2026 (3) TMI 1493 - AT - Income Tax

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 ... Addition u/s 69A as alleged unexplained money invested in the shares - bogus deduction of long term capital gains u/s. 10(38) HELD THAT: - The Tribunal found that the reassessment was initiated on the premise that the assessee had obtained bogus long-term capital gains and claimed exemption in respect of the shares in question. However, during the relevant year the assessee had not sold those shares and had not claimed any long-term capital gain. The shares were stated to have been acquired in Financial Year 2009-10, and therefore the investment in them could not be treated as unexplained investment in A.Y. 2018-19. The Tribunal also observed that the reasons recorded were founded only on the investigation wing report and not on any independent enquiry by the Assessing Officer. In these circumstances, the addition made under section 69A was held to be untenable. [Paras 6, 7] The addition made under section 69A was directed to be deleted. Final Conclusion: The appeal was allowed. The Tribunal held that, since no sale of the shares had taken place and no exempt long-term capital gain had been claimed in A.Y. 2018-19, and the investment related to an earlier year, the impugned addition under section 69A could not stand. 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.