Taxpayer's Statement Validates Dumb Document Found During Search: ITAT Upholds Unexplained Investment Addition

The Income Tax Appellate Tribunal (ITAT) recently upheld the addition of ₹25 lakhs as unexplained investment under Section 69 of the Income Tax Act, 1961. This decision was based on a 'dumb document' found during a search operation, which was validated by the taxpayer's sworn statement. The case involved Devaram Srinivasa Reddy and his wife, Smt. Krishna Veni Kandala, who were subject to a search where loose sheets detailing cash transactions were seized. Srinivasa Reddy admitted in a sworn statement to paying ₹1 crore as an advance for property purchase. The Assessing Officer (AO) subsequently added ₹25 lakhs to each assessee's income as unexplained investment. The assessees appealed to the Commissioner of Income Tax (Appeals) [CIT(A)] and then to the ITAT, arguing the document was invalid. However, the ITAT, comprising Vijay Pal Rao and Manjunatha G, confirmed that the seized document was corroborated by Srinivasa Reddy's sworn statement, thus directly validating the payment for property. The tribunal rejected the assessee's explanation for the cash source, dismissing their appeals and upholding the addition.