Absence of Corroborative Material establishing Unexplained Investment: ITAT deletes Addition u/s 69B of Income Tax Act [Read Order]

The Chennai Benchof the Income Tax Appellate Tribunal (ITAT) deleted addition under Section 69B of the Income Tax Act, 1961 in the absence of corroborative material establishing unexplained investment.

The Assessing Officer (AO) treated the alleged cost of construction as Rs.77,38,424/- based on an impounded loose sheet and after reducing the amount disclosed by the assessee made addition under Section 69B of the Income Tax Act. On appeal, the CIT(A) partly allowed the appeal. In respect of addition under Section 69B of the Income Tax Act, the CIT(A) held that the impounded document itself reflected total construction cost of Rs.62,38,424/- and not Rs.77,38,424/- as adopted by the AO.

The Authorised Representative (AR) for the assessee submitted that the additions are based entirely on loose sheets and diary entries which do not possess any evidentiary value in the absence of corroborative evidence. Regarding the addition under Section 69B of the Income Tax Act, he submitted that the impounded sheet was merely an estimate and not evidence of actual expenditure. It was also contended that the assessee had produced books of account, bills, vouchers, purchase invoices and engineer's estimate demonstrating that the shed was constructed at substantially lower cost.

The Departmental Representative (DR) relied upon the orders of the Assessing Officer and the CIT(A). It was submitted that the impounded documents were recovered from the assessee's premises and therefore carried evidentiary value.

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A Division Bench of Inturi Rama Rao, Accountant Member and Manu Kumar Giri, Judicial Member observed that “No defect was pointed out in the books of account maintained by the assessee. It is settled law that additions under Section 69B cannot be sustained merely on the basis of estimates, assumptions or rough notings found in loose papers unless supported by cogent and corroborative evidence demonstrating actual investment outside the books of account.”

The Bench concluded that the Revenue failed to place any material on record to substantiate its allegation that the assessee had invested an amount over and above what was duly disclosed and accounted for. It was noted that mere suspicion or estimation, unsupported by corroborative evidence, cannot form the basis for invoking the provisions of Section 69B of the Income Tax Act.

Since no credible evidence was brought on record to establish any unexplained investment by the assessee, the addition sustained by the CIT(A) amounting to ₹15,88,424 under Section 69B of the Income Tax Act lacked legal foundation. Accordingly, the addition was held to be unsustainable and was directed to be deleted.

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