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Facts
The assessee's case was reopened under Section 147 based on her husband's statement (under Section 131(1A)) regarding the purchase of a plot for Rs. 22,00,000/-, while the registered value was Rs. 3,40,000/-. The AO made an addition of Rs. 18,60,000/- as unexplained investment under Section 69, which was subsequently confirmed by the CIT(A). The assessee then appealed to the Tribunal.
Held
The Tribunal observed that while there was no independent corroborative evidence from the Revenue, the husband's admission carried evidentiary value and the denial of cross-examination argument was not sustainable in the peculiar facts. To avoid prolonged litigation and multiplicity of proceedings, and considering the assessee's sole source of income was business, the Tribunal directed the AO to assess the Rs. 18,60,000/- as business income instead of unexplained investment under Section 69.
Key Issues
The key issues were the sustainability of the addition of Rs. 18,60,000/- as unexplained investment under Section 69 based primarily on the assessee's husband's statement, and whether this addition could be reclassified as business income.
Sections Cited
250, 147, 131(1A), 69
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Order PER LALIET KUMAR, J.M This appeal by the assessee is directed against the order of the Ld. CIT(A) / NFAC, Delhi dated 11/03/2025, passed u/s 250 of the Income Tax Act, 1961, for assessment year 2019-20.
Briefly the facts of the case are that the assessee filed her return of income declaring Rs.5,03,780/-. The case was reopened u/s 147 on the basis of a statement recorded from the assessee’s husband, Shri Kuldeep Singh, u/s 131(1A), as well as information from the investigation wing. 2.1 The Ld. AO concluded that the assessee had purchased a plot for Rs.22,00,000/- against the registered deed value of Rs.3,40,000/-. On this basis, an addition of Rs.18,60,000/- was made as unexplained investment u/s 69 of the Act.
Against the order of the AO the assessee went in appeal before the Ld. CIT(A) who has confirmed the addition, holding that the assessee had not satisfactorily explained the source of the on-money investment.
Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal.
During the course of hearing the Ld. AR contended that the impugned addition has been made merely based on the statement of her husband without any corroborative evidence, such as receipts, bank records, or third-party verification. The Assessing Officer brought nothing on record to show an actual cash payment of Rs. 18,60,000/-.
5.1 It was further submitted that the assessee has recorded in her balance sheet the sum of Rs.9,05,260/- representing registered purchase value and supported construction expenses. No unexplained investment has been made. 5.2 The Ld. AR for the Assessee through written submissions placed before undersigned, further emphasized that even though the addition is unsustainable in law, however for the peace of mind and avoid prolonged litigation, she prays that the Hon’ble Tribunal may direct that the sum, if considered taxable at all, be treated as normal business income instead of unexplained investment u/s 69 of the Act as the investment if any was from her sole source of business income, and therefore any addition should be assessed under business income.
Per contra, the Ld. DR supported the orders of the lower authorities. Ld. DR submitted that the assessee’s husband, in a sworn statement recorded u/s 131(1A), categorically admitted that the property was purchased for Rs.22,00,000/- with additional construction of Rs. 12–13 lakhs.
6.1 The Ld. DR argued that the assessee failed to discharge her onus of proving the source of investment, and therefore the Ld. AO rightly invoked Section 69, which was correctly upheld by the Ld. CIT(A).
We have heard the rival submissions and perused the material available on record. The impugned addition has been made solely on the basis of the statement of the assessee’s husband, and admittedly no opportunity of cross-examination was afforded. It is settled law, as held by the Hon’ble Supreme Court in Andaman Timber Industries v. CCE (281 CTR 241), that denial of cross-examination when such statement is relied upon constitutes a serious infirmity and results in violation of the principles of natural justice. However, in the facts of the present case, the record reveals that the Revenue had required the assessee to join the investigation and to depose, but instead she permitted her husband to appear and disclose the source of investment. Thus, the statement relied upon emanates from her own authorised representative in the course of investigation. In such background, we find no useful purpose would be served in directing cross-examination of her own husband, who himself had accepted the investment in the property. Accordingly, the argument of denial of cross-examination is not found to be sustainable in the peculiar facts of the case.
7.1 At the same time, it is equally valid that the Revenue has not brought on record any independent corroborative evidence to establish that the assessee had in fact paid a consideration of Rs.22,00,000/- for the purchase of the property, whereas the registered sale deed clearly reflects a consideration of only Rs.3,40,000/-. For invoking the provisions of section 69 of the Act, it is incumbent upon the Revenue to first establish, based on cogent material, that the assessee had made such an unexplained investment outside the recorded consideration. Unless such foundational facts are proved, the deeming fiction under section 69 cannot be applied. However, it cannot be overlooked that in the course of investigation, the husband of the assessee, who was permitted by her to depose, had categorically admitted and stated that a sum of Rs.22,00,000/- was paid towards the purchase of the property. In such circumstances, the addition cannot be deleted merely on the ground that no further independent evidence was produced by the Revenue, since the admission of the assessee’s husband carries significant evidentiary value. Furthermore, by allowing her husband alone to depose and withholding her own statement, the assessee, through her conduct, effectively restricted the scope of the investigation and thereby prevented the Revenue from probing deeper and bringing further evidence on record. Thus, the interplay between the absence of corroboration and the voluntary admission must be carefully weighed when deciding the sustainability of the addition under Section 69 of the Act.
7.2 It is further noted from the categorical submissions of the Ld. AR of the assessee that her sole source of income is from business activities. Considering her request to avoid multiplicity of proceedings and the fact that the amounts are duly recorded in the balance sheet, I hold that the impugned addition, if at all, should be assessed as business income rather than as unexplained investment under Section 69.
7.3 Accordingly, I am of the considered opinion that the order of the CIT(A) be set aside, and the Assessing Officer is directed to assess the impugned sum of Rs. 18,60,000/- as part of the business income of the assessee. 8. In the result, the appeal of the assessee is partly allowed.
(Order pronounced in the open Court on 25/08/2025)