Section 69

Section 69 — the law in short

What the courts have decided on section 69, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Baladin Ram v CIT Supreme CourtHelps department
  I made unexplained investments after the close of my accounting year. Which year can the officer tax them in, and can he reopen an earlier year to do it?
  The financial year, and yes he can reopen. The Supreme Court held that where income is found to come from an undisclosed source, for which no accounts are kept and no previous year has been chosen, the only way it can be assessed is as income of the ordinary financial year. So investments of about Rs 27,000 made in the Sarpat and bamboo business between December 1943 and February 1944 fell in the financial year 1943-44 and were assessable for 1944-45, not 1945-46. Disclosing them in the 1945-46 proceedings was no disclosure for 1944-45, so section 34(1)(a) was attracted.
• Alishan Complex P Ltd v Initiating Officer High CourtHelps taxpayerValidity unconfirmed
  The benami attachment rests on a retracted statement and they refused cross-examination. Is that evidence?
  No. An untested and retracted statement, standing alone, is no evidence at all on which a benami finding can rest. Where such a statement is the only material against a party, the power in s.19(1)(b) of the Prohibition of Benami Property Transactions Act to summon and examine the witness stops being discretionary and becomes a duty, and income-tax assessment findings on the source and genuineness of the funds are relevant material the Initiating Officer is bound to consider.
• PCIT v DSG Papers (P) Ltd High CourtHelps taxpayer
  The addition rests on statements of ex-employees and third parties I was never allowed to question. Is the assessment good?
  The additions were deleted, but read the High Court decision for what it is. The Chandigarh Tribunal directed deletion of the additions in all five years, holding that the assessee had not been allowed to cross-examine the persons on whose statements the Assessing Officer relied and that the evidence was internally contradictory — invoices said to have been destroyed were recovered from the residence of an ex-president against whom the company had filed an FIR before the search. The Punjab and Haryana High Court dismissed the revenue's appeal, but its order is two paragraphs long and gives no reasons of its own: it adopts a detailed judgment of even date in a companion appeal, IT Appeal No. 38 of 2023, which is not available in a subscription case-law database.
• CIT v Satya Narain Patni High CourtHelps taxpayer
  The search party left our jewellery alone but the AO has still added part of it. Can he do both?
  No, on these facts, and the reason is wider than the seizure decision. The Rajasthan High Court held that once the Board has expressed the opinion in Instruction No. 1916 that jewellery up to 500 grams for a married lady, 250 grams for an unmarried lady and 100 grams for a male member is not to be seized, it should normally follow that jewellery within those quantities will not be questioned as to its source and acquisition either. Here the family's entitlement was 2,700 grams against 2,202.464 grams found, the authorised officer had seized nothing, and the Assessing Officer's later addition on part of the same jewellery had no basis — he gave no reason for fixing 1,600 grams as the reasonable quantity. The Court preserved the department's power over the excess: jewellery beyond those weights can be questioned and, if not properly explained, treated as unexplained investment.
• CIT v Chensing Ventures High CourtHelps taxpayerValidity unconfirmed
  I surrendered unexplained cash payments as income at a survey and I also have a business loss for the same year. Can the officer refuse to set the loss off against the surrendered income?
  Not on the law as it then stood. The Madras High Court dismissed the Revenue's appeal, holding that no substantial question of law arose. The Assessing Officer had added Rs 28,50,000 as undisclosed income under section 69 and had allowed no set-off of the determined business loss of Rs 8,20,384 against it, giving no reason for the refusal. Section 71 permits a loss remaining after set-off within a head to be set off against income of the same year under any other head, capital gains apart. Income tax is one tax on total income, so once the loss is determined it must be set off against income determined under any other head.
• Fakir Mohmed Haji Hasan v CIT High CourtHelps department
  An unexplained investment has been added to my income under section 69A and the asset was then confiscated. Can I set the loss off against that addition?
  No. The Gujarat High Court held that income deemed under sections 69, 69A, 69B and 69C falls under none of the heads in section 14, not even income from other sources, because those sections apply precisely where the source is unknown or unexplained. Since the deemed income cannot be classified under a head, the deductions that go with a head are not available against it. Gold worth Rs 48,72,000 found concealed in the assessee's car and confiscated by customs was rightly added under section 69A, and its confiscation could not be claimed as a trading loss.
• CIT v Metachem Industries High CourtHelps taxpayerValidity unconfirmed
  There are credits in my partners' capital accounts. The officer says the partners cannot prove where the money came from and is adding it to the firm's income. Can he?
  No, once the firm has identified the depositor and he owns the entry. The Madhya Pradesh High Court answered the reference against the Revenue and held that where it is established that an amount was invested by a particular person, partner or otherwise, the firm's responsibility is over. The firm cannot be asked whether the money invested was properly taxed; it need only explain that the investment was made by that individual, and it is for him to account for it. If he owns the entry the firm's burden under section 68 is discharged, and the officer's remedy is to proceed against that person, if necessary under section 69.
• Jagdish Kumar Arora v DCIT ITATHelps taxpayerValidity unconfirmed
  You surrendered income in a survey. Is it taxed at 60% under s.115BBE, or at your normal rate?
  Where the source is your own business, at your normal rate. The deeming provisions only bite where the source is unexplained; unrecorded debtors from the business are explained, so s.115BBE was held not to apply.
• Seo Lehenga House v DCIT ITATHelps taxpayerValidity unconfirmed
  I have already offered the profit on the disputed transactions. Can the officer add the broker's commission on top under s.69C?
  Not where the commission is already inside the profit you offered. The Tribunal deleted a s.69C addition for cash commission paid to a broker for arranging bogus purchases and sales, in each of six consolidated appeals covering two assessees and five assessment years, because in every year the gross profit the assessee had already declared on those transactions exceeded the commission the Assessing Officer himself had determined. For the leading year the gross profit was Rs. 14,57,154 at 1.60 per cent against a determined commission of Rs. 5,31,795, and the Rs. 3,32,371 the first appellate authority had sustained was deleted. The rates differ year by year.
• Net Agri Company Pvt Ltd v ITO ITATHelps taxpayer
  The Commissioner (Appeals) accepted my explanation for the investment but then made a fresh addition for cash deposits he spotted in my bank statement, without telling me. Can he do that?
  No. The Delhi Tribunal held that the Commissioner (Appeals) cannot determine taxability from a new source, and cannot enhance without show-causing the assessee. The Assessing Officer had added the investment in property as unexplained under section 69. Having accepted the evidence and deleted most of it, the Commissioner (Appeals) went on to tax cash deposits in the bank account used to repay the bridging loan, treating them as unexplained cash credits under section 68. That was a different exercise from the one the officer had done, it went beyond the Tribunal's earlier remand, and no notice was given. The addition of Rs 1,75,50,000 was deleted.
• Jafferali K. Rattonsey v DCIT ITATHelps taxpayer
  I held shares in physical form for years and dematerialised them just before selling. The AO says my holding period runs from the demat date. Is he right?
  No. The date of purchase is taken from the broker's note or contract note, and the period of holding runs from that date, not from the date of dematerialisation. The Assessing Officer had converted a long-term gain into a short-term one by treating the demat date as the date of acquisition and the market price on that date as cost; the Tribunal rejected both moves.
• ITO v Smt. Parul Grover ITATHelps taxpayerValidity unconfirmed
  I refinanced. I took a fresh loan from another bank and used it to close my original house construction loan. The officer says the new loan was not taken for construction, so no s.24(b) interest. Is there authority against him?
  Yes. Where the second borrowing has really been used merely to repay the original loan taken for the house, interest on the second loan is deductible, and the Tribunal applied CBDT Circular No.28 dated 20 August 1969 to allow it. The deduction is confined to the part of the fresh loan actually traced to repayment of the original housing loan, worked out proportionately.
• CBDT Circular No. 11/2019 — set-off of loss against s.115BBE income CBDT Circulars & InstructionsHelps taxpayer
  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?
  Yes. Circular No. 11 of 2019 records the Board's view that an assessee is entitled to claim set-off of loss against income determined under s.115BBE up to assessment year 2016-17. It is the department's own instruction, so an Assessing Officer cannot take a contrary view for those years — and by the same document, the position from assessment year 2017-18 is that the set-off is denied.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.