Valuation report alone cannot sustain addition for unexplained construction investment under section 69, tribunal holds

5-Second Takeaway

An addition for unexplained investment in construction under section 69 cannot be sustained on the DVO’s estimate alone. In the absence of independent evidence that the assessee actually incurred expenditure beyond the amount disclosed, the addition was deleted.

The case concerned an addition made under section 69 on the footing that the cost of construction of a building or structure was understated. The assessing officer relied on the Departmental Valuation Officer’s report to support the difference between the declared cost and the estimated cost.

The tribunal held that the DVO’s valuation is an important item of evidence, but it is not conclusive proof of actual unexplained investment. A mere estimated difference in valuation does not automatically establish that the assessee incurred additional expenditure.

On the facts, the assessing officer had not brought any independent material to show that the assessee had actually spent more than what was disclosed. There was no corroborative evidence to connect the valuation difference with real, unaccounted outlay.

The addition under section 69 was therefore deleted. The tribunal followed the view that an estimated valuation difference, without supporting evidence, is insufficient to sustain an addition for unexplained investment.