Section 69B unexplained expenditure requires proof of actual understatement, not mere wealth-tax valuation or notional market value.

Section 69B requires the Assessing Officer to first establish, on evidence, that the assessee actually expended more than the amount recorded in the books; only then can the burden shift to the assessee. A valuation drawn from Rule 3 of Part B of the Third Schedule to the Wealth Tax Act, 1957 cannot replace proof of actual extra consideration under the Income-tax Act. In the absence of incriminating material showing understatement of purchase price, and where the revenue relied only on valuation, high rental yield, or perceived market value, the addition cannot be sustained because section 69B does not permit taxation on a notional or fictional basis.

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Issues: Whether an addition under section 69B of the Income-tax Act, 1961 could be sustained on the basis of a valuation adopted from the Wealth Tax Act, 1957 without first proving that the assessee had actually expended more than the amount recorded in the books of account.

Analysis: Section 69B requires the Assessing Officer to first find, on evidence, that the assessee has expended an amount over and above what is recorded in the books. The initial burden does not shift to the assessee unless such understatement is first established. In the present case, no incriminating material seized in the search showed understatement of the purchase price. The revenue authorities instead applied the valuation mechanism under Rule 3 of Part B of the Third Schedule to the Wealth Tax Act, 1957. That rule is designed for computation of wealth-tax value and cannot substitute for proof of actual extra consideration paid under the Income-tax Act. The Court held that a mere inference from a property's high rental yield or supposed market value is insufficient, because section 69B does not authorise tax on a notional or fictional basis.

Conclusion: The addition under section 69B was unsustainable because the revenue failed to prove actual understatement of investment or consideration; the rule-based wealth-tax valuation could not by itself establish unexplained expenditure. The issue was decided in favour of the assessee.

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