Unexplained stock investment addition upheld where delayed retraction could not displace search admissions and valuation evidence.

An assessment framed under section 143(3) was not required to be made under section 144 because the books of account had not been rejected on the record, so the additional ground was held inadmissible. Excess iron ore stock found during search and survey, supported by registered valuation, contemporaneous statements, and the assessee's initial admission, justified the addition for unexplained investment. The later retraction was delayed, unsupported by a contrary valuation, and unaccompanied by a satisfactory explanation of source or reconciliation with the books. The appeal was dismissed.

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Issues: (i) Whether the additional ground that the assessment should have been framed under section 144 of the Income-tax Act, 1961 after rejection of books was admissible. (ii) Whether the addition on account of unexplained investment in iron ore stock, based on valuation and statements recorded during search and survey, was sustainable.

Issue (i): Whether the additional ground that the assessment should have been framed under section 144 of the Income-tax Act, 1961 after rejection of books was admissible.

Analysis: The assessee had been assessed under section 143(3) on the basis of material already on record. The books of account were not rejected, and the claim that the assessment was necessarily required to be completed under section 144 was not supported by the record.

Conclusion: The additional ground was not admissible and was rejected against the assessee.

Issue (ii): Whether the addition on account of unexplained investment in iron ore stock, based on valuation and statements recorded during search and survey, was sustainable.

Analysis: Excess iron ore stock was found during search and survey proceedings. The stock was valued by a registered valuer, the valuation was confronted to the assessee, and the assessee initially agreed to the valuation and offered the amount as additional income. The later retraction came after a substantial delay and was not supported by any satisfactory explanation or contrary valuation. The assessee also failed to explain the source of investment or reconcile the excess stock with the books of account despite repeated s. The evidentiary material, including the statements recorded under search, was therefore accepted as reliable for making the addition.

Conclusion: The addition for unexplained investment was upheld against the assessee.

Final Conclusion: The assessee failed to establish any legal or factual infirmity in the assessment or in the addition sustained by the lower authorities, and the appeal was dismissed.

Ratio Decidendi: A delayed and unsubstantiated retraction from an admission recorded during search, when corroborated by valuation material and unsupported by any satisfactory explanation of source, does not displace the addition for unexplained investment.

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