In plain words: a very common addition in scrutiny and search cases is under Section 68 — unexplained cash credits like loans and share capital.
What Section 68 is
If a sum is credited in your books (a loan, deposit, share capital) and you cannot satisfactorily explain its nature and source, it can be added as your income — and taxed under the harsh 115BBE regime.
The three things you must prove
- Identity of the creditor/investor.
- Creditworthiness/capacity — that they could provide the sum.
- Genuineness of the transaction.
The evidence that helps
- PAN, confirmation and returns of the creditor.
- Bank statements showing the source and the banking trail.
- Loan agreements, interest, repayment and TDS.
- For share capital, the investor's financials and source.
The higher bar for share capital
For share application/premium, the law and courts expect the company to also explain the source of the source in appropriate cases — so investor diligence matters.
How to defend
- Produce complete documentation for each credit.
- Establish the three ingredients clearly.
- Distinguish genuine business credits from bogus entries.
- Rebut reliance on mere suspicion.
Frequently asked questions
What is a Section 68 addition? Taxing an unexplained credit (loan, deposit, share capital) in your books as income.
What must I prove? Identity, creditworthiness and genuineness of the credit.
What helps most? Complete documentation and the banking trail for each credit.
How Vakil Help Desk helps
Vakil Help Desk advises on income-tax searches and surveys, Section 148/148A reassessment notices, search assessments, penalty and prosecution — and represents clients before the tax authorities, CIT(A), the ITAT and the High Courts. If you are facing a raid, a notice or a reassessment, we can help you respond correctly.
This article is for general legal awareness, not individual legal advice. Income-tax search, seizure and reassessment law, the time limits and the procedure are revised by the Finance Acts and clarified by the courts from time to time, and the right step depends on your facts and the current position. Please consult a professional before responding to a search, notice or reassessment.