Landmark Cases on Evidence, Onus and Natural Justice

Additions to income cannot be made solely on the basis of electronic evidence like messages or images found on a mobile phone without corroborative evidence. The Assessing Officer must investigate the source of such information and confront the assessee.

The principles of natural justice require that an assessee be given a fair opportunity to challenge the correctness of a survey report used against them, which includes disclosure of the report and a chance to explain or object to its findings.

Where a case is cited, the court will consider whether the facts and issues in the cited case are similar to the present case. If the facts are entirely different, the cited case is distinguishable.

Statements recorded during a survey under Section 133A of the Income Tax Act do not have evidentiary value on their own and can only be used for corroboration purposes.

An assessee must substantiate claims with proper evidence. If an assessee fails to do so, even after opportunities are provided, the disallowance by lower authorities will be confirmed.

An assessee who displays a casual approach and lacks interest in pursuing an appeal may not be granted further opportunities, especially when the burden of proof to rebut the Assessing Officer's findings rests with the assessee under Section 114(g) of the Evidence Act.

Not granting an assessee an opportunity to cross-examine witnesses is a procedural irregularity, not a fatal flaw, and the matter may be remanded to provide such an opportunity.

Additions to income cannot be made solely on the basis of third-party statements without confronting the assessee with the statement and corroborating evidence.

An assessee cannot dispute additions to income if the taxing authority taxes them based on a statement of facts voluntarily made by the assessee.

The Assessing Officer cannot make additions to income based solely on suspicions or unusual features noticed in the assessee's business without corroborating material evidence. Such features are only a starting point for inquiry, not proof of suppression or understatement of sale price.

The Karnataka High Court distinguishes its prior rulings in CITA v. Karnataka State Agricultural Produce Processing and Export Corporation Ltd. (2015) and CIT v. Karnataka Urban Infrastructure Development and Finance Corporation (2009) when a profit motive is present, unlike cases involving welfare activities.

The Ahmedabad ITAT in Pravinbhai Keshavbhai Patel v. DCIT held that additions cannot be made based solely on seized documents from a third party without establishing their relevance to the assessee or providing an opportunity for cross-examination, especially when the assessee provides explanations.

Tax can only be levied on real income, not on hypothetical income. This principle is fundamental to income tax law.

A judgment is confined to the facts and circumstances of its own case and should not be read as a provision of law. For the ratio of a former case to be applicable to a latter case, the facts and circumstances must be similar.

The burden of proof lies on the party alleging an illegality in an assessee's transaction, not on the assessee to prove its legitimacy, especially when details of creditors are provided.

A factual conclusion is regarded as perverse when no person, duly instructed and acting judicially, could have reached that conclusion based on the record.

An adverse inference may be drawn against a party for non-furnishing required evidence, particularly when the evidence is in their possession. This principle applies even when accounting entries do not reflect the reality of a transaction.

Photocopies of documents have very little evidentiary value and cannot be the sole basis for making additions in assessment proceedings. The assessing officer must produce original documents or further evidence to substantiate any addition.

Administrative, quasi-judicial, and judicial orders must record reasons. This ensures that justice not only appears to be done but is also demonstrably done.

When documents or messages are seized under section 132(4A) of the Income Tax Act, a presumption arises against the assessee, who must then provide a plausible explanation to rebut it.

The Tribunal deletes additions on account of unexplained gold and diamond jewellery when supported by CBDT Instructions, even if the description doesn't precisely match the Assessing Officer's expectations.

The Assessing Officer cannot reject the books of account without assigning specific reasons. Such reasons must demonstrate that transactions were omitted, items were sold at higher prices than disclosed, or proper particulars, bills, and vouchers are not forthcoming.

The complainant must prove their financial capacity to lend the sum in question, especially when the loan is claimed to be in cash and disputed. The burden is on the complainant to show they had the requisite funds for advancing the loan.

Transactions must be held to be non-genuine if the facts and circumstances do not accord with the test of human probabilities.

When the revenue relies on the statements of certain individuals to implicate an assessee, the principle of cross-examination must be followed to ascertain the truth, failing which the assessment may be void.

Addition should not be made when tax authorities fail to conduct inquiries with TDS deductors regarding discrepancies between Form 26AS and books of account, despite having the information and opportunity. Disallowance of expenses is arbitrary and against the rule of law if made without rejecting books of account or identifying specific discrepancies.

A party cannot accept part of a will and reject other parts; they must abide by all its directions.

Authorities and tribunals subordinate to the High Court are bound to follow its decisions unless they are stayed on appeal. Subordinate authorities cannot disregard binding precedents of the High Court.

An inferior tribunal must follow a binding decision of a superior court, even if the department has not accepted that decision and filed an appeal.

The Income Tax Officer can consider the totality of facts and circumstances to draw inferences and is not limited to direct evidence, as circumstantial evidence is permissible in tax cases.

A taxpayer who is a victim of alleged fraud and not part of a sham operation is not necessarily liable for tax benefits claimed by others.

No addition can be made based on a presumption under section 132(4A) using figures from another firm's books without corroborative evidence. Presumptions regarding the correctness of documents cannot be raised against a third party without such evidence.

A gross breach of natural justice, such as providing inadequate time to respond to a notice, means a matter cannot be remanded for reconsideration. The principles of natural justice require that parties have sufficient time to respond to allegations.

Documents previously accepted as correct can still be considered incriminating if circumstances suggest otherwise, especially when earlier conclusions were based on suppressed or misrepresented facts. This distinction is crucial between a mere change of opinion and a change of opinion based on fresh facts.

An addition to income is not sustainable if the document relied upon by the tax department is a 'dumb document' lacking details about the transaction's nature, period, or parties involved, and the assessee denies knowledge and provides an affidavit indicating the transactions relate to someone else.

A gift may not be accepted as genuine in the absence of natural love and affection between the donor and the recipient.

Additional evidence that is relevant and required for imparting justice must be admitted and appreciated by the appellate authorities.

Where the statutory language is plain and unambiguous, external aids like precedents cannot be used to obscure or rewrite the legislative command.

When penalty proceedings are initiated, the onus shifts to the Revenue to prove that the assessee concealed income or furnished inaccurate particulars. The Revenue must demonstrate that the assessee offered an explanation for alleged concealment or inaccurate particulars.

Fresh evidence cannot be introduced in appellate proceedings to support a new argument or a new case, as this would circumvent the established assessment process.

A loose paper found during a search cannot be the sole basis for making an addition to income without corroborative material and evidence, especially if the Assessing Officer misinterprets figures without supporting evidence.

Prima facie, premium or salami is not income, and the onus is on the Revenue to prove it is a revenue payment. The Revenue must present evidence to show the premium has been inflated or rent suppressed.

Additions on account of alleged on-money accepted by the assessee should be restricted to the profit element embedded within that on-money.

The opportunity for an assessee to be heard must be real, reasonable, and effective. A "paper opportunity" or one given for a very short duration violates the principles of natural justice.

Entries in the accounts of a third party alone are insufficient to prove that an assessee has engaged in transactions outside of their books.

The Assessing Officer cannot make additions to income based solely on presumptions and assumptions; corroborative material is required for any assessment.

A retraction of a statement made under section 132(4) is not automatically accepted. The Assessing Officer may be justified in not accepting the retraction if there is a significant time gap between the statement and the retraction, and there is no corroborative evidence to support the retraction.

The court lays down guidelines on how allegations against an assessee must be considered, inferring proof through a logical process from the totality of facts and circumstances, especially when direct evidence is unavailable. The assessee must discharge the primary onus under Section 68 regarding the genuineness of transactions.

The requirement of providing a reasonable opportunity of being heard must be upheld before an administrative, quasi-judicial, or judicial authority makes an order that results in adverse civil consequences for the affected party, and this cannot be overlooked for administrative convenience.

The expression 'in reference to their common intention' in Section 10 is comprehensive and gives a wider scope than 'in furtherance of' in English law, meaning anything said, done, or written by a co-conspirator after the conspiracy is formed can be evidence against others.