Practice note · 2026-09-29 · By CA Arun Mehta
Section 68 or Section 69A: It Turns on Whether There Are Books
Section 68 applies only to a sum found credited in books of account maintained by the assessee for the previous year. Section 69A applies where the assessee is found to be the owner of money that is not recorded in books. A bank passbook is not the assessee’s books of account, so a cash deposit by someone who keeps no books falls under section 69A and not section 68.
An officer looks at three cash deposits in a salaried taxpayer’s savings account, disbelieves the explanation, and frames the addition as an unexplained cash credit under section 68.
There is a difficulty with that before anyone reaches the merits. Section 68 needs books of account. A salaried individual keeps none, and a bank passbook is not a substitute for them.
This is not pedantry about citation. The two sections put the burden on different shoulders.
The sections do not overlap
| Section 68 | Section 69A | |
|---|---|---|
| What it catches | a sum credited in the books | money the assessee is found to be the owner of |
| Precondition | books of account maintained by the assessee for that previous year | the money is not recorded in the books, if any are kept |
| The year | the previous year in which the sum is credited | the financial year in which ownership is found |
| Who moves first | the assessee explains the credit | the department establishes ownership |
They are drafted to turn on a single fact: whether the amount is in the assessee’s own books. If it is, the head is section 68 and the explanation is owed. If it is not — and often there are no books at all — the head is section 69A, and something has to be established before any explanation is owed.
Why the passbook is not books of account
The point was settled a long time ago and is still being argued.
A passbook or bank statement is written up by the bank in the course of the bank’s business. It is not maintained by the assessee, and it is not maintained *for* the assessee in the sense the section requires. In CIT v. Bhaichand H. Gandhi, 141 ITR 67, the Bombay High Court held that a bank passbook supplied by the bank to its constituent is not a book of account of the assessee, so a credit appearing in it cannot be charged under section 68.
The same reasoning disposes of the variations. A ledger the assessee is not required to keep and does not keep is not made into books by the officer wishing it existed. Nor is a broker’s statement, a builder’s receipt file, or a spreadsheet recovered from somebody else.
What changes when the head changes
Who has to move first
Under section 68 the sum is already in the assessee’s own books. He has, by making the entry, asserted something about it, and the initial onus of explaining nature and source sits with him.
Section 69A begins somewhere else. The assessee must be found to be the owner of the money. That is a finding the department has to reach on material, and until it is reached there is nothing for the assessee to answer. It is not a formality: additions fail on it. An order deleting ₹3.94 crore on 28 September 2026 did so because the material never fixed receipt in the year assessed — the evidence was dated after the year it taxed.
Which year
Section 68 fixes the year by the entry: the previous year in which the sum is credited. Section 69A fixes it by the finding of ownership, in the financial year concerned.
Where money is alleged to have moved outside the books, nothing supplies the year automatically. It has to be proved like anything else.
Source of the source
The proviso to section 68 requires, for share application money, share capital and share premium received by a closely held company, that the resident shareholder’s own source be explained as well — from AY 2013-14. The Finance Act 2022 extended the same requirement to loans and borrowings generally, from AY 2023-24.
Section 69A carries no equivalent. Where an addition has been framed under section 69A, a demand to explain the source of the source has no statutory foundation. That is worth noticing, because the demand is made anyway.
The rate does not change
Section 115BBE charges income referred to in sections 68 and 69 to 69D at 60 per cent, with surcharge and cess taking it near 78, and allows no deduction and no set-off of loss. It applies to both heads alike, from AY 2017-18.
So correcting the head does not reduce the rate. It changes who must prove what, and that is usually where the appeal is won or lost.
Does the wrong section sink the addition?
Not by itself, and it is worth being straight about this rather than overselling the ground.
Section 292B protects an order from being invalidated for a defect in form where it is, in substance, in conformity with the Act. Appellate authorities have upheld additions under the correct provision where the facts supported it, treating the misdescription as curable.
The argument still earns its place, for a narrower reason. Where the correct head is section 69A, the department needed a finding of ownership. If the assessment never made one — because it thought it was applying section 68, where none is required — that finding cannot be made for the first time in appeal on material the assessee was never confronted with. The misdescription is not the defect. The missing finding is.
Before you reply
- Establish whether books exist at all. Not a passbook. Not somebody else’s record. Books the assessee maintains, for that previous year.
- Read the show-cause against the section it names. If it demands an explanation of a credit, ask which book it is credited in.
- If the head is section 69A, ask where the ownership finding is. Amount, recipient, year — all three, in the assessment order.
- If the head is section 68, check whether the proviso is even engaged before answering a source-of-source demand.
- Answer the substance in any event. The head is a ground of appeal; the explanation is still the case.
The broader question of what the Tribunal actually weighs on these additions is taken up in what decides an unexplained credit appeal, and the onus on share capital and unsecured loans in section 68: what the onus actually requires.
This note is general information drawn from the statute and reported decisions, not advice on your matter. Every addition turns on its own record.
Questions this answers
- What is the difference between section 68 and section 69A?
- Section 68 charges a sum found credited in the books of account maintained by the assessee for the previous year, where the nature and source are unexplained. Section 69A charges money the assessee is found to be the owner of in a financial year, where that money is not recorded in the books, if any are kept. The dividing fact is whether the amount appears in the assessee’s own books.
- Can a cash deposit in a savings account be taxed under section 68?
- Not where the assessee maintains no books of account. A bank passbook or statement is maintained by the bank, not by the assessee, and has been held not to be the books of account of the assessee — see CIT v. Bhaichand H. Gandhi, 141 ITR 67 (Bom). The correct head for such a deposit is section 69A, which requires the department to first find the assessee to be the owner of the money.
- Does an addition fail because the officer quoted the wrong section?
- Not automatically. Section 292B protects an order from being invalidated for a defect in form where it is in substance in conformity with the Act, and appellate authorities have sustained additions under the correct provision where the facts supported it. The point still matters, because section 69A requires a positive finding of ownership that section 68 does not, and a finding never made in the assessment cannot be supplied for the first time on appeal.
More practice notes
- The Evidence Was Dated After the Year It TaxedA search, a broker, three WhatsApp messages and ₹3.94 crore of additions. Two of the messages were dated after the year they were taxing — and that decided it.
- Your Bank Wants a Form 15CB. Rule 37BB Often Does NotOnly one of the five routes through Rule 37BB carries an accountant’s certificate. The other four are got wrong in both directions — a certificate commissioned for nothing, or a Part D filed on a sum that was chargeable all along.
- The Buyer Deducts on the Whole Sale Price. What to Do Before the DeedSection 195 makes the buyer liable, and a buyer who cannot verify your cost deducts on the entire consideration. The remedy has to be in hand before the deed is executed, not after.
Holding one of these yourself?
Every assessment turns on its own record. A note like this one tells you what the tribunals have accepted; it cannot tell you whether your papers carry it. Bring the notice in before the reply is drafted, not after.
Notice Assessment Session — 30 minutes, ₹5,000 + gst. A defence outline: the points to take, the documents to assemble, and the date each step falls due.