Mr. Mahesh Verma, aged 64 years, is a resident individual running a small trading business and maintaining regular books of account. On 1 st April…

Mr. Mahesh Verma, aged 64 years, is a resident individual running a small trading business and maintaining regular books of account. On 1 st April 2021, he gifts - 3,00,000 to his wife, Nisha, and - 2,00,000 to his daughter, Ria, who is 20 years old. Both Nisha and Ria invest the gifted amounts on the same date in Government of India 11% Taxable Bonds. The interest on these bonds accrues annually and is automatically reinvested in the same bonds in their respective names. In the financial year 2024-25, Mahesh maintains a savings bank account with a co-operative land development bank, from which he earns interest of 20,000. He further holds a fixed deposit and a recurring deposit with Mani Finance Ltd., a Non-Banking Finance Company (NBFC), earning interest of 25,000 and - 10,000, respectively. During the scrutiny assessment of A.Y. 2025-26, the Assessing Officer examines Mahesh's balance sheet and bank statements and discovers investments of 7,00,000 not recorded in the books of account. Mahesh is unable to offer a satisfactory explanation regarding the nature and source of these investments. From the information given above, choose the most appropriate answer to the following questions –