Landmark Cases on Evidence, Onus and Natural Justice

Loose papers without independent corroboration are considered 'dumb documents' and cannot be used as the sole basis for an income tax addition.

Where no evidence is brought on record to show that excess consideration was paid over and above the sale consideration recorded in the registered sale deed, the registered sale deed's consideration is considered correct and final.

A statement made under Section 132(4) during a search cannot be the sole basis for an addition to income if it lacks supporting evidence and is subsequently retracted with cogent reasoning and affidavits.

An assessee must substantiate claimed losses with credible evidence to discharge the primary onus upon them; failure to do so can lead to the setting aside of the Tribunal's order.

When an accused raises the issue of the complainant's financial capacity to advance a loan as a probable defence, the onus shifts back to the complainant to prove their financial capacity by leading evidence, especially in cases involving cash loans and subsequent cheque issuance, even with the presumption under Section 139 of the N.I. Act operating in their favour.

The rejection of an assessee's explanation without considering all relevant evidence constitutes an error in law. Business expediency is a significant factor when payments exceed the limits prescribed by Section 40A(3).

A best judgment assessment is not arbitrary and must be guided by principles of justice, equity, and good conscience. It cannot be made capriciously or in disregard of the material on record.

The law does not compel a person to do what is impossible. Courts must adopt this general exception when considering particular cases.

Income-tax additions cannot be made solely based on uncorroborated notes found on loose sheets of paper.

An assessee's concealment of profits cannot be inferred solely because the Assessing Officer adopted a higher rate of estimated turnover or receipts than that declared by the assessee, especially when the assessee did not maintain proper accounts.

An appellate tribunal should not ignore the contents of an affidavit filed before a lower authority, which was the basis for relief, as an affidavit is a valid piece of evidence that can be acted upon in assessment or appellate proceedings.

The nomenclature given to entries in the books of accounts is not relevant for ascertaining the real nature of a transaction. The tax authorities must ascertain the true nature of the transaction irrespective of how it is recorded in the books.

The Supreme Court's exercise of powers under Article 32 read with Article 142 to prevent environmental degradation and uphold Fundamental Rights under Article 21 is a fundamental issue. The case discusses sustainable development principles, derived from Articles 21, 48-A, and 51-A(g) of the Constitution, and the option to impose future bans on activities like mining.

An assessee establishes the genuineness of purchases by providing all necessary information, including supplier details, payment through account payee cheques, and verification of exported goods by customs authorities, unless the Assessing Officer has positive material to show otherwise.

An order made in violation of the rule of audi alteram partem (the right to be heard) is null and void and can be struck down as invalid. This applies to quasi-judicial or administrative decisions.

Tribunals should not set aside an order passed by the CIT(A) without cogent reasons, and doing so without such reasons is arbitrary and unreasonable. However, the Supreme Court has affirmed this principle while dismissing an SLP on grounds of delay.

The same income cannot be taxed twice in the hands of different assessees, as this would violate the principle against double taxation.

An addition under Section 69C is not justified when the assessee provides documentary evidence of transactions and the onus shifts to the department to rebut such evidence.

Additions made based solely on third-party statements without corroborative evidence or opportunity for cross-examination are invalid. Additions on the same transactions in the hands of the firm and individuals amount to double taxation.

Tribunals can restore additional evidence filed by an assessee to the CIT(A) for a fresh decision after considering such evidence.

The Assessing Officer (AO) fails to discharge their duty when they conduct no enquiry to verify evidence furnished by the assessee to discharge the initial onus under section 68, instead merely relying on the assessee's submission.

An Assessing Officer (AO) cannot solely rely on non-compliance with Section 133(6) notices to disregard evidence furnished by the assessee to discharge the initial onus under Section 68, without conducting further independent enquiries.

Courts can look beyond the form of a transaction to its substance to determine if it was a device to avoid tax, by removing the veil to ascertain the real nature of the transaction.

Addition to income cannot be made on the basis of suspicion, conjectures, or surmises when actual consideration has passed.

Additional evidence cannot be admitted by a CIT(A) if no attempt was made to produce it before the Assessing Officer or if there was no regard for the requirements of Rule 46A.

Production of additional evidence at the appellate stage is not a matter of right for a litigant, but is within the discretion of the court, to be exercised judiciously.

A partnership firm is not a legal entity separate from its partners; it is merely a compendious name for the partners. Consequently, an opportunity of hearing extended to the firm is considered an opportunity extended to all its partners.

Public authorities holding power in trust for the public must exercise those powers when circumstances warrant, as there is no discretion to withhold their use. This principle has Supreme Court approval.

The department cannot arbitrarily reject the assessee's books of account and estimate income at a higher figure without proving that the books do not reflect the true income.

An addition made by the tax authorities is justified when it is based on an admission made by the assessee. Retraction of such an admission is not acceptable at a later stage, especially when evidence has been found and confronted, and the assessee offers no explanation.

Entries found on loose papers during a search cannot, on their own, be considered material for making an addition to income. Such additions require corroborative evidence and proper inquiry.

Where an assessee provides documentary evidence of share transactions, the Assessing Officer must investigate any potential fallacies in that evidence rather than making an assumption of guilt.

Additions to income based on a director's statement during a survey are not valid if the statement lacks evidentiary value and the Assessing Officer has not rejected the assessee's books of account.

Income is assessable to tax only if it has actually accrued or been received, and not merely if it is a notional or hypothetical income. An entry in books of account does not create taxable income if no real income has resulted.

The High Court held that the Assessing Officer's power to admit additional evidence under Rule 46A of the Income Tax Rules, 1962, is not unfettered and must be exercised judiciously, considering whether the evidence could have been produced earlier.

When the Revenue seeks to rely on a statement made by an assessee, it must consider the entire statement and cannot selectively pick parts to its advantage.

When payments are made by account payee cheque, the identity of the payee is established, and the assessee is not expected to pursue the payee further to prove the genuineness of the transaction.

The legislature cannot, by a mere declaration, overrule or revise a judicial decision. It can only render a judicial decision ineffective by enacting a new law that fundamentally alters the character of the subject matter of the decision.

Paper jottings found on third-party premises, without corroborative evidence, cannot be treated as conclusive evidence to bring on-money to tax as income from undisclosed sources.

Affidavits are considered self-serving documents and do not possess substantive evidentiary value when compared to other forms of incriminating material. The genuineness of transactions and the substance of evidence obtained during surveys or searches take precedence over affidavits.

Additional evidence submitted by an appellant can be admitted in appeal proceedings under Rule 46A of the Income Tax Rules, 1962, if it is crucial for deciding the issues and computing the actual income.

The Assessing Officer (AO) fails to appreciate affidavits of concerned parties furnished by the appellant confirming that no cash was either paid to or received from the appellant, that too without cross-examining the deponents, and assessment cannot merely rely upon ex-parte details/data belonging to third parties.

The Tribunal has the discretion to admit additional evidence in the interest of justice if it deems it necessary for the proper adjudication of a matter, even if the application is filed by a party to the appeal and not solely on the Tribunal's own initiative.

When notice is sent by speed post to the correct address and dispatch is proven, there is a rebuttable presumption that the notice was duly served on the assessee.

The court is not concerned with the self-condemnatory nature of statements in affidavits filed by respondents to justify legislation, as the deponents of such affidavits do not bind the quasi-judicial authorities.

Books of account are considered valid if they are original and demonstrate they are kept in the regular course of business. Mere maintenance of expenses in a Macbook cannot substitute for proper books of account.

Judicial interpretation of a statutory provision is presumed to be accepted by the legislature if no amendment is made.

It is difficult to determine the exact starting point of a criminal conspiracy, and affirmative evidence about its formation date is not always possible.

A judicial decision is only authority for what it directly decides; the ratio decidendi is paramount, not every observation or logical deduction from observations.

Additions to income cannot be made solely on the basis of a statement recorded under section 132(4) unless there is positive and conclusive evidence found during the search to support such a statement.