Sec.69B : Amount of Investments, etc., not fully disclosed in the books of accounts

Section 69B has been reproduced below:

“Where in any year the taxpayer has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the taxpayer for any source of income, and the taxpayer offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, than the excess amount may be deemed to be the income of the taxpayer for such year.”

Explanations with reference to case laws:

• In [ Amar Kumari Surana v. CIT [1996] 89 Taxman 544 (Raj.),] it was held that the burden is on the revenue to prove that real investment exceeded the investment shown in account books of the assessee. Merely on the basis of fair market value no addition can be made under section 69B, but if on the basis of sufficient material on record some reasonable inference can be drawn that the assessee has invested more amount in purchase of plot than that shown in account books, then only the addition under section 69B can be made.

• In [CIT v. Daya Chand Jain Vaidya], the Allahabad Court shifted the onus on to the department saying that if the assessee’s explanation that the investments were in fact held by his wife and sons is not sustainable, then the department has to prove with material evidences that the investments were owned only by the assessee himself. Having said this, it is noteworthy that sec.69B per se uses the phrases like “is found to be the owner of any bullion, jewelry or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewelry or other valuable article……” (as opposed to the word ‘reasons to believe’) which is very conclusive that there is no room for any taxation based on a mere suspicion.

• In case of doubt, Assessing Officer can make reference to Valuation Cell – If the assessee maintained books of accounts in the regular course of business and necessary entries relating to the expenditure towards cost of construction are entered in the books of accounts, which are open to verification, and its correctness is not doubted, it should be accepted. In case of doubt, Assessing Authority can refer the matter to the valuation cell for determination of cost of construction and rely upon such report as an evidence, but it is open to the assessee to challenge the correctness of such valuation report and in case if it establishes that such report is not correct and reliable, expenditure shown in the construction as per the books of accounts is liable to be accepted. – [CIT v. Meerut Cement Co. Pvt. Ltd. [2006] 15-0 Taxman 7 (All.)]