Unexplained investment addition fails where shares were acquired earlier and the assessment rests only on an investigation report.

An addition as unexplained investment could not be sustained in the relevant assessment year where the shares in question had been acquired in an earlier year, no sale had taken place during the year, and no long-term capital gain had been declared for that year. Reassessment based only on an investigation report, without independent verification by the Assessing Officer, was insufficient to support the section 69A addition. The addition was therefore held unsustainable and deleted.

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Issues: Whether the addition made as unexplained investment under section 69A could be sustained when the assessee had not sold the shares during the relevant assessment year and the reopening was based on an investigation report without independent verification.

Analysis: The reassessment was initiated on the premise that the assessee had claimed bogus long-term capital gains and exemption in respect of shares of Yes Bank Ltd. and Eicher Motors Ltd. However, the record showed that no sale of those shares had taken place during the relevant year and no long-term capital gain had been declared for that assessment year. The addition eventually made under section 69A did not match the stated reason for reopening, and the conclusion rested only on the investigation report without independent enquiry by the Assessing Officer. Since the shares were acquired in an earlier year, the investment could not be treated as unexplained investment in the relevant assessment year.

Conclusion: The addition under section 69A was not sustainable and was directed to be deleted.

Final Conclusion: The assessee succeeded and the impugned addition was set aside.

Ratio Decidendi: An addition as unexplained investment cannot be sustained for the relevant year when the alleged investment was made in an earlier year and the reopening or addition is based only on an external report without independent enquiry and without any corresponding sale or income claim in that year.

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