Unexplained investment addition fails when uncorroborated seized papers and inconsistent third-party statements do not prove actual cash payment.

An addition under section 69 for alleged unexplained investment in a shop could not be sustained where the seized paper was unsigned, the supporting material did not reliably establish any cash payment over and above the documented consideration, and third-party statements were inconsistent. The Tribunal also noted that denial of cross-examination and Rule 46A could not justify confirmation of the addition on these facts, because no additional evidence had been improperly introduced before the first appellate authority. The addition was therefore deleted, applying the principle that unexplained investment cannot rest on conjecture without credible proof of actual payment by the assessee.

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Issues: Whether the addition made under section 69 of the Income-tax Act, 1961 towards alleged cash payment for purchase of a shop could be sustained on the basis of a seized paper and third-party statements, and whether denial of cross-examination and invocation of Rule 46A of the Income-tax Rules, 1962 justified confirmation of the addition.

Analysis: The seized paper was unsigned and the material relied upon was not independently established to show that the assessee had actually paid cash over and above the documented sale consideration. The record also contained inconsistent statements from members of the builder group, and the assessee had denied making any cash payment. On these facts, the Tribunal held that the case was not one where Rule 46A of the Income-tax Rules, 1962 could be pressed into service against the assessee, since no additional evidence had been filed before the first appellate authority. Following the co-ordinate bench decision on similar facts involving the same project and vendor, the Tribunal found that the addition rested on conjecture rather than proved material.

Conclusion: The addition under section 69 was not sustainable and was deleted. The issue was decided in favour of the assessee.

Ratio Decidendi: An addition for unexplained investment cannot be sustained merely on the basis of an uncorroborated seized paper and third-party statements, without reliable material establishing actual cash payment by the assessee.

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