CBDT Instruction on Sections 68, 69A, 69B, 69C, 69D and Section 115BBE after C&AG Compliance Audit – Directions for Uniform Assessment, Investigation and Correct Tax Computation

 

FACTS OF THE CASE

  1. The Comptroller and Auditor General of India (C&AG) conducted a Compliance Audit on the application of Sections 68, 69A, 69B, 69C and 69D read with Section 115BBE of the Income-tax Act, 1961.
  2. The audit found variations among Assessing Officers in invoking the relevant deeming provisions relating to unexplained income.
  3. The audit also noted incorrect application of tax rates and computational errors, leading to loss of revenue.
  4. CBDT examined the audit observations and issued directions to all field formations vide F.No.225/26/2026-ITA.II dated 29.05.2026.

 

ISSUES INVOLVED

  1. Whether Assessing Officers are required to ascertain the true nature and source of unexplained amounts before invoking Sections 68, 69A, 69B, 69C or 69D.
  2. Whether additions made under Sections 68, 69A, 69B, 69C and 69D must be taxed in accordance with Section 115BBE.
  3. Whether losses or expenditure can be set off against income assessed under the aforesaid provisions.
  4. Whether incorrect reporting in ITBA computation sheets can lead to errors in tax computation and carry-forward of losses.

 

PETITIONER'S ARGUMENTS

Not Applicable.

The matter arises from CBDT administrative directions issued pursuant to C&AG audit observations and does not involve litigation before any judicial forum.

 

RESPONDENT'S ARGUMENTS

Not Applicable.

The matter pertains to administrative instructions issued by CBDT and does not arise from adversarial proceedings.

 

CBDT FINDINGS / DIRECTIONS

  1. Assessing Officers must satisfy themselves regarding the true nature and source of the amount before invoking Sections 68, 69A, 69B, 69C or 69D.
  2. Necessary inquiries and investigations should be conducted, including use of powers under Section 133(6) of the Income-tax Act, 1961.
  3. The relevant provision should be invoked strictly on the basis of facts and evidence gathered during assessment proceedings.
  4. Section 115BBE must be considered while making additions under Sections 68, 69A, 69B, 69C and 69D.
  5. Income assessed under these provisions is subject to taxation at special rates prescribed under Section 115BBE.
  6. Expenditure deduction and set-off of losses are not permissible against such income in accordance with Section 115BBE.
  7. Relevant fields in ITBA computation sheets must be filled correctly to avoid computational mistakes relating to income, tax and loss carry-forward.

 

IMPORTANT CLARIFICATION

• CBDT has reiterated that additions under Sections 68, 69A, 69B, 69C and 69D cannot be made mechanically and must be supported by proper inquiry and evidence.

• The true nature and source of unexplained amounts must be determined before selecting the applicable statutory provision.

• Taxability under Section 115BBE must be examined in every case involving additions under Sections 68, 69A, 69B, 69C and 69D.

• Incorrect coding or computation in ITBA may result in erroneous tax calculations and improper carry-forward of losses.

• The instructions also apply to corresponding provisions under the Income-tax Act, 2025, namely Sections 102, 103, 104, 105, 106 and Section 195.

 

SECTIONS INVOLVED

Income-tax Act, 1961

• Section 68 – Unexplained Cash Credits

• Section 69A – Unexplained Money, Bullion, Jewellery, etc.

• Section 69B – Amount of Investments not Fully Disclosed

• Section 69C – Unexplained Expenditure

• Section 69D – Amount Borrowed or Repaid on Hundi

• Section 115BBE – Tax on Income Referred to in Sections 68 to 69D

• Section 133(6) – Power to Call for Information

 

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