Sec 68 unexplained income
This query is : Resolved
12 December 2025
A person received rs. 1,00.000=00 in cash as refund of advance money given for purchase of property, as purchase didn't happen. Should he offer rs. 1,00,000=oo u/s 68 , since he cannot get confirmation from person refunded money. the same cash has been deposited in bank.
Dhirajlal Rambhia
(Expert)
12 December 2025
The person should not offer the refund amount of ₹1,00,000 under Section 68 of the Income Tax Act. The amount received is a refund of an advance and not an unexplained cash credit or income.
The main challenge is the lack of confirmation from the person who refunded the money. The burden of proof lies with the person who received the cash to explain the source and nature of the deposit to the satisfaction of the Assessing Officer (AO) if an inquiry arises.
To substantiate that this is a genuine refund and avoid it being treated as unexplained income (taxed at around 78% under Section 115BBE), the individual should gather all available evidence related to the original transaction:
Original Agreement: A copy of the agreement for the purchase of the property that was later canceled.
Proof of Original Payment: Evidence (bank statements, cheque copies) showing the original payment of the advance money to the seller.
Correspondence: Any written communication (emails, letters, messages) with the seller regarding the cancellation of the deal and the terms of the refund.
The main challenge is the lack of confirmation from the person who refunded the money. The burden of proof lies with the person who received the cash to explain the source and nature of the deposit to the satisfaction of the Assessing Officer (AO) if an inquiry arises.
To substantiate that this is a genuine refund and avoid it being treated as unexplained income (taxed at around 78% under Section 115BBE), the individual should gather all available evidence related to the original transaction:
Original Agreement: A copy of the agreement for the purchase of the property that was later canceled.
Proof of Original Payment: Evidence (bank statements, cheque copies) showing the original payment of the advance money to the seller.
Correspondence: Any written communication (emails, letters, messages) with the seller regarding the cancellation of the deal and the terms of the refund.
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