Landmark Cases on Evidence, Onus and Natural Justice

A complainant in a proprietorship concern case must provide evidence to prove ownership of the concern. Without such proof, the complainant cannot be considered a payee or holder in due course.

A statement made under Section 132(4) of the Income Tax Act must be read in its entirety if the Revenue intends to rely on it.

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 can render a judicial decision ineffective by enacting a valid law that fundamentally alters the character of the subject matter retrospectively, provided it does not directly overrule the decision itself.

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.

The Assessing Officer (AO) cannot rely solely on ex-parte details or data without cross-examination, especially when affidavits confirm no cash transactions.

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.

A decision rendered per incuriam, meaning through lack of care or in ignorance of binding precedent, does not need to be followed.

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.

A statement recorded under section 132(4) can be the basis for a block assessment order, even if the assessee later retracts it.

The validity of a legislation is to be judged by its own provisions, not by the statements made in affidavits filed on behalf of the state or the justifications provided therein.

An act done by a public servant in accordance with law cannot be considered an offence committed while discharging official duty, especially if done in collusion with others without proper permits.

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

If an assessee fails to produce acceptable accounts, revenue authorities may estimate income based on available materials and past assessment records.

Additions to income cannot be made on the basis of mere assumptions. There must be tangible material on record to serve as evidence for any such addition.

A show cause notice must be precise and unambiguous, clearly stating the case to be met, and adequate time must be given for the assessee to make a representation. Failure to do so vitiates the order.

Where an accused admits issuing a cheque and signing it, admits transactions, and admits some amount is due, a defence that the cheque was given by way of security and misused will not absolve them of liability, particularly when the issuance and signature are undisputed.

Additions of unexplained income and invoking Section 115BBE for higher taxation are invalid without issuing a show-cause notice and confronting the assessee. Failure to do so violates the principles of natural justice.

Additions to income based on mere suspicion, without adequate inquiry or evidence, are not permissible. The assessing officer's assumptions must be supported by material facts, and unsubstantiated claims by the assessee do not automatically shift the burden of proof back to the assessee without the AO's own proper investigation.

The burden of proving contrary to apparent facts lies on the party making the allegation, and additions made without proper foundation and documentary evidence are liable to be deleted.

Courts must consider the specific facts and circumstances when awarding compensation, aiming for just compensation. This includes accounting for the economic value of work, such as that performed by a homemaker.

Addition of income based solely on a partner's statement or entries in a diary is invalid without supporting material, as the onus is on the Assessing Officer to gather such evidence.

An addition to income cannot be made solely on the basis of a statement made during a survey if there is no other corroborating material discovered during the survey.

An addition can be made based on statements recorded behind the assessee's back, but the validity of such additions is contested if the assessee is not given an opportunity to cross-examine the deponent.

Purchases supported by valid documents, banking payments, and reflected in GST returns with ITC claimed and allowed cannot be disbelieved merely on suspicion. A buyer is not legally obligated to ensure a supplier's tax compliance, even if suppliers are inactive on the GST portal.

The restriction on an appellate court's power regarding other offenses does not apply with the same rigor to offenses under the Negotiable Instruments Act (NI Act) which involve presumptions against the accused. An accused cannot deny signatures on cheques drawn from their bank account for a specific sum, which attracts presumptions under Sections 118 and 139 of the NI Act.

A statement or admission made under section 132(4) possesses strong evidentiary value.

An assessee must prove the genuineness of a transaction, including the identity and creditworthiness of parties, by providing more than just copies of purchase bills and account payee cheques.

Loose sheets and digital evidence found during a search have no evidentiary value and are legally inadmissible if they lack proper authentication under the Evidence Act. Such material cannot form the basis for additions to income.

Retractions of statements made during search or survey assessments should be made at the earliest opportunity or within a reasonable time. Later retractions may be considered an afterthought.

An assessee's accounts cannot be rejected solely for failing to provide supplier confirmations and bills for closing stock, as the materiality of a stock register depends on the business type.

The Income Tax Act is not intended to enable the state to collect or retain monies not properly payable to it. The tax authorities are required to collect only that which is properly payable by the assessee under the Act.

The contents of an affidavit filed by an assessee cannot be treated as less important than a statement given by a creditor before the Assessing Officer. Tax authorities must verify the nature of assets and confront affidavits filed by the assessee.

When an assessee has duly recorded the actual cost of construction and this cost has been accepted by the Tribunal, the opinion of a valuer cannot be substituted for the recorded cost without a finding that the building is of a better quality or larger than claimed.

Proceedings before the CIT(E) that violate the principle of natural justice, such as inadequate notice or opportunity to be heard, are bad in law and deserve to be set aside. Such matters are often remanded for fresh adjudication.

An addition made by the tax authorities is sustainable where a transaction does not appear to be genuine or above board.

The appellate authority (CIT(A)) should admit additional evidence if it is vital to decide the issue and its admission would advance the cause of justice and not prejudice the revenue. Such admission should be followed by a remand report from the Assessing Officer (AO).

The department cannot approbate and reprobate; it cannot accept part of a transaction and reject another part. If interest has been paid with TDS deduction, the department cannot deny the allowability of the interest expenditure.

The Commissioner (Appeals) must provide an opportunity of hearing to the assessee before enhancing the assessment. An enhancement made without this opportunity is bad in law and must be deleted.

The statutory mandate for an Assessing Officer to provide an opportunity to rebut evidence is not discretionary and is an indispensable requirement, embodying the principle of natural justice.

Statements of other parties cannot be relied upon to disallow purchases unless an opportunity for cross-examination is provided. The dismissal of the revenue's SLP by the Supreme Court validates this principle.

Expenditure cannot be disallowed on account of 'bogus purchase' solely on the basis of assumption and presumption, especially when the assessee establishes the authenticity of transactions. Additions made on a bad assessment order are also bad in law.

Subsequent events do not affect tax liability for a past year; any loss arising from non-receipt of money becomes a capital loss in the year it becomes irrecoverable.

Proceedings initiated against a deceased assessee are a nullity, even if notice is served on the legal heir who participates. The legal heir retains the right to challenge the service of notice.