Landmark Cases on Evidence, Onus and Natural Justice

An appellate authority has the jurisdiction to admit additional evidence if it is necessary for a complete and effective adjudication of the matter.

Additions made on the basis of WhatsApp chats or loose papers seized during a search can be deleted if the assessee proves they were not involved in those transactions and the evidence lacks substantiation. The burden of proof lies with the revenue to connect the seized material to the assessee.

For substituted service of notice by affixation to be valid, the serving officer must exercise all due and reasonable diligence to find the assessee or their agent, strictly adhering to the procedure under Rule 17 of Order V of the Civil Procedure Code. Failure to follow this proper procedure renders the service invalid and cannot sustain subsequent proceedings.

An addition to income cannot be made solely based on a Departmental Valuation Officer's report without any corroborating incriminating material. The burden of proof rests on the revenue.

An audit report does not prevent the Assessing Officer from requesting documentary evidence to verify the genuineness of transactions.

The mere existence of a time gap between cash withdrawals and their subsequent redeposit does not invalidate the assessee's explanation, especially in the absence of contrary evidence. The authorities must give due latitude to human conduct when assessing the truthfulness of an explanation.

When an assessee fails to discharge the onus to prove the identity, creditworthiness, and genuineness of cash credits under Section 68, the Assessing Officer is justified in making an addition to income. Appellate authorities also possess the power to admit additional evidence during appeal proceedings, as the Evidence Act does not apply to their proceedings.

Statements made in an affidavit are not automatically accepted as true and reliable, even if uncontroverted. Circumstances suggesting otherwise can lead to their rejection.

A strong suspicion, however compelling, cannot replace the need for concrete evidence or proof in income tax proceedings. Assessments based on mere presumptions, without factual support, are not justified.

An assessment or addition to income cannot be made solely based on a retracted statement, especially when it is not corroborated by seized material or other concrete evidence. The revenue must produce evidence to establish claims like understatement of sale consideration or 'on-money'.

Additional evidence can be admitted at the appellate stage only if the court deems it necessary for pronouncing its judgment or for substantial cause, not as a matter of right for the assessee. The mere importance of evidence does not justify its admission at the appellate stage if not produced before the AO.

Additions to income cannot be sustained solely on the basis of information found in electronic devices or loose papers seized from third parties if that information is not supported by independent and corroborative evidence.

The assessee bears the onus to establish any claim for deduction of expenditure when computing taxable income, especially when parties from whom purchases were allegedly made deny such transactions before sales tax authorities.

Denial of the right to cross-examine a witness violates the principles of natural justice and the right to be heard (audi alteram partem).

Where transactions are found to be bogus, additions on account of such transactions cannot be deleted by the Tribunal without examining the evidence on record. The Assessing Officer is justified in making additions, including 100% of bogus purchases, when transactions are proved to be non-genuine.

A retracted statement by the assessee generally carries no weight and can be rejected by the revenue. The court cites this principle in conjunction with other cases where similar retractions were dismissed.

Additions to income cannot be justified based on loose papers or rough notes found during a search if there is no other corroborative evidence to prove that the amounts represent undisclosed income or actual expenditures not recorded in books of account. The onus is on the revenue to discharge its burden of proof.

An assessment order enhancing income without disclosing the basis of enhancement and relying on mere suspicion is not sustainable. Best judgment assessment must be based on relevant material and cannot be arbitrary.

An addition to an assessee's income based solely on information from a sales-tax department that purchases were bogus is not sustainable if the assessee has discharged the primary onus by showing payments through account payee cheques and producing vouchers for sales.

A retracted statement obtained during a search under Section 132(4) can be disregarded if the Assessing Officer believes the retraction is baseless and intended to shield the assessee from evidence found.

The findings and conclusions of a Commission of Inquiry are not judicial pronouncements and do not have binding force or legal consequences. A commission's report is merely an opinion that lacks finality and authoritativeness.

Disallowance of expenses cannot be made if their genuineness is not challenged. For unexplained money, possession of gold jewellery by married ladies up to 500 grams is considered explained.

A retracted statement, even if made voluntarily, cannot be the sole basis for making an addition in income. Other corroborative material is required to sustain such an addition.

Where the Assessing Officer (AO) does not conduct any further inquiry or investigation to support additions made, and there is no positive evidence to confirm the AO's action, additions under section 68 cannot be sustained if the loan transaction was properly documented and repaid through banking channels.

Loose papers and documents seized from third parties cannot be used to add to an assessee's income without providing the assessee an opportunity to cross-examine deponents and without supporting evidence.

The burden of proving a transaction to be benami, or that the apparent owner is not the real owner, rests strictly on the party asserting it, requiring definite evidence or circumstances that reasonably infer the fact, not mere suspicion.

An admission is strong evidence but not conclusive, and the person who made it can show it is incorrect.

The revenue bears the burden of proving that an assessee has undisclosed income. A mere assertion by the assessee, especially without evidence or linkage to seized documents, cannot be accepted.

An assessee cannot be penalized for the actions of its supplier, nor can it be expected to know the commercial rationale behind how a supplier operates its bank account. The assessee is not burdened with the task of investigating the genuineness of the seller or their business transactions if they have provided evidence like bank statements and purchase bills to prove the genuineness of their own purchases and the Assessing Officer has not doubted their sales.

An Assessing Officer may reject the genuineness of a transaction if the evidence provided by the assessee is not trustworthy, even if the transaction appears to be conducted through cheques or other formal means. The burden of proving the genuineness of a transaction lies primarily on the assessee.

An assessee fails the 'Human Probability Test' when they cannot establish the genuineness of a claim for exempt income under section 10(38) and attempt to conceal unaccounted cash. Share transaction profits credited to an assessee's bank account must be added as income under section 68 if the receipt cannot be explained.

Retraction of a statement recorded under oath during a search is not accepted unless supported by strong and contemporaneous evidence, especially when corroborative documents and seized materials support the additions.

Admissions made under Section 132(4) of the Income Tax Act are not valid evidence if not corroborated by any other incriminating material found during a search.

Belated and unsupported retractions of statements made during a search or seizure are meaningless and will not be considered by the Assessing Officer. Such retractions must be substantiated with evidence.

When a statement is made voluntarily and not under coercion, and the assessee fails to take steps to rectify it before the relevant authorities, the retraction of such a statement later is not valid.

Loose papers containing numerical entries, found during a survey under section 133A, do not have evidentiary value for making additions to income without any other supportive evidence. The Assessing Officer cannot make additions solely based on such loose papers.

Jewellery found during a search that is adequately explained as being owned by a married lady for a long time, even without documentary evidence, should not be added to income, as this recognizes realities of life.

Statements made during a survey under section 133A, even if a confession of additional income, are not conclusive evidence and can be retracted. Such statements cannot form the sole basis for additions in block assessment if the assessee demonstrates they are incorrect.

An assessee must provide evidence to prove the actual rendering of services for expenses claimed, as each assessment year is a separate unit of assessment and res judicata or consistency principles do not override the burden of proof.

A presumption under Section 114(e) of the Indian Evidence Act can only be drawn from established facts through probable and logical reasoning, not from other presumptions. Consolidated approval for multiple assessment years by an approving authority renders the requirement of individual approval for each year under Section 153D nugatory.

An assessment order is a nullity if crucial rights are denied to the assessee or if the assessment is based purely on suspicion, surmises, and conjectures without tangible evidence.

A case is considered favourable to the assessee's contention when it aligns with their submission, as demonstrated by its inclusion in a list of supportive judgments.

An assessee's admission or waiver cannot make an otherwise non-taxable income taxable; chargeability depends strictly on the charging section of the law.

The Assessing Officer must establish a nexus between expenses incurred and the earning of exempt income before making any disallowance under Section 14A. The burden of proof lies with the Revenue.

A statement recorded during a search action in the presence of independent witnesses has overriding effect over a subsequent retraction. A bald assertion of retraction at a later stage cannot be accepted.

A retracted statement cannot be relied upon without corroboration, and cross-examination permission is not always required.

Loose sheets seized during a search are considered 'documents' within the meaning of section 158B(b), and there is a presumption under section 132(4A) regarding such seized documents. The assessee must produce rebuttal evidence to disprove entries made in these loose sheets.

The Income Tax Appellate Tribunal can delete additions made by the Assessing Officer on account of undisclosed receipts if there is no corroborative evidence on record.