Landmark Cases on Evidence, Onus and Natural Justice

A litigant, particularly a businessman, who delays taking action for over a decade despite a favorable court order to recover allegedly illegally retained monies, does not deserve relief in discretionary and equitable jurisdiction.

Additions to income cannot be made based on mere surmises or suspicion. The genuineness of a transaction cannot be doubted if the grounds raised by the revenue have not been commented upon by the Tribunal.

The addition for unexplained expenditure or purchases cannot be made solely on the basis of the supplier's failure to appear before the tax authorities, especially if the assessee has discharged the onus of proving the genuineness of the transactions. Merely returning notices issued under Section 133(6) is insufficient to declare purchases as bogus.

An income tax addition cannot be sustained if made solely on the basis of documents seized from a third party, without corroborative evidence or an opportunity to cross-examine the relevant person. The matter should be remanded for fresh consideration.

The distinction between ordinary breaches of law and order and those constituting a threat to public order is significant. Public order implies a more serious disturbance affecting the community at large.

Evidence that is cogent, credible, and trustworthy can be relied upon by the court, even if it comes from interested witnesses.

A sworn statement confessing to unexplained cash found at a taxpayer's premises can be rejected if it lacks supporting evidence and is made by a third party who subsequently applies to the Settlement Commission. The decision is based on the preponderance of probability.

The admission of additional evidence by the appellate authority under Rule 46A of the Income-tax Rules is permissible when such evidence is necessary to meet the ends of justice, even if it was not produced before the Assessing Officer, provided the assessee shows sufficient cause for not producing it earlier.

The Income Tax Appellate Tribunal (ITAT) can admit additional evidence during appeal proceedings, provided it is relevant to the issues at hand. This principle is supported by decisions like Cholamandalam MS General Insurance Co Ltd.

Transactions cannot be re-characterized as sham or bogus unless evidence demonstrates they are indeed so. Authorities erred in re-characterizing remittances of share application money without such proof.

Penalty can only be levied when facts are disproved by the revenue, not merely when facts are not proved or an explanation is not satisfactory.

An unsigned paper containing an allocation of profits among partners lacks evidentiary value. Loose papers seized generally cannot be considered accounts for legal purposes.

Additions to income cannot be made by tax authorities merely on the basis of doubts, conjectures, or surmises. The authorities must base their decisions on evidence and established facts.

An assessee who offers additional income during a survey operation is not bound by that offer if they later provide complete details of their trading activity and income during assessment proceedings, and in such cases, the additional income cannot be added.

When an assessee provides bank statements showing clearance of cheques issued for payments, and no defects in the books of account are pointed out, disallowance of expenditure is not justified even if the supplier could not be located or summoned.

When considering particular cases, the general exception to the rule of law must be adopted.

A Supreme Court decision that gives reasons for dismissing a special leave petition attracts Article 141 of the Constitution, making the declared law binding on all courts. A simple dismissal of a special leave petition without reasons does not constitute a declaration of law under Article 141.

Additions to income cannot be made solely on the basis of statements made by the assessee during a search, particularly when no incriminating material is found. The additions must be considered on their own merits.

A retracted statement under Section 132(4) cannot be the sole basis for making additions to income without corroborative evidence, especially when the assessee provides a more convincing explanation.

When an assessee claims income as agricultural, the burden of proof lies with the assessee to substantiate this claim with evidence. Unsubstantiated claims of agricultural income can be treated as income from other sources.

The genuineness of a transaction can be decided based on the primary facts on record, meaning the revenue is not required to produce clinching evidence to prove purchases are bogus.

An addition to income cannot be sustained on the basis of a note on a piece of paper if it is not in the assessee's handwriting.

An Assessing Officer cannot make an addition to income purely on guesswork without any material or tangible evidence, even though they are not bound by strict rules of evidence.

A transaction that is seemingly valid but entered into for an ulterior purpose to avoid taxes may constitute a colorable device, even if genuine and acted upon.

No additions can be made solely on the basis of third-party statements or departmental valuation reports without corroborating independent evidence and without affording an opportunity for cross-examination. Additions cannot be made in income merely on the basis of a report obtained from a Departmental Valuation Officer if no evidence was found during the search.

A presumption against the assessee under section 68 for unexplained credits is rebuttable. The initial burden is on the assessee to establish the authenticity of transactions, after which the burden shifts.

A court can rely on investigation reports during assessment proceedings.

In criminal proceedings, incriminating evidence including witness identification of an accused at key meetings and call records demonstrating communication during a conspiracy can be used to establish guilt.

The complainant must prove their financial capacity to lend the sum for which a cheque was issued. If the complainant fails to establish this, the presumption under Section 139 of the Negotiable Instruments Act may not apply.

An addition to income cannot be made solely on the basis of a retracted statement given during a search or survey, especially when the assessee lacks relevant details and is under mental pressure.

The onus is on the revenue to prove that a transaction is not real or that an allegation is true; a mere suspicion is insufficient to support an assessment.

A finding that a club's activities attract the principle of mutuality cannot be interfered with by the revenue unless the revenue demonstrates the finding is totally perverse.

Rule 46A(3) of the Income Tax Rules is mandatory; failure to provide the Assessing Officer (AO) with a reasonable opportunity to examine additional evidence, cross-examine witnesses, or produce rebuttal evidence requires re-adjudication by the CIT(A).

The presumption under section 132(4A) is rebuttable, and if the assessee provides a reasonable explanation for seized documents, the presumption can be rebutted.

Seized papers referred to in a settlement application, even if they belong to third persons, can be used and utilized against those third persons.

A statement made during search proceedings under section 132(4) can be used as evidence to determine unexplained income, provided there is preponderance of probability to support it.

Courts may overlook procedural irregularities or trivial breaches of law to ensure substantial justice, but must carefully examine if a "failure of justice" is genuine or a mere pretense.

An assessment order passed without disposing of the assessee's objections to reopening is improper, void, and a violation of natural justice.

If the authorities constituted under a particular statute do not take action against an assessee, there is no violation of that statute's provisions, and an assessing officer cannot allege such a violation.

Additional evidence can be admitted by the appellate authority even if not produced before the Assessing Officer if there are sufficient reasons for non-production and the evidence is necessary to examine the issue.

Additions made by the Assessing Officer based solely on loose papers, which are not conclusive evidence, are insufficient for making additions to income. Such evidence cannot be considered definitive.

For offenses under the NDPS Act involving heroin, the actual quantity of heroin, not the total weight of the substance, is considered for punishment. This requires testing the purity of the heroin found.

Judicial and official acts are presumed to be performed regularly, and this presumption applies to police officers.

A registered sale deed carries a presumption of validity, and the onus is on the party challenging it to provide evidence to rebut this presumption.

Proof beyond reasonable doubt is equivalent to proof that affords moral certainty to the judge, acknowledging that absolute exactness is rarely achievable in practical scenarios.

Statements made during a search under section 132 of the Income Tax Act should be viewed with caution and are not automatically accepted as absolute truth, especially if denied, varied, or shown to be given under duress.

When an assessee fails to prove the genuineness of purchases, additions can be made on the basis of a net profit rate, even if the High Court finds the Tribunal's order to be non-speaking, provided the declared GP rate is better than previous years. However, the Assessing Officer's addition for unexplained purchases may be reduced based on the Tribunal's findings.

A decision obtained by fraud on the court is liable to be set aside. A party who secured such a decision by fraud cannot be allowed to enjoy its fruits.

A statement recorded under section 132(4) can be the basis for making an addition, especially when corroborated by other evidence like WhatsApp records, and the principle of preponderance of probabilities applies.

Statements relied upon by tax authorities cannot be used to draw inferences if they only discuss one aspect of an assessee's business, such as printing, without addressing other critical aspects like sales made outside India.