 679 (ITAT Amritsar)]

Unexplained cash attracts 69A & Section 115BBE de hors Assessee’s income disclosure & categorization

The Assessee, a resident of Andhra Pradesh, along with two others, was apprehended at the Excise check post while travelling in a bus from Hyderabad to Kozhikode and cash of Rs. 2.40 Cr. was found and seized. The three deposed before the Excise officials, giving mutually consistent statements, i.e., of Rs.1.62 Cr. belonged to Shri Sravan Neela Kumar, one of the three persons, and the balance Rs.77.10 Lac belonged to the Assessee.  The Assessee initially claimed that the said of Rs. 77.10 Lac belonged to his employer, Shri D. Ramesh, a Hyderabad based trader dealing in gold/gold jewellery and that they were travelling to Kozhikode to purchase gold.  Based on the information provided by the Excise Department, the Revenue made requisition under Section 132A and seized the cash. The Assessee could not furnish any evidence in support of either the stated purpose of the visit or the contention that cash belonged to the said Shri D. Ramesh. Shri. D. Ramesh also neither owned the amount nor issued any confirmatory statement. On the contrary, the Assessee submitted a written statement to the DDI stating that he was running a petrol pump in his hometown at Telangana for the past several years on leased land and that he was travelling to Kozhikode for exploring petrol business prospects thereat. The amount of Rs.77 lakhs seized from him had been pooled by him from his friends and relatives for the said purpose. So, however, they were reluctant to come forward to admit the same and, therefore, he was surrendering the cash seized as income from other sources for impugned Assessment year 2017-18, further requesting for appropriating tax on this income, refunding the balance, and relieving the Assessee of penal proceedings. This was followed by returning the said amount as his income in response to notice under Section 148. The income was returned as ‘other income’, under the head ‘income from other sources’.   The Revenue accepting the returns of income for Assessment years 2011-12 to 2016-17, i.e., in the proceedings initiated by issue of notices under Section 153A, assessed the income returned of Rs. 77.10 Lac for the impugned Assessment year under Section 69A as unexplained and levied tax under Section 115BBE. The Assessee filed an appeal before the CIT(A) who dismissed the same.  The present appeal is filed before the ITAT against the CIT(A) order.

Before the ITAT, the Assessee filed additional evidence in the form of 33 Affidavits (dt. 27.03.2023) by Shri D. Ramesh and others, stated to be his friends and relatives. Shri Ramesh admitted to be resident of Andhra Pradesh, carrying on the business of making ornaments and gold jewelry, and that the Assessee, his employee, was carrying cash (Rs. 77.10 Lac) to Kerala for purchase of gold therefrom. Further, several people, the list of which was attached, were his clients, who had approached him on 01.07.2016 with cash for purchasing gold.

Cochin ITAT holds that once the Assessee is unable to substantiate the source of the seized cash or admits being sourced from unspecified persons, Section 69A would automatically apply; Holds that offering such income under the head ‘Income from Other Sources’ is inconsequential as for attracting deeming provision of Section 69A and higher tax-rate under Section 115BBE; ITAT holds that once the Assessee has himself returned the cash found on him as his own income and stated that the friends and relatives from whom the same had been obtained, were reluctant to come forward, there is an admission of non-explanation of the source of income and therefore, Revenue is fully justified in regarding the same as unexplained, both as to its nature and source; Relies upon the Supreme Court judgment in CIT v. Prakash Chand Lunia (Decd.) v. CIT (2023) 454 ITR 61 : 293 Taxman 229 : 149 taxmann.com 416 (SC) wherein the Supreme Court confirmed the application of Section 115BBE for deemed incomes; ITAT observes that there is no factual basis for the Assessee to raise the legal ground against Section 69A since in penalty proceedings the Assessee admitted to have surrendered his income under Section 69A which removes the factual basis for assuming the legal stance that his ITR for the impugned Assessment year claiming the income to be under Section 56 is not on record; Relies upon the judgment of Gujarat High Court in Fakir Mohmed Haji Hasan (2002) 247 ITR 290 120 Taxman 11 :  (Guj.) and of Punjab & Haryana High Court in Kim Pharma (P) Ltd. (2013) 258 CTR 454 : 35 Taxmann.com 456 (P&H) wherein it was held that the computational provisions applicable to different heads of income, are not attracted qua income brought to tax under the deeming provisions 69 to 69C which accordingly is not liable to be classified under those heads of income;  ITAT rejects the additional evidence filed by the Assessee in the form of 33 affidavits from his employer, friends and relatives claiming to be owners of seized cash due to delay in furnishing the evidence and contradiction with Assessee’s ITR; Holds that the only manner in law in which the Assessee could amend his ITR, is by filing a revised ITR, which is impermissible in reassessment proceedings; Further observes that the Assessee having admitted the income, “the only issue that arises is of it being assessable under section 56, i.e., as returned, or under section 69A, as assessed, with the tax rate being consequential. The plea for admission of additional evidence is not maintainable, both on facts and in law.”; Thus, dismisses the Assessee’s appeal; [In favour of revenue] (Related Assessment year : 2017-18) - [Uma Maheshwara Rao Chinni v. ACIT(C), Kozhikode [TS-259-ITAT-2024(COCH)] – Date of Judgement : 15.04.2024 (ITAT Cochin)]

Section 115BBE inapplicable where satisfaction for Section 68/69 invocation not recorded; Quashes rectification order

Hyderabad ITAT allows Assessee’s appeal, quashes rectification order under Section 154 passed for taxing the additional income offered by Assessee during survey proceedings at 30% under Section 115BBE; Holds that Section 115BBE is not applicable in the instant case as Revenue failed to record satisfaction for treating the additional income as undisclosed under Section 68/69/69A/69B/69C/69D; During survey conducted on Assessee's business premises, Assessee gave statement under Section 131 offering an additional income of Rs. 20 Lacs for Assessment year 2015-16; Consequently, Assessee filed a return of income admitting an income of Rs. 23.62 Lacs including the additional income offered earlier, which was accepted by the Revenue; Subsequently, Revenue passed a rectification ordear under Section 154 holding that the unaccounted income declared by the Assessee of Rs. 20 Lacs was to be taxed under section 115BBE at flat rate of 30% instead of slab rates, which was upheld by CIT(A); ITAT observes that the Revenue did not invoke Section 115BBE during the course of assessment and accepted the additional income offered by the Assessee; Accepts Assessee’s argument that the option of rectification under Section 154 would have been available to the Revenue if Section 115BBE was invoked but the Revenue levied the tax at a different rate by mistake, relies on Jaipur ITAT ruling in Hari Narain Gattani v. DCIT (2021) 123 taxmann.com 8 (ITAT Jaipur) and ACIT v. Sudesh Kumar Gupta in ITA No. 976/JP/2019 (Assessment year : 2014-15), dated 09.06.2020 wherein it was held that if the Revenue accepted Assessee’s return of income and levied the tax on the undisclosed income as per the slab rates, without determining such income as undisclosed under Sections 68 or 69, then subsequent exercise of powers under section 154 to invoke Section 115BBE is bad in law; Referring to provisions of Section 115BBE as also Section 68/69/69A/69B/69C/69D, observes that unless the Revenue records that the Assessee has not offered any explanation about the nature and source of the unexplained money or the explanation offered is not to his satisfaction, Sections 68, 69, 69A, 69B, 69C or 69D cannot be invoked; Points out that in the absence of compliance on the part of Revenue to record the aforementioned satisfaction, it cannot be presumed that such an order was passed in respect of any income determined under Sections 68, 69, 69A, 69B, 69C or 69D or that the tax has to be levied under section 115BBE; Thus opines that, “it cannot be said that there was any mistake apparent from record or that the proceedings are amenable to the jurisdiction of the learned Assessing Officer under section 154”; Thus holds that exercise of jurisdiction under section 154 by the Revenue is bad in law and quashes the order under section 154. [In favour of assessee] (Related Assessment year : 2015-16) – [Anjanee Vijetha Kasturi v. ACIT, Kurnool [TS-246-ITAT-2023(HYD)] – Date of Judgement : 09.05.2023 (ITAT Hyderabad)]

Amended provisions of section 115BBE providing for prohibition of set-off of losses against income determined under section 115BBE is applicable prospectively from assessment year 2017-18

Memorandum explaining the Finance Bill 2016 viz-a-viz the above amendment, read as under:

“Clarification regarding set off losses against deemed undisclosed income.”

“Section 11588E of the Act, inter alia, provides that the income relating to section 68 of section 69 of section 69A or section 69B or section 69C or section 69D is taxable at the rate of thirty percent and further provides that no deduction in respect of any expenditure or allowances in relating to income referred to in the said sections shall be allowable.

Currently, there is uncertainty on the issue of set off of losses against income referred in section 11588E of the Act. The matter has been carried to judicial forums and courts in some cases has taken a view that losses shall not be allowed to be set off against income referred to an section 11588E. However, the current language of section 11588E of the Act does not convey the desired intention and as a result the matter is litigated. In order to avoid unnecessary litigation, it is proposed to amend the provisions of sub-section (2) of section 11588E to expressly provide that no set off of any loss shall be allowable in respect of income under section 68 of section 69 or section 69A or section 69B or section 69C or section 69D.

This amendment will taken effect from I April 2017 and will accordingly, apply in relation to assessment year 2017-18 and subsequent years.”

Amended provisions of section 115BBE providing for prohibition of set-off of losses against income determined under section 115BBE is applicable prospectively from assessment year 2017-18. Therefore, assessee would be entitled to claim set-off of loss against income determined under section 115BBE till assessment year 2016-17. [In favour of assessee] (Related Assessment year : 2015-16) – [Sri Balaji Forgings (P) Ltd. v. ACIT (2022) 144 taxmann.com 126 (ITAT Delhi)]

Upholds revision of wrong tax-rate under Section 115BBE after CIT(A) passed quantum order

Chandigarh ITAT dismisses Assessee’s appeal, upholds revisionary order setting aside assessment order due to failure in applying the correct rate of tax as per Section 115BBE on the addition made under Section 69C; Assessee, in pursuance to a search operation declared income of Rs. 7.80 Lac for Assessment year 2017-18 which was subsequently assessed by making an addition of Rs. 1.36 Cr as normal income and Rs.42 Lac under Section 69C being unexplained salary and Rs. 12.46 Lac being unexplained investment under Section 69; CIT(A) reduced Section 69C addition to Rs. 28.37 Lac and deleted addition of unexplained investment under Section 69; Subsequently, PCIT initiated proceedings under Section 263 on the premise that Assessing Officer calculated the whole income at normal rate of 30% instead of charging special rate prescribed in Section 115BBE for unexplained salary expenditure and investment; Assessee raised objection on the ground that CIT(A) has already reduced the quantum additions and Assessing Officer’s order got merged with CIT(A) order which cannot be subject matter of revision under Section 263; PCIT disposed of objection by holding that that the issue of special rate of tax was never agitated or adjudicated in the appellate proceedings and accordingly, the same is subject matter of revision under Section 263; ITAT observes that Assessing Officer gave clear cut finding and recorded satisfaction that there is a failure on the part of Assessee to furnish any explanation regarding unexplained salary expenditure and accordingly, made addition under Section 69C which was subsequently reduced by appellate authority but the applicability of Section 69C remained untouched while disposing off Assessee’s appeal; Clarifies that the issue does not pertain to non-applicability of Section 115BBE but pertains to applicability of rate of tax under Section 115BBE as applicable for the year under consideration; Also observes that Assessing Officer determined the Assessee’s income under Section 69C read with Section 115BBE and determined the tax-rate of 30% under pre-amended law instead of 60% in accordance with the law applicable for the year under consideration; Accordingly, holds that Assessing Officer erred in not applying the rate of tax as per the amended law and the order so passed is rightly held by PCIT as erroneous in so far as prejudicial to the interest of Revenue. [In favour of revenue] (Related Assessment year : 2017-18) – [Agya Ram Manohar Lal v. PCIT(C), Ludhiana [TS-892-ITAT-2022(CHANDI)] – Date of Judgement : 10.11.2022 (ITAT Chandigarh)]

Business loss eligible for set off till Assessment year 2016-17 against income covered under Section 115BBE

Kerala High Court allows Assessee’s appeal, holds Assessee eligible to set off of business loss from deemed income under Section 68 by relying on coordinate bench ruling in Vijaya Hospitality and Resorts Ltd. v CIT and others (2019) 419 ITR 322; For Assessment year 2013-14, Assessee-Company filed its return of income claiming set-off of business loss of Rs. 1.76 Cr against deemed income under Section 68 of Rs. 1.86 Cr; While framing the assessment order, Revenue made a lumpsum addition of Rs. 3 Lacs, which was proposed to be revised by the CIT under Section 263; CIT held that as per Section 115BBE, income referred to in section 68, section 69, section 69A, section 69B, section 69C or Section 69D are not eligible for set off of brought forward business loss and unabsorbed depreciation and since the set-off of loss was allowed in the assessment order, it was erroneous and prejudicial to the interests of Revenue, which was upheld by ITAT; Before the High Court, Assessee submitted that the deemed income falls under one head or the other under Section 14 and thus set-off of business loss is available and also that Section 115BBE as was applicable for the subject Assessment year did not contain the words “or set off of any loss” and thus set off of business loss is not one of the prohibited items for setting off of loss from the income earned by the Assessee; On the contrary, Revenue contended that as on the date of CIT order, the precedent binding on the Revenue was Kerala Sponge Iron Ltd. and thus no revision could be made out by referring to a view taken by coordinate bench in Vijaya Hospitality subsequently and CBDT Circular; High Court accepts Assessee’s reliance on coordinate bench ruling in Vijaya Hospitality as also CBDT Circular No.3/2017 dated 20.01.2017 whereby it was clarified that since the term ‘or set off of any loss’ was specifically inserted only by the Finance Act 2016, with effect from 01.04.2017 an assessee is entitled to claim set-off of loss against income determined under Section 115BBE till Assessment year 2016-17. [In favour of assessee] (Related Assessment year : 2013-14) – [Bhima Jewellers v. CIT, Kozhikode [TS-754-HC-2022(KER)] – Date of Judgement : 25.08.2022 (Ker.)]

Provisions of section 115BBE had been invoked by Assessing Officer during assessment proceedings and tax rate had been charged at rate of 30 per cent on surrendered income under section 115BBE and thus, action of Assessing Officer in rectifying and increasing rate of taxation from 30 per cent to 60 per cent on undisclosed income in view of amended section 115BBE did not come within purview of section 154

Assessing Officer completed assessment in case of assessee under section 143(3) at assessed income of Rs. 41.78 lakhs which included income surrendered pursuant to search of Rs.22.19 lakhs as current year’s business income offered to tax, by charging tax and interest at normal rates and raised nil demand. Thereafter, Assessing Officer issued notice under section 154 firstly, on ground that tax rate on surrendered income was to be charged as per provision of section 115BBE and secondly, during assessment proceedings, tax rate on surrendered income had been charged at 30 per cent, however, as per amended provisions of section 115BBE, it should have been charged at 60 per cent. Order of Assessing Officer is affirmed by the CIT(A). On appeal the Tribunal held that there was nothing stated in either pre-amended or post-amended provisions of section 115BBE that where assessee surrenders undisclosed income during search action for relevant year, tax rate has to be charged as per provisions of section 115BBE. Further there was no finding that provisions of section 115BBE had been invoked by Assessing Officer during assessment proceedings and tax rate had been charged at rate of 30 per cent on surrendered income under section 115BBE and thus, action of Assessing Officer in rectifying and increasing rate of taxation from 30 per cent to 60 per cent on undisclosed income in view of amended section 115BBE did not come within purview of section 154. Accordingly action of Assessing Officer in invoking jurisdiction under section 154 was not legally tenable. [In favour of assessee] (Related Assessment year : 2017-18) – [Hari Narain Gattani v. DCIT (2021) 210 TTJ 771 : 186 ITD 434 (ITAT Jaipur)]

Section 115BBE not applicable on voluntary surrender of income to cover discrepancy

Chandigarh ITAT allows Assessee’s appeal, sets aside Revenue’s order for applying Section 115BBE on income voluntarily surrendered;  In a search operation carried out at the Assesee-Company’s premises and at the residence of Directors whereby the director surrendered Rs. 97.11 lacs on account of unexplained cash on which due taxes were paid by him, further additional Rs. 15 lakh was offered to tax for Assessment year 2017-18 to cover any discrepancy resultant of the search operation; Assessee disclosed Rs. 15 lacs in the revised return filed after being show-caused by the Revenue about its non-disclosure, Revenue treated the amount as income from unexplained sources, and charged it at a higher rate of tax under section 115BBE; ITAT observes that Revenue did not point out any unexplained credit, unexplained investment, money, bullion or jewellery or unexplained expenditure pertaining to the 15 lacs, observed that this amount is offered to cover up an discrepancies relating to business income; Holds that since provisions of section 68, and section 69 to 69D are not applicable in respect of the income, provisions of section 115BBE not attracted, directs Assessing Officer to compute tax on surrendered income of 15 lacs under normal provisions as applicable to business income. [In favour of assessee] (Related Assessment year : 2017-18) – [Bajaj Sons Ltd. v. DCIT(C), Ludhiana (2021) 190 ITD 128 : 128 taxmann.com 406 : TS-456-ITAT-2021(CHANDI) (ITAT Chandigarh)]

Term ‘or set-off of any loss’ being specifically inserted only vide Finance Act, 2016, with effect from 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under section 115BBE till assessment year 2016-17

Tax on income referred to in section 68 to section 69D - Whether any expense or allowance shall not be allowed from income assessed under section 69 but, section 115BBE does not indicate that set off of brought forward business losses shall not be allowed from income assessed under section 69 for purpose of calculating tax under section 115BBE. Since term ‘or set off of any loss’ was specifically inserted only vide Finance Act, 2016, with effect from 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under section 115BBE till assessment year 2016-17. [In favour of assessee] (Related Assessment year : 2015-16) - [ACE Infracity Developers (P) Ltd. v. DCIT(C), Noida (2021) 127 taxmann.com 264 (ITAT Delhi)]

Section 115BBE does not apply to business receipts/business turnover - Where Department had itself accepted undisclosed amount of assessee in his bank account as undisclosed business receipts/ turnover, section 115BBE would not attract

Tax on income referred to in section 68 to section 69D (Applicability of) – The limited question is that whether business receipts/business turnover is taxable under section 115BBE of the Act? As per the intention of legislature, the burden to apply section 115BBE and section 68 to section 69D of the Act rest on revenue shoulder. That burden cannot be discharged on the basis of assumption and presumption made by the assessing officer. Having gone through the section 115BBE, we are of the view that business activity related income may not ordinarily get placed u/s 68 to section69D of the Act. In the assessee’s case under consideration, the assessee submitted before the assessing officer that deposits of Rs. 91,48,326/- in bank were business receipts. Where Department had itself accepted undisclosed amount of assessee in his bank account as undisclosed business receipts/turnover, section 115BBE would not attract. [In favour of assessee] (Related Assessment year : 2014-15) – [Abdul Hamid v. ITO (2020) 183 ITD 711 : 117 taxmann.com 986 (ITAT Gauhati)]

Tax on income referred in Sections 68, 69, 69B 69C, 69D – Set off of loss – Survey - Surrender of income – Set off of losses was to be allowed – The amendment made to section 115BBE denying the benefit of set off of losses with effect from 01.04.2017 was retrospective in nature

The assessee surrendered the additional income during the survey. The income surrendered were partly in nature of business income and partly deemed income. The assessee had set off debit entries and business loss against the same. The Assessing Officer treated the entire additional income surrendered as deemed income as provided under sections 69, 69A, 69B and 69C separately and charged to tax under section 115BBE and denied the set off of losses. On appeal the Tribunal held that the amendment made to section 115BBE denying the benefit of set off of losses with effect from 01.04.2017 was retrospective in nature, it is prospective, hence the assessee is entitled to setoff of the losses against deemed income assessed under Sections 69, 69A and 69C of the Act. Followed, PCIT v. Khushi Ram & Sons Foods (P) Ltd. in (ITA No. 126 of 2015, dated 29.07.2016 (P&H). Thus, it is held that the income surrendered by the assessee is partly assessable as business income and partly assessable as deemed income and against both of them, the assessee was entitled to claim set off of business losses, both the current and brought forward. [In favour of assessee] (Related Assessment years : 2013-14, 2014- 15) - [Famina Knit Fabs. v. ACIT, Ludhiana (2019) 176 ITD 246 : 104 taxmann.com 306 (ITAT Chandigarh)]

Unexplained investments - Income Surrendered during survey proceedings on account of undisclosed debtors is business income and not deemed income - Assessee entitled to set off of business loss against such surrendered income

Tribunal held that the surrender had been made on account of undisclosed debtors. The CIT(A) had rightly treated the surrendered income as in the nature of business income of the assessee and accordingly, allowed the benefit of set off of losses against it. (Related Assessment year : 2012-13)—[DCIT v. Khurana Rolling Mills (P) Ltd. (2019) 73 ITR 613 (ITAT Chandigarh), DCIT v. Khurana Steels Ltd. (2019) 73 ITR 613 (ITAT Chandigarh)]

Set-off of losses not permissible against unexplained income, investments, money etc. chargeable under sections 68/69/69A/69B/69C/69D [Section 115BBE]

It was held that the income surrendered by the assessee voluntarily in a survey could not be reduced by set off of brought forward losses. It held that sections 70 and 71 could not be applied for setting off of losses against the income surrendered consequent to survey.—[Kim Pharma (P) Ltd. v. CIT (ITA No. 106 of 2011)(P& H)]

Assessing Officer made addition to assessee’s income in respect of excess stock by invoking of provisions of section 115BBE, in view of fact that amended provisions of section 115BBE were applicable with effect from 01.04.2017 and not prior to that, impugned addition was to be set aside

During course of search and survey operation, assessee surrendered income on account of excess stock - However, in return of income, assessee showed lower income on account of excess stock by taking a plea that prevailing price of gold had fallen as on 31.03.2013. Assessing Officer rejected assessee’s explanation and made addition under section 69, read with section 115BBE on account of excess stock - Commissioner (Appeals) deleted said addition by accepting claim of assessee that price of gold as on 31.03.2013 was much less than price at time of valuation done during survey. So far as applicability of amended provisions of section 115BBE is concerned, same is applicable with effect from 01.04.2017 and not prior to that. Therefore, Assessing Officer was not justified in invoking provisions of section 115BBE for assessment year in question. However, in view of fact that question as to whether entire stock which was found excess at time of survey remained as unsold till 31.03.2013 so that assessee could take benefit of reduction in prevailing price of gold against surrendered income on account of unexplained investment in stock, had not been examined by lower authorities, matter was to be remanded back for said limited purpose of verification. [In favour of assessee/Matter remanded] (Related Assessment year : 2013-14) – [ACIT(C), Jaipur v. Satish Kumar Agarwal (2018) 172 ITD 143 : 96 taxmann.com 373 (ITAT Jaipur)]

Impact of section 115BBE under various circumstances Income shown as agricultural but not proved is taxable as other income

The assessee had declared a sum of Rs. 12,36,000 as agricultural income. During the course of assessment, the Assessing Officer held that agricultural income offered for rate purpose is in respect of six properties which is claimed to be belonging to the members of Muthoot family. The Assessing Officer after examining the documents of each of these six agricultural properties, held that the said properties did not belong to the assessee, but to the other family members. Further, it was categorically concluded by the Assessing Officer that the assessee has not produced any documentary evidence to show that he was in receipt of agricultural income on account of operation conducted by him on the said family properties. It was held that the categorical findings of the Assessing Officer was never dispelled by the assessee by placing contra evidence. Admittedly, the assessee was never the owner of the agricultural properties from where it is claimed that he was in receipt of agricultural income of Rs. 12,36,000. The assessee did not produce any documentary evidence to prove that he was in receipt of any agricultural income on account of any agricultural operation carried out by him. Therefore, we are of the view that the Income-tax Authorities have correctly held that the assessee was not in receipt of Rs. 12,36,000 as agricultural income. Having held Rs. 12,36,000 as not agricultural income, the sum that is credited to the book of account has to be necessarily added as income from other sources under section 68 of the Income Tax Act. Therefore, we see no reason to interfere with the order of the CIT(A) and we confirm the same. (Related Assessment year : 2009-10) - [Sri George M George v. ACIT - Date of Judgement : 04.10.2018 (ITAT Cochin)]

Claiming bogus income from agricultural operations as exempt

In the case of Avdhesh Kumar Jain v. CIT (1990) 48 Taxman 266 (All.), the assessee claimed that certain amount earned from agricultural operations was exempt. The ITO found that the assessee had failed to produce any satisfactory evidence about his being engaged in agricultural activities. The assessee was also not able to state as to whom the agricultural produce was sold. He, therefore, assessed the aforesaid amount as income from undisclosed sources in the hands of the assessee.

Bogus income claimed as exempt income from horse racing

In the case of B.C. Paul v. CIT (1981) 6 Taxman 170 (Cal.), in return filed for the assessment year 1965-66, the assessee, being not a regular punter, disclosed receipts of Rs. 1,58,250 but claimed the same to be exempt from tax on the ground that they were casual receipts from horse racing. ITO treated impugned amount as an income from undisclosed sources holding that there were discrepancies in assessee’s statement and that assessee had failed to discharge onus of proving nature and source of impugned receipt. As the assessee failed to prove the receipts from horse racing as a genuine claim, the application of section 68 by the Assessing Officer was upheld.