Section 104 — Unexplained asset. Successor to s.69A, s.69B of the 1961 Act.
Section 104 is in Chapter VI — Aggregation of Income, which runs from section 101 to section 107.
Sub-section (1) applies where in a tax year an asset is found to be owned by or belonging to the assessee but is not recorded in his books of account for any source of income, or where the Assessing Officer finds that the amount spent on acquiring the asset exceeds the amount recorded in those books. If the assessee offers no explanation about the nature and source of the acquisition, or offers an explanation the Assessing Officer does not find satisfactory, the value of the asset — or the excess amount, as the case may be — is deemed to be the assessee's income of the tax year in which the asset was found to be owned by or belonging to him. Sub-section (2) defines "asset" for this purpose to include money, bullion, jewellery, virtual digital asset or other valuable article.
It closes the gap between what a person's books show and what he is found to own, putting the burden of explaining an unrecorded asset or an understated acquisition cost on the person holding it. Without it, assets acquired out of untaxed income would carry no charge because no receipt appears anywhere in the accounts.
The year of charge is the tax year in which the asset is found to be owned by or to belong to the assessee — not the year of acquisition — so a discovery today can be assessed today even for an old purchase. The deemed income is the value of the asset where nothing is recorded, but only the excess where the books record a smaller figure than was actually spent. An explanation must cover both the nature and the source of the acquisition; a partial account leaves the Assessing Officer free to find it unsatisfactory under clause (b).
In a tax year an individual is found to own jewellery worth Rs. 40 lakh that appears nowhere in his books, and a virtual digital asset on which the Assessing Officer finds Rs. 25 lakh was spent against Rs. 10 lakh recorded. He offers no explanation at all of the nature and source of the jewellery, and an explanation of the digital asset which the Assessing Officer does not find satisfactory. Sub-section (1) then deems Rs. 40 lakh — the whole value, where nothing is recorded — and Rs. 15 lakh — only the excess, where the books record less than was spent — to be his income, Rs. 55 lakh in all. It is charged in the year the assets were found to be owned by him rather than the year he acquired them, and keeping no books is no answer, because the sub-section reaches an asset not recorded in the books 'if any' maintained by him.
In a scrutiny assessment order that adds the value of the asset or the excess expenditure as deemed income, and in the show cause preceding it asking the assessee to explain the nature and source of the acquisition. The only authority the section names is the Assessing Officer, in whose opinion the explanation must be satisfactory.
the value of such asset, or such excess amount, as the case may be, shall be deemed to be the income of the assessee of the tax year in which such asset has been found to be owned by, or belonging to, the assessee
| 1961 provision | What changed in the move |
|---|---|
| s.69A | 1. 'may be deemed' becomes 'shall be deemed'. Both s.69A and s.69B were permissive on their face; s.104 is mandatory. 2. Virtual digital assets are brought inside the section by name. The 1961 s.69A list - money, bullion, jewellery or other valuable article - did not mention them, and a VDA had to be argued into 'other valuable article'. S.104(2) removes the argument. 3. The reach widens from 'is found to be the owner of' to 'has been found to be owned by or belonging to the assessee'. 'Belonging to' catches beneficial holding that bare ownership did not obviously reach. 4. Two sections become one, so the excess-cost case and the wholly-unrecorded case now share a single deeming rule and a single year of taxability. 5. S.69B's separate limb for 'investments' is dropped as a distinct category - unexplained investments now sit in s.103, and s.104 speaks only of acquiring an asset. 6. The unit of time changes from 'financial year' to 'tax year', and the year of taxability is stated expressly as the year in which the asset is found to be owned by or belonging to the assessee, which s.69A conveyed only by 'for such financial year'. |
How we established this. Read s.104 of the 2025 Act against s.69A and s.69B of the 1961 Act, all three read in full. The first limb of s.104(1) is s.69A rewritten: 1961 - '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, 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 ... 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'. Every element survives - found to be the owner, not recorded in the books maintained for any source of income, no explanation or an unsatisfactory explanation about the nature and source of acquisition, deemed income of that year - with the enumerated items lifted out into the inclusive definition of 'asset' in s.104(2). The second limb, 'or the Assessing Officer finds that the amount expended in acquiring such asset exceeds the amount recorded in such books of account ... Such excess amount ... Shall be deemed to be the income', is s.69B, whose operative words are 'the Assessing 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 ... The excess amount may be deemed to be the income of the assessee for such financial year'. So s.104 is a single section carrying both. This confirms the mapping s.69A to s.104 that earlier work in this pass had provisionally recorded, and shows it is not one-to-one: s.69B goes into the same section.