The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, has held that Section 69 of the Income Tax Act, 1961 cannot be invoked where the investment is duly recorded in the assessee’s books of account. The Tribunal observed that the foundational requirement for invoking Section 69 is that the investment must be unrecorded. The case arose from the assessment of Dalbir Singh for Assessment Year (AY) 2015–16. The assessee’s return declaring income of ₹2.48 lakhs was initially processed under Section 143(1). Subsequently, the assessment was reopened after information was received regarding the assessee’s purchase of property for ₹126.58 lakhs.
The assessee was engaged in the business of poultry and allied activities. He explained that the investment in the property had been made from explained sources over different financial years and was reflected in the respective balance sheets.
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The assessee contended that the investment had been duly disclosed in his financial statements over different years and that the sources of investment were explained. The assessee also furnished evidence relating to unsecured loans from which the investment was stated to have been made.
The two-member Bench comprising Manoj Kumar Aggarwal, Accountant Member, and Rajesh Damodarlal Sharma, Judicial Member, noted that the balance sheet as on March 31, 2015 disclosed investment in land amounting to ₹133.06 lakhs. Thus, the investment treated by the AO as unexplained was already reflected in the assessee’s books and financial statements.
The Tribunal observed that Section 69 applies where investments are not recorded in the books of account and the assessee either offers no explanation regarding their nature and source or the explanation is not satisfactory. It held that mere dissatisfaction with the source of a duly recorded investment cannot convert it into an unexplained investment under Section 69.
The Tribunal further noted that the investment made during the relevant year was only ₹36.58 lakh, whereas the AO had made the addition of the entire ₹126.58 lakh, including investments relating to earlier years. Since Section 69 is year-specific, investments pertaining to earlier financial years could not be mechanically taxed in AY 2015–16.
The Tribunal accordingly held that the addition could not be sustained on merits and allowed the assessee’s appeal.
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Dalbir Singh vs ITO Ward – 1
CITATION : 2026 TAXSCAN (ITAT) 1368Case Number : ITA No.1185/CHANDI/2025Date of Judgement : 17 August 2026Coram : MANOJ KUMARCounsel of Appellant : Ashok GoyalCounsel Of Respondent : Vivek Vardhan
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