Unexplained income or asset
Previously, if the taxpayer fails to justify any amount credited, value of the investment, money, value of the article, or amount of expenditure, suppressed amount of production, sales or any amount chargeable to tax or of any item of receipt liable to tax, the CIR may taxed such items to the extent that they are not adequately explained under the head ‘income from other sources’.
The Finance Act has approved to tax the suppressed amount of production, sales or any amount chargeable to tax or of any item of receipt liable to tax as “Income from Business” whilst other items would continue to be taxed as “Income from Other Sources” to the extent it is not adequately explained to the satisfaction of the Commissioner.
This is a corrective amendment as it rationalizes the tax treatment of items under their respective head to which they relate. However, the suppressed receipts may be susceptible to minimum tax under section 113 while benefit of adjusting carry forward business losses will be available against these receipts.
