Unexplained investment addition deleted where opening capital was brought forward and fresh capital was fully covered by drawings.

An addition for unexplained investment was not sustainable where the amount of Rs. 7,481 was only the opening capital brought forward from the earlier year and not fresh investment during the relevant year. The further sum of Rs. 500 could not be treated as unexplained because the assessee's drawings exceeded that amount, fully covering the capital introduced. On that factual basis, the inference of unexplained investment failed and the addition was deleted.

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Issues: Whether the addition of Rs. 7,981 as unexplained investment could be sustained where the amount represented the opening capital brought forward from the earlier year and the only fresh capital introduced during the year was fully covered by drawings.

Analysis: The assessment record did not show any basis for treating the opening balance of Rs. 7,481 as fresh investment during the relevant previous year. The assessee's capital account indicated that this amount was the closing capital as on 31 March 1975, and therefore it could not be characterised as an investment made during the year under consideration. The further addition of Rs. 500 towards capital was also not justified, since that amount was supported by drawings exceeding the sum added. In these circumstances, the inference of unexplained investment was not sustainable.

Conclusion: The addition of Rs. 7,981 was deleted and the issue was decided in favour of the assessee.

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