INCOME TAX ACT, 1961

Section 69

Income from undisclosed sources - Addition under section 69 - Addition made by AO without rejecting books of account -

Pursuant to inspection stock of assessee was found much higher as compared to books of account of assessee. AO calculated the difference between the stock as per books of account and the stock as per inspection report. After giving certain deduction of expenses, AO assessed the difference as unexplained investment under section 69 and thereby made addition to income. Held: AO had not rejected the books of account of assessee. To estimate the unexplained investment in assessee's hands, first of all, AO has to reject the books of account of assessee. Without rejecting the books of account, it is not proper to make addition towards unexplained investment under section 69. Prima facie, AO needs to reject the books of account of assessee and thereafter, he can estimate the unexplained investment in work-in-progress by following the market price or cost, whichever was lower. Since AO failed to do so, therefore, the addition made under section 69 was deleted.

REFERRED : CIT v. P.K. Noorjahan (1999) 237 ITR 570 (SC) : 1999 TaxPub(DT) 0080 (SC)

FAVOUR : In assessee's favour

A.Y. :

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