Additions for unexplained cash credits, investments, money or expenditure under Sections 682025 Act: s. 102 to 69D2025 Act: s. 106 are taxed at a flat 60% plus surcharge and cess under Section 115BBE2025 Act: s. 195, with no deductions allowed. These are among the most common, and most costly, issues in assessments and reassessments.
Income Tax, across India (faceless)
What this notice means
The burden is on the taxpayer to explain the nature and source of the credit or investment. For loans and share capital, identity, creditworthiness and genuineness of the lender must be proved.
Common reasons it is issued
- Cash deposits during the year beyond the business pattern
- Unsecured loans or share capital from parties with low income
- Investment in property not matching declared income
- Purchases or expenses not recorded in books
Time limit to respond
Documents to keep ready
- Cash book and sales records explaining deposits
- Loan confirmations, lender ITRs and bank statements
- Property documents and source-of-funds trail
- Earlier years’ cash balance evidence
How we handle it
- Build a source-wise reconciliation of each deposit or credit
- Collect confirmations and documents from lenders and parties
- Draft a reply with evidence and case laws on burden of proof
- Contest additions in appeal where explanations are wrongly rejected
Points to note
- Explanations must be consistent with books and earlier returns
- Penalty u/s 271AAC2025 Act: no equivalent may follow additions taxed u/s 115BBE2025 Act: s. 195
What usually comes next
- Reassessment Notice u/s 148A / 148Reassessment notices on cash deposits
- Reply to Penalty Notice u/s 270A and Other PenaltiesPenalty that may follow an addition
- Appeal before Commissioner of Income Tax (Appeals)Appealing the addition
Frequently asked questions
Is cash deposited from business sales taxable again?
No, if it is properly recorded as sales and already offered to tax. The reply must show this clearly with books and returns.
Official sources
- Authenticate a notice (DIN check)incometax.gov.inConfirm that a notice or order is genuine before replying
- Income Tax e-Filing portalincometax.gov.inReply to notices under e-Proceedings and file first appeals
- Income Tax Departmentincometaxindia.gov.inActs, rules, circulars and the 1961 to 2025 section utility
Received a notice or an order?
Call us to talk it through. Keep the notice and its response date handy.