Unilateral cancellation deed cannot defeat a registered land agreement; unexplained investment may remain sustained absent proof of source and creditworthiness.

A unilateral registered cancellation deed does not, by itself, nullify a duly registered land purchase agreement in the absence of a civil court decree, with the effect that the original transaction remains legally operative. Sections 31, 32 and 33 of the Specific Relief Act, 1963 govern cancellation of instruments, and the document notes that this principle applies where an assessee seeks to undo an admitted investment in land. It also states that unexplained investment under section 69 may be sustained where the assessee fails to establish the source and creditworthiness of alleged investors, especially when partial relief has already been granted on enquiries.

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Issues: Whether the addition made under section 69 of the Income-tax Act, 1961 towards unexplained investment in land purchase could be deleted on the basis of a unilateral registered cancellation deed and the assessee's rectification plea.

Analysis: The assessee had earlier admitted the investment and accepted the addition to buy peace, and later sought deletion on the basis of cancellation deeds said to have been executed by the vendor. The cancellation was held not to nullify the original registered agreement in the absence of a decree of a civil court. The Court treated sections 31, 32 and 33 of the Specific Relief Act, 1963 as governing cancellation of instruments and held that a registered instrument cannot be treated as cancelled merely by unilateral registration of a cancellation deed. The assessee also failed to establish the full creditworthiness of the alleged 30 investors, and the Assessing Officer had already granted relief to the extent supported by enquiries.

Conclusion: The addition under section 69 was rightly sustained and the challenge to the rectification and appellate orders failed.

Final Conclusion: The assessee did not establish any legal or factual basis to disturb the sustained addition for unexplained investment, and the appeal was rejected.

Ratio Decidendi: A unilateral cancellation deed cannot displace a duly registered sale agreement in the absence of a civil court decree, and an admitted unexplained investment may be sustained where the assessee fails to prove the source and creditworthiness of the funds.

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