Retracted search statement and uncorroborated loose papers cannot sustain on-money and unexplained investment additions.

Retraction of the director's search statement, coupled with the absence of independent verification from flat purchasers, made the seized loose papers insufficient to establish alleged on-money receipt on sale of flats. The fact that the recorded sale prices were above stamp duty values further weakened the inference of unaccounted cash. As the section 69B addition for unexplained investment rested on the same uncorroborated material, it also could not survive once the foundational evidence failed. On this reasoning, both the alleged on-money addition and the consequential unexplained investment addition were deleted.

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Issues: (i) Whether additions for alleged on-money received on sale of flats could be sustained solely on the basis of seized loose papers and the director's statement, after retraction and without corroboration from buyers; (ii) Whether the consequential addition made as unexplained investment in immovable property under section 69B of the Income-tax Act, 1961 was sustainable.

Issue (i): Whether additions for alleged on-money received on sale of flats could be sustained solely on the basis of seized loose papers and the director's statement, after retraction and without corroboration from buyers.

Analysis: The seized material was found in the personal cabin of the director and was not signed or owned by the assessee company. The statement initially recorded during search was later retracted on the plea of coercion, and the revenue did not undertake independent verification with the flat purchasers. The sale documents and declared consideration were also examined, and the recorded sale prices were found to be above the stamp duty values, weakening the inference of unaccounted cash receipt. In these circumstances, the loose paper and the retracted statement were held insufficient to conclusively establish receipt of on-money by the assessee.

Conclusion: The addition on account of alleged on-money receipt was not sustainable and was deleted in favour of the assessee.

Issue (ii): Whether the consequential addition made as unexplained investment in immovable property under section 69B of the Income-tax Act, 1961 was sustainable.

Analysis: The addition under section 69B was derived from the same retracted statement and the same uncorroborated seized material that formed the basis of the on-money addition. Once the foundational material was found insufficient to establish undisclosed receipt, the consequential assumption of unexplained investment could not survive on the same evidence.

Conclusion: The addition under section 69B was unsustainable and was deleted in favour of the assessee.

Final Conclusion: The disputed additions for both assessment years failed for want of reliable corroboration and were deleted, leaving the assessee successful on all contested tax issues.

Ratio Decidendi: A retracted statement and uncorroborated seized papers, without independent verification of the underlying transactions, are insufficient to sustain additions for alleged undisclosed income or consequential unexplained investment.

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