Cash Credits & Unexplained Income – Sec 68 – Budget 2012

Existing provision of Sec 68 mandates that where any income is found in the books of assessee as credited or unexplained in the previous year and the assessee has not offered any explanation of that income or the Income Tax Authority is not satisfied regarding the nature and source of that income, then the sum so credited shall be chargeable to Income Tax of the assessee.
 The Section under discussion has been amended to the effect that if the assessee is a company  in which public are not substantially interested  and any cash credits consists of  share application money , share capital or share premium or any such amount then  it shall be regarded as unexplained income and shall be chargeable to tax .It is therefore quite evident from the amendment that the channelisation of black money from unauthorised sources into the share premium of family run companies will no longer be a routine procedure.The art of subscribing to the shares at a mammoth premium via unexplained incomes will be governed by Sec 68, and will cost considerably.
The sum so credited shall be taxed if the same is not disclosed by the assessee. However, the aforesaid provision will not take effect in case of a Venture capital fund or venture capital company.
 The amendment shall be effective from 1^st April, 2013 and shall apply in the relevant assessment years.