Unexplained investment additions fail where the assessment relies on presumption, not independent evidence, and the taxpayer's explanation stands unrebutted.

Addition for alleged marriage expenses and unexplained investment in a daughter's name was deleted because it rested only on ACB information, with no independent inquiry by the AO. The assessee's explanation that marriage was met from KVP maturity proceeds and that the daughter's FDR came from marriage gifts remained unrebutted. The Special Judge, ACB had also acquitted the assessee and noted that allegations about family members' investments lacked corroborative evidence. On these facts, the ITAT held the addition to be based on presumption rather than evidence and allowed the appeal.

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Issues: Whether the addition of Rs. 1,25,000 made towards alleged estimated marriage expense and alleged unexplained investment in the name of the assessee's daughter was sustainable.

Analysis: The addition was made only on the basis of information received from the ACB, without any independent inquiry by the Assessing Officer. The assessee had explained that the marriage expenditure was met out of maturity proceeds of KVP and that the FDR in the daughter's name was funded from gifts received at her marriage. These explanations were not rebutted. The Special Judge, ACB had also acquitted the assessee and had found the allegation regarding investments in the names of family members to be unsupported by corroborative evidence. In these circumstances, the addition was held to be based on presumption and not on evidence.

Conclusion: The addition of Rs. 1,25,000 was deleted and the assessee's appeal was allowed.

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