Sec 68 unexplained income - tax is imposed

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ghosh (Querist)
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13 December 2025 A person received cash as refund of advance money say rs 1,00,000=00. Does he has to pay tax on it u/s 68, if he shows in his books. Reason of not paying tax is section 68 is applicable if A.O is not satisfied with reason with cash deposits. Also is concealment of income applicable?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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13 December 2025 - Applicability: Section 68 applies when any sum is found credited in the books of an assessee and the assessee either:
- Fails to explain the nature and source of the sum, or
- The explanation given is not satisfactory in the opinion of the Assessing Officer (AO).
- Concealment applies when:
- Income is hidden or misrepresented, OR
- False entries are made to reduce taxable income.
- AO can only invoke Section 68 if the nature and source of the cash deposit is not explained or is unsatisfactory.
- If you had originally given the advance in cash exceeding ₹20,000, Section 269SS would have been violated.
- But if the advance was given by cheque/bank transfer, then no issue arises at that stage.
- If you show the entry as “Refund of Advance,” you need to substantiate it.
- The best evidence is confirmation from the payer, because it directly proves the source.
Without the satisfactory evidence AO can charge you with the section.

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