Is there anything from the Board telling the officer he has to establish the section before he makes a deeming addition?
Yes. Following a C&AG compliance audit that found officers were invoking the wrong section and applying the wrong rate, the Board directed field offices that the Assessing Officer "has to satisfy himself as to the true nature and source of the amounts for which such sections are invoked", that the necessary enquiry — including under s.133(6) — may be carried out, and that "Based upon inquiry and facts of the case, relevant provisions of the Act may be invoked." The same letter gives the Income-tax Act 2025 counterparts: s.195 for s.115BBE and s.252 for s.133(6), each one for one, and “section 102, 103, 104, 105 and 106” against the whole set “section 68, 69A, 69B, 69C and 69D”, which is a correspondence between two lists and not between their members in order.
Decided by the CBDT Circulars & Instructions (Central Board of Direct Taxes, Department of Revenue, Ministry of Finance — signed by Dr. Indu Bala, Deputy Secretary (ITA-II), issued with the approval of Member (IT), CBDT, addressed to all Principal Chief Commissioners and Director Generals of Income Tax) on 2026-05-29, reported as F.No. 225/26/2026-ITA.II, May 2026. It bears on section 68, section 69A, section 69B, section 69C, section 69D, section 115BBE, section 133(6) of the Income Tax Act 1961, in Cash Credits & Unexplained Money, Assessment & Scrutiny and Evidence & Burden of Proof matters.
The usual answer to a wrong-section objection is that the label does not matter. This letter is the department's own statement that it does: the Board tells its officers to reach the section through enquiry into nature and source rather than to pick one and let the appellate authorities sort it out. It is a departmental instruction and not a decision, so it does not decide what happens when the officer gets it wrong — but it puts the requirement on the record in the department's words, and a reply that quotes it is quoting the Board to its own officer.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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The Comptroller and Auditor General carried out a compliance audit on the application of ss.68, 69A, 69B, 69C and 69D read with s.115BBE and objected that there was variation in the provisions officers invoked and in the additions they made, and that incorrect application of the rate of tax led to loss to the exchequer. The Board issued this letter to all Principal Chief Commissioners and Director Generals in response.
Field offices are directed to satisfy themselves as to the true nature and source of the amounts before invoking any of these sections, to carry out the necessary investigation or enquiry including under s.133(6), to invoke the relevant provision on the basis of that enquiry and the facts of the case, to apply s.115BBE where an addition is made under those sections, and to complete the relevant columns of the computation sheet on the ITBA system correctly.
The direction is framed as a response to the audit objection rather than as an interpretation of the sections. Its structure is sequential: enquiry first, then the choice of provision, then the rate. The letter also gives the Income-tax Act 2025 counterparts in brackets: s.195 for s.115BBE and s.252 for s.133(6), each one for one, and “section 102, 103, 104, 105 and 106” against the set “section 68, 69A, 69B, 69C and 69D”. That second correspondence is set to set and not item to item — the audit was confined to those five sections and s.69 is absent from it, so the two lists cannot be read off against each other in order.
The Assessing officer has to satisfy himself as· to the true nature and source of the amounts for which such sections are invoked.
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Handle my notice → Ask a CA on WhatsAppYes. Following a C&AG compliance audit that found officers were invoking the wrong section and applying the wrong rate, the Board directed field offices that the Assessing Officer "has to satisfy himself as to the true nature and source of the amounts for which such sections are invoked", that the necessary enquiry — including under s.133(6) — may be carried out, and that "Based upon inquiry and facts of the case, relevant provisions of the Act may be invoked." The same letter gives the Income-tax Act 2025 counterparts: s.195 for s.115BBE and s.252 for s.133(6), each one for one, and “section 102, 103, 104, 105 and 106” against the whole set “section 68, 69A, 69B, 69C and 69D”, which is a correspondence between two lists and not between their members in order. This was decided by the CBDT Circulars & Instructions (Central Board of Direct Taxes, Department of Revenue, Ministry of Finance — signed by Dr. Indu Bala, Deputy Secretary (ITA-II), issued with the approval of Member (IT), CBDT, addressed to all Principal Chief Commissioners and Director Generals of Income Tax) and bears on section 68, section 69A, section 69B, section 69C, section 69D, section 115BBE, section 133(6) of the Income Tax Act 1961. It is reported as F.No. 225/26/2026-ITA.II, May 2026. The usual answer to a wrong-section objection is that the label does not matter. This letter is the department's own statement that it does: the Board tells its officers to reach the section through enquiry into nature and source rather than to pick one and let the appellate authorities sort it out. It is a departmental instruction and not a decision, so it does not decide what happens when the officer gets it wrong — but it puts the requirement on the record in the department's words, and a reply that quotes it is quoting the Board to its own officer. If it applies to you, the first step is this: Quote paragraph 2(i) in the reply and ask the officer to record what enquiry he made into the nature and the source of the disputed amount before choosing the section.
The Comptroller and Auditor General carried out a compliance audit on the application of ss.68, 69A, 69B, 69C and 69D read with s.115BBE and objected that there was variation in the provisions officers invoked and in the additions they made, and that incorrect application of the rate of tax led to loss to the exchequer. The Board issued this letter to all Principal Chief Commissioners and Director Generals in response. The matter was decided on 2026-05-29 by the CBDT Circulars & Instructions (Central Board of Direct Taxes, Department of Revenue, Ministry of Finance — signed by Dr. Indu Bala, Deputy Secretary (ITA-II), issued with the approval of Member (IT), CBDT, addressed to all Principal Chief Commissioners and Director Generals of Income Tax). On those facts the CBDT Circulars & Instructions held as follows. Field offices are directed to satisfy themselves as to the true nature and source of the amounts before invoking any of these sections, to carry out the necessary investigation or enquiry including under s.133(6), to invoke the relevant provision on the basis of that enquiry and the facts of the case, to apply s.115BBE where an addition is made under those sections, and to complete the relevant columns of the computation sheet on the ITBA system correctly.
The direction is framed as a response to the audit objection rather than as an interpretation of the sections. Its structure is sequential: enquiry first, then the choice of provision, then the rate. The letter also gives the Income-tax Act 2025 counterparts in brackets: s.195 for s.115BBE and s.252 for s.133(6), each one for one, and “section 102, 103, 104, 105 and 106” against the set “section 68, 69A, 69B, 69C and 69D”. That second correspondence is set to set and not item to item — the audit was confined to those five sections and s.69 is absent from it, so the two lists cannot be read off against each other in order. In the words reproduced by the source cited on this page: "The Assessing officer has to satisfy himself as· to the true nature and source of the amounts for which such sections are invoked."
It was decided by the CBDT Circulars & Instructions on 2026-05-29 and is reported as F.No. 225/26/2026-ITA.II, May 2026. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 68, section 69A, section 69B, section 69C, section 69D, section 115BBE, section 133(6), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Field offices are directed to satisfy themselves as to the true nature and source of the amounts before invoking any of these sections, to carry out the necessary investigation or enquiry including under s.133(6), to invoke the relevant provision on the basis of that enquiry and the facts of the case, to apply s.115BBE where an addition is made under those sections, and to complete the relevant columns of the computation sheet on the ITBA system correctly. It arises in Cash Credits & Unexplained Money, Assessment & Scrutiny and Evidence & Burden of Proof matters, on section 68, section 69A, section 69B, section 69C, section 69D, section 115BBE, section 133(6) of the Income Tax Act 1961, and was decided by Central Board of Direct Taxes, Department of Revenue, Ministry of Finance — signed by Dr. Indu Bala, Deputy Secretary (ITA-II), issued with the approval of Member (IT), CBDT, addressed to all Principal Chief Commissioners and Director Generals of Income Tax. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the purchase is in the books and paid through the bank, point out that nature and source are on the record and that paragraph 2(ii) requires the section to follow the facts. Ask for the s.133(6) responses the letter contemplates — the Board's own route to the finding is an enquiry with the counterparty, not an investigation-wing report standing alone. Use the letter’s mapping for s.115BBE to s.195 and s.133(6) to s.252, which it gives one for one. Do not read its list of ss.68, 69A, 69B, 69C and 69D against ss.102 to 106 as a pairing in that order — the audit it answers leaves out s.69 altogether. On the enacted text s.68 is s.102, s.69 is s.103, s.69A is s.104, s.69C is s.105 and s.69D is s.106, with s.69B split between s.103 and s.104. Do not overstate it — it is a direction to officers, it creates no right in the assessee, and it says nothing about the consequence of a wrong choice.
Still good law. The letter was read on the Board's own site and no later communication withdrawing or modifying it was found. Because it is an internal direction rather than a s.119 circular, no notification of its withdrawal would be expected to appear; treat its currency as verified only to the extent that the document is still served on the department's site. That finding was checked against a published source, which is linked on this page, on 2026-08-23. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The letter itself was read on the department's own site and is quoted from it. The day of the month is imperfectly rendered on that document, which reads "New Delhi, the ~1'May, 2026"; the commentary that reports it gives the date as 29 May 2026, and that is the date recorded here — the divergence is disclosed rather than resolved. The letter is an administrative direction to field offices following a C&AG audit objection; it is not a circular under s.119 and no page opened says it was issued under that section. It says nothing about s.37(1) as the alternative to s.69C, nothing about s.271AAD, and nothing about what happens to an addition made under the wrong provision. It does not tell you what happens to an addition made under the wrong one of these sections — whether it falls or is sustained under the correct provision. It does not address s.37(1) at all, so it does not help directly with the argument that a documented purchase is a disallowance rather than unexplained expenditure. It does not deal with the penalty sections, and the C&AG report it responds to was not itself located. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Field offices are directed to satisfy themselves as to the true nature and source of the amounts before invoking any of these sections, to carry out the necessary investigation or enquiry including under s.133(6), to invoke the relevant provision on the basis of that enquiry and the facts of the case, to apply s.115BBE where an addition is made under those sections, and to complete the relevant columns of the computation sheet on the ITBA system correctly.
TaxSphere, “CBDT letter of 29 May 2026 on invoking ss.68 to 69D with s.115BBE”, https://taxnotice.vittsphere.com/caselaw/case/cbdt-letter-225-26-2026-invoking-the-right-deeming-section/ (validity last checked 2026-08-23)
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Is there anything from the Board itself I can put in front of the officer on setting off losses against s.68 or s.69 additions in an old year?
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