Unexplained investment additions fail where records show work-in-progress arose in earlier years, not the year under appeal.

Unexplained investment additions under section 69 could not be sustained where year-wise expenditure records and ledger accounts showed that the work-in-progress and stock had accumulated over earlier years, beginning in financial year 2008-09. The opening balance in the year under appeal indicated that the investment related to prior periods, and income could not be assessed in the current year merely because earlier disclosures were incomplete or differently formatted. Contemporaneous records were treated as sufficient evidence of prior-year expenditure, so the lower authorities erred in ignoring them. The addition was deleted and relief was granted to the assessee.

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Issues: Whether the addition made under section 69 of the Income-tax Act, 1961 towards alleged unexplained investment in opening work-in-progress and stock could be sustained in the assessment year in question.

Analysis: The assessee produced year-wise expenditure details and ledger accounts showing that the impugned work-in-progress had accumulated over several earlier years, beginning from financial year 2008-09. The opening balance in the year under appeal itself indicated that the investment belonged to prior periods. An addition under section 69 or section 69A can be made only in respect of investment made in the relevant previous year, and the Revenue cannot treat an accumulated historical investment as income of the current year merely because earlier return disclosures were said to be incomplete or in a different format. The contemporaneous records were sufficient to show that the expenditure was incurred in earlier years and the lower authorities erred in ignoring that material.

Conclusion: The addition under section 69 was not sustainable and was directed to be deleted. The appeal was allowed in favour of the assessee.

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