Revenue appeal dismissed; s.69 addition deleted for alleged unexplained FD investments by s.10(23C)(iiiab) exempt university

ITAT Ahmedabad (AT) dismissed the Revenue's appeal against an addition under s.69 for alleged unexplained investments in time deposits by an exempt university under s.10(23C)(iiiab). The Tribunal held the AO relied only on transactional data from the Insight Portal and Form 26AS without direct evidence or bank verification, while the assessee produced SBI confirmation, bank statements and ledger extracts showing no such FDs. As the AO neither proved the investments nor rebutted the assessee's explanation, the addition was deleted.

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ISSUES PRESENTED AND CONSIDERED

1. Whether an addition under section 69 (unexplained investment) can be sustained where the Assessing Officer's allegation is based on third-party transactional data (Insight Portal/Form 26AS) without branch/account specific particulars and without independent verification from the bank.

2. Whether an addition under section 69 can be sustained where the assessee (a government-funded exempt educational institution) produces bank statements, ledger extracts and a bank confirmation denying the existence of the alleged fixed deposits, and the Assessing Officer fails to disprove those explanations with cogent material.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Reliance on third-party transactional data without particulars and independent verification

Legal framework: Additions under section 69 require a finding that investments exist which are not recorded in books of account and for which the assessee does not furnish a satisfactory explanation; the Assessing Officer bears the onus of establishing factum of investment.

Precedent Treatment: The Court refers to the settled principle that section 69 additions must be based on cogent material establishing unrecorded investments; no specific precedents were invoked or overruled in the order.

Interpretation and reasoning: The Assessing Officer relied on Insight Portal/Form 26AS transactional figures (aggregate cash deposits and time deposits) without providing account-specific or branch-wise particulars; such incomplete/ambiguous information was insufficient to establish that the alleged fixed deposits were held by the assessee. The Assessing Officer did not undertake independent verification with the bank despite the assessee's requests and clarifications, and therefore failed to convert third-party data into admissible evidence of actual investments by the assessee.

Ratio vs. Obiter: Ratio - The Tribunal's finding that third-party transactional data, standing alone and lacking particularisation and independent verification, is insufficient to sustain an addition under section 69 is treated as the operative reasoning. Obiter - Observations on the administrative origin of the Insight Portal data are explanatory.

Conclusions: The addition based solely on unparticularised Insight Portal/Form 26AS data and without bank verification is unsustainable; the Assessing Officer's approach failed to discharge the onus of proving the existence of unexplained investments.

Issue 2 - Effect of assessee's contemporaneous records and bank confirmation denying deposits

Legal framework: When the assessee produces books of account, bank statements and a contemporaneous bank confirmation negating the existence of alleged investments, the Assessing Officer must rebut that evidence with cogent contrary material to justify an addition under section 69.

Precedent Treatment: The Tribunal applies settled legal principle that unexplained investment additions are justifiable only where the AO establishes factum of investments and rebuts the assessee's explanations; no contrary precedent was relied upon to justify upholding the addition.

Interpretation and reasoning: The assessee, being a government-funded exempt educational institution with no allegation of diversion of funds, furnished bank statements, ledger extracts and an explicit confirmation from the bank that no fixed deposits in the alleged amounts existed in the relevant year. The Assessing Officer neither produced direct bank records nor conducted enquiries to contradict the bank confirmation or the assessee's records. Given the presence of affirmative evidence negating the alleged investments, the Assessing Officer's failure to disprove the evidence rendered the addition speculative and unsupported.

Ratio vs. Obiter: Ratio - The Tribunal's holding that affirmative bank confirmation and contemporaneous accounting records, when unrebutted by the Assessing Officer, preclude an addition under section 69 is central to the decision. Obiter - Remarks on the assessee's exempt status and absence of diversion are contextual but not necessary to the legal holding that the AO failed to discharge his burden.

Conclusions: Where the assessee provides bank statements, ledger extracts and a bank confirmation denying the existence of alleged fixed deposits, and the Assessing Officer does not obtain or produce independent contradictory evidence, an addition under section 69 cannot be sustained.

Cross-references and Combined Reasoning

Both issues converge on the evidentiary standard required for section 69 additions: (a) the AO must establish the factum of investment with cogent, particularised evidence; and (b) where the assessee furnishes contemporaneous bank records and an explicit bank confirmation denying the transactions, the AO must rebut those materials by independent verification or equally cogent evidence. Failure on either limb-reliance on unparticularised third-party data or failure to disprove the assessee's records-renders an addition untenable.

Disposition

The Tribunal upholds the appellate authority's deletion of the addition under section 69, finding the Assessing Officer's addition to be based on incomplete, ambiguous and unverified information and not supported by independent evidence contradicting the assessee's bank statements and bank confirmation.

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