CHAPTER VI — AGGREGATION OF INCOME

Section 101 — Total Income

BLOCK 1 : SECTION TEXT (NEW ACT, 2025)

Total income.

101. In computing the total income of an assessee, there shall be included all income on which no income-tax is payable under Chapter XVII-A4.

BLOCK 2 : CORRESPONDING SECTION IN OLD ACT (1961)

Section 66 of the 1961 Act — Total income

Section 66 — In computing the total income of an assessee, there shall be included all incomes on which no tax is payable under Chapter VII (then operative).

BLOCK 3 : COMMENTARY

Section 101 retains the principle that even certain rebate-eligible incomes are aggregated for rate-determination purposes. The cross-reference to Chapter XVII-A4 (corresponding to old Chapter VII rebates) preserves the rate-fixing role of aggregation. The mechanism is technical — used for working out the average rate of tax on which double-taxation relief and certain rebates are computed.

Section 102 — Unexplained Credits

BLOCK 1 : SECTION TEXT (NEW ACT, 2025)

Unexplained credits.

102. (1) Where any sum is found credited in the books of an assessee maintained for any tax year, and— (a) the assessee offers no explanation about the nature and source of such credit; or (b) the explanation offered about the nature and source of such credit by assessee is not satisfactory in the opinion of the Assessing Officer, then, the sum so credited shall be charged to income-tax as income of the assessee of that tax year.

(2) Where the sum credited consists of loan / borrowing, the explanation shall be deemed not satisfactory unless the person in whose name the credit is recorded also offers a satisfactory explanation about the nature and source.

(3) Where the assessee is a closely-held company and the sum credited consists of share application money / share capital / share premium, the explanation shall be deemed not satisfactory unless the resident person in whose name the credit is recorded also offers a satisfactory explanation about the nature and source.

(4) Sub-sections (2) and (3) shall not apply where the person in whose name the sum is recorded is a venture capital fund or VCC referred to in Schedule V.

BLOCK 2 : CORRESPONDING SECTION IN OLD ACT (1961)

Section 68 of the 1961 Act — Cash credits

Section 68 — Where any sum is found credited in the books and the assessee offers no explanation or unsatisfactory explanation, the sum is income. Provisos: (i) for loan / borrowing — creditor must also explain (FA 2022 amendment); (ii) for closely-held company share capital / premium — resident shareholder must also explain (FA 2012 amendment); (iii) carve-out for VCF / VCC.

BLOCK 3 : COMMENTARY

Section 102 is the most-litigated section under the head of unexplained credits. The substantive content is preserved word-for-word.

Three-tier explanation regime. (i) For ordinary credits — assessee's explanation must be satisfactory as to nature and source. (ii) For loans / borrowings (post-FA 2022) — the creditor must also independently satisfactorily explain his own source. (iii) For share capital / premium of closely-held companies (post-FA 2012) — the resident shareholder must satisfactorily explain his source.

Three-tier source test (post-FA 2012 / 2022). The Department's burden is met when initial enquiry shows the credit; the assessee's burden then arises to show source — not just identity. The two-tier test (CIT v. Lovely Exports (P) Ltd. (2009) 319 ITR 5 (Del.) [now superseded for closely-held companies]) is no longer enough for closely-held company share capital / premium. The Supreme Court's decision in PCIT v. NRA Iron & Steel (P) Ltd. (2019) 412 ITR 161 (SC) is the leading authority — identity is not enough; source of the source is required. Section 102(3) statutorily codifies this.

Practical takeaway. (i) For closely-held companies receiving share capital / premium: maintain donor / investor source documents (bank statements, ITR copies, balance sheets) for the resident shareholder. (ii) For loan transactions: maintain creditor's own source documents. (iii) For VCF / VCC investments: invoke s. 102(4) carve-out — only the fund needs to satisfy KYC; no source-of-source. (iv) In assessment proceedings, respond to s. 102 enquiry with comprehensive documentation upfront — incomplete responses leave room for the AO to record dis-satisfaction. The case-law on what constitutes 'satisfactory explanation' remains unchanged from the old regime.

Sections 103 to 107 — Unexplained Investments / Money / Expenditure / Borrowings

BLOCK 1 : SECTION TEXT (NEW ACT, 2025)

Unexplained investment, money, expenditure, etc.

103 — Unexplained investment: Investment not recorded in books, or AO finds amount expended exceeds amount recorded — chargeable as income of the tax year. Source: corresponding old s. 69.

104 — Unexplained money / bullion / jewellery / valuable article: Where the assessee is found to be the owner of money, bullion, jewellery, or other valuable article and offers no satisfactory explanation, the value is income. Source: corresponding old s. 69A.

105 — Investment / bullion / valuable article — where books show partial recording: AO may treat the unrecorded portion as income. Source: corresponding old s. 69B.

106 — Unexplained expenditure: Where the assessee has incurred any expenditure and offers no satisfactory explanation about the source of expenditure, such expenditure is income. Source: corresponding old s. 69C — with the additional rule that no deduction shall be allowed for the expenditure under any other head.

107 — Amount borrowed / repaid on hundi: A hundi loan or repayment in cash is deemed to be income of the year in which it was borrowed / repaid (effectively penalises hundi-money-laundering). Source: corresponding old s. 69D.

BLOCK 2 : CORRESPONDING SECTION IN OLD ACT (1961)

Sections 69, 69A, 69B, 69C, 69D of the 1961 Act

Section 69 — Unexplained investments. Section 69A — Unexplained money etc. Section 69B — Investments not fully disclosed. Section 69C — Unexplained expenditure (no deduction under any other head). Section 69D — Hundi transactions.

BLOCK 3 : COMMENTARY

Sections 103 to 107 of the new Act re-state the parallel deeming provisions of old ss. 69, 69A, 69B, 69C and 69D respectively. Substantively unchanged. These provisions, together with section 102 (cash credits) and section 198 of the new Act (special tax rate of 60% on unexplained income, formerly s. 115BBE), constitute the 'unexplained income' regime.

Special tax rate. Section 198 of the new Act (corresponding to old s. 115BBE) imposes a flat tax rate of 60% (plus surcharge of 25% and cess) on income chargeable under sections 102 to 107 — translating to an effective rate of about 78% — without any deduction under any provision of the Act. The ban on deduction is absolute; no set-off of losses (under Chapter VII) is permitted. The penalty regime under section 271AAC (corresponding section in Chapter XXI of new Act) imposes 10% additional penalty on top.

Continuity of jurisprudence. Sumati Dayal v. CIT (1995) 214 ITR 801 (SC) — burden of proof under s. 68 / 69; CIT v. P. Mohanakala (2007) 291 ITR 278 (SC) — when explanation is satisfactory. All continue to apply.

Practical takeaways. (i) For all clients facing notice under sections 102-107: respond within statutory time, with full documentation. The 60% / 78% rate makes the difference between explained and unexplained dramatic. (ii) For HNI clients with foreign assets: also coordinate with Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 — that Act has its own deeming provisions and 30% / 90% / 120% / 150% penalty regime. (iii) For demonetisation / bank cash deposits (Nov 2016) — old s. 115BBE litigation continues; assessees still defending old assessments should rely on Sandeep Singh Khanuja v. ITO line of jurisprudence. (iv) For closely-held companies — the source-of-source standard makes early documentation imperative; do not defer enquiries until summons stage.

Chapter VI — At a Glance

Practitioner notes

• Section 198 (formerly s. 115BBE) tax rate of 60% + 25% surcharge + cess applies to all sections 102-107 — effective rate ~78%. No deductions or set-offs.
• Penalty under Chapter XXI (formerly s. 271AAC) — 10% on top, where the assessee himself includes such income in his return (and 50%-200% of tax otherwise under s. 270A).
• For closely-held companies: maintain source-of-source documentation for share capital / premium received.
• For loans: creditor's source documents must be on file; FA 2022 amendment is now in s. 102(2).
• Coordinate with the Black Money Act, 2015 for foreign-asset cases — separate regime with its own penalties.