Unexplained investment in auto sweep fixed deposits rejected where bank records showed salary-linked savings and FD linkage.

Fixed deposits created through an auto sweep facility were held not to be unexplained investment where the assessee produced bank statements and FD details showing salary credits in the savings account, automatic transfer of surplus balances into fixed deposits, and re-credit on premature break-up when needed. The bank records corroborated the linkage between the savings account and the deposits, and the revenue did not disprove this explanation. On the material on record, the deposits were found to have arisen from salary income and savings, so the addition under section 69 was deleted.

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Issues: Whether the deposits in fixed deposits through the auto sweep facility constituted unexplained investment liable to addition under section 69 of the Income-tax Act, 1961.

Analysis: The assessee produced bank statements and fixed deposit details showing that salary credits were received in the savings account and that excess balances were automatically swept into fixed deposits, with premature break-up and re-crediting back to the savings account when required. The bank records also supported the linkage between the savings account and the fixed deposits. The revenue did not demonstrate that this explanation was false or incorrect. On the material placed on record, the fixed deposits were shown to have arisen from salary income and savings, not from unexplained sources.

Conclusion: The addition under section 69 was not sustainable and was directed to be deleted in favour of the assessee.

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