Unexplained investment addition fails where alleged on-money is supported only by seized data and an uncorroborated third-party statement.

Addition for unexplained investment based on alleged on-money for a flat purchase cannot stand on a seized pen drive and a third-party statement alone. Without independent enquiry tracing the cash trail or corroborative material linking the assessees to any extra payment, and where the third party made no specific admission of receipt from them, the alleged cash component remained unproved. Suspicion and uncorroborated third-party material were insufficient to sustain the addition, so it was deleted in favour of the assessees.

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Issues: Whether the addition made as unexplained investment on account of alleged on-money paid for purchase of a flat could be sustained solely on the basis of a seized pen drive and a third-party statement, without independent corroborative evidence.

Analysis: The assessments rested on material found in a pen drive seized from a third party and on a statement recorded from that person. However, there was no independent enquiry to trace the cash trail or any corroborative material linking the assessees to the alleged cash payment. The statement of the third party did not contain a specific admission regarding receipt of cash from the assessees, and the assessees had consistently denied any payment over and above the cheque consideration. An addition under the unexplained investment provision cannot be sustained merely on suspicion or on an uncorroborated third-party statement.

Conclusion: The addition was unsustainable and had to be deleted, in favour of the assessees.

Ratio Decidendi: An addition for unexplained investment based on alleged on-money payment cannot be upheld unless the seized material and third-party statement are supported by independent corroborative evidence establishing the assessee's actual cash payment.

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