Recorded Land Investment Cannot Be Taxed Under Section 69: ITAT Chandigarh

Dalbir Singh Vs ITO (ITAT Chandigarh)

Summary: ITAT Chandigarh allowed Dalbir Singh’s appeal for AY 2015-16 and deleted the addition of Rs.126.58 lakh made under Section 69 as unexplained investment. The Tribunal noted that the land investment was already disclosed in the assessee’s books/financial statements, with the balance sheet as on 31 March 2015 showing land investment of Rs.133.06 lakh. It held that the foundational condition for Section 69 is that the investment must be unrecorded; dissatisfaction with the source of a recorded investment does not by itself bring the investment within Section 69.

The Tribunal further observed that only Rs.36.58 lakh of the investment pertained to the relevant year, while substantial amounts had been invested in earlier financial years. Since Section 69 is year-specific, earlier-year investments could not mechanically be taxed in AY 2015-16 merely because information about the aggregate property transaction was received during reassessment. It also recorded that evidence regarding unsecured loans had been furnished and Section 68 was not invoked. Accordingly, the addition was held unsustainable on merits and the assessee’s appeal was allowed.

FULL TEXT OF THE ITAT CHANDIGARH ORDER

1. Aforesaid appeal by assessee for Assessment Year (AY) 2015-16 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 22.07.2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 147 r.w.s. 144B of the Act on 29.03.2022. The sole grievance of the assessee is confirmation of addition of cash deposit for Rs.126.58 Lacs. Having heard rival submissions, the appeal is disposed-off as under.

2. The assessee’s return of income as filed at Rs.2.48 Lacs was initially processed u/s 143(1). However, pursuant to receipt of information that the assessee purchased property for Rs.126.58 Lacs, the case was reopened. The assessee is stated to be engaged in business of poultry and allied activities from which the assessee declared business income. In the recorded reasons, it was alleged by Ld. AO that assessee’s Income Tax Return was not commensurate with the financial transaction of purchase of property and it was alleged that there was unexplained investment to the extent of Rs.126.58 Lacs. The assessee refuted the allegations of Ld. AO and stated that the impugned investment was made out of explained sources over different financial years which could be tabulated as under: –

In this year, the investment was only for Rs.36.58 Lacs and the stated investment was reflected in respective Balance Sheets. The investment was stated to be sourced out of loans taken by the assessee. The Ld. AO, going by the fact that the assessee had capital balance of Rs.32.80 Lacs, rejected the claim of the assessee. Finally, the amount of Rs.126.58 Lacs was added as unexplained investment u/s 69. The Ld. CIT(A) confirmed the addition against which the assessee is in further appeal before us.

Our findings and Adjudication

3. We have carefully heard the rival submissions and perused the material available on record. The short controversy before us is whether the Assessing Officer was justified in treating the entire amount of Rs.126.58 Lacs as unexplained investment u/s 69 of the Act, notwithstanding the fact that the assessee had duly reflected the investment in land in his financial statements over different years and had furnished an explanation regarding the source thereof.

4. On perusal of the Balance Sheet as on 31.03.2015, as placed on record, we find that the assessee has disclosed investment in land amounting to Rs.133.06 Lacs. Thus, the very investment which has been treated by Ld. AO as unexplained investment stood duly reflected in the books / financial statements of the assessee. In our considered opinion, the provisions of Section 69 would be attracted only where the assessee has made investments which are not found recorded in the books of account and the assessee either offers no explanation regarding the nature and source thereof or the explanation so offered is not found to be satisfactory. The first and foundational requirement for invoking Section 69 is, therefore, that the investment should be unrecorded. The same is not the case here. Merely because Ld. AO was not satisfied with the sources of such investment, the same, by itself, would not convert a duly recorded investment into an investment falling within the mischief of Section 69. The distinction between an investment which is not recorded in the books and an investment whose source is alleged to be unsatisfactory cannot be lost sight of while invoking a deeming provision such as Section 69. Therefore, in our considered opinion, the essential condition for invoking Section 69 is not satisfied on the facts of the present case.

5. It could further be seen that investment made by the assessee during this year is Rs.36.58 Lacs only whereas Ld. AO has made entire addition though part of the investment has been made in earlier years. Such an approach, in our considered view, cannot be sustained. The provisions of Section 69 are year-specific and contemplate a deeming of the value of investment as income of the financial year in which the investment has been made. Consequently, an investment pertaining to earlier financial years cannot be mechanically brought to tax in AY 2015-16 merely because information regarding the aggregate property transaction was received during the course of the reassessment proceedings. We further find that the assessee duly furnished evidences qua unsecured loans which have not been doubted since the provisions of Sec.68 have not been invoked by Ld. AO while framing the assessment. A mere comparison between the assessee’s capital balance and the amount of investment cannot justify the invocation of deeming fiction contained in Sec.69.

6. Finally on the given facts and circumstances of the case, the impugned addition could not be sustained on merits. We order so. Delving into the legal ground has een rendered academic in nature.

7. In the result, the appeal of the assessee is allowed. Order pronounced on 17^th August, 2026