Unexplained Investments under Section 69 of IT Act

What are Unexplained Investments?

The unexplained investments come under Section 69 of the Income Tax Act,1961. These investments are made by the assesses in a financial year just preceding the assessment year.

If the investments are not mentioned in the account books of the assessee and he/she cannot provide the correct explanation for such investments, then the assessment officer will consider the value of these investments as the income of the assessee for the financial year. It will be taxed as per the income slab rate.

Tax Rate for Unexplained Investments

Under section 69A of the Income Tax Act, the income is taxed at the rate of 60% with the additional charges such as surcharges at 25% and 4% of Health and Education cess, which makes it a total of 78% tax rate.

Example: Consider Ramesh invests Rs 1 lakh in an FY without mentioning it in its books of account. If he was unable to provide the explanation for the source of this investment, then the AO will treat this investment as a part of his income.

The tax liability would be:

Important Conditions Under Section 69

Here are the important conditions that need to be fulfilled as per Section 69 of the Income Tax Act:

• If investments are not recorded in the financial accounts of the assesses under any source of income.
• The assessee had made the given investments in the financial year that just preceded the assessment year.
• If the assessor could not provide the information about the source and the nature of the investment.
• If the assessing officer thinks that the explanation provided by the assesse is not satisfactory.