Information in loose papers not corroborated with assessee, can’t be said to belong to assessee

When information contained in loose papers not corroborated with assessee, there is absolutely no room for presumption that it belongs to the assessee.

In a recent judgment, ITAT Agra has held that information contained in loose papers if not corroborated with the assessee, there is absolutely no room for presumption that it belongs to the assessee.

ABCAUS Case Law Citation:
4913 (2025) (12) abcaus.in ITAT

In the instant case, the Revenue had challenged the order passed by the CIT(A) in deleting addition on account of unexplained expenditure u/s 69C of the Income Tax Act, 1961 (the Act) in construction of its factory.

A search and seizure action u/s 132 was carried out at the residence and business premises of one Business Group. Certain documents in the form of loose papers were found relating to unaccounted expenditure made in respect of new plant of the assessee. Based on the WhatsApp chats and loose papers found, the AO observed that it was incriminating material and proceeded to make the addition in the hands of the assessee.

The AO observed that the loose sheet contained the amount of total expenditure made and accordingly, after deducting amount paid through banking channel, he considered the difference as having been paid in cash.

The Tribunal observed that none of the loose papers were signed, dated and without their being any description. Also, the AO had not clearly brought on record who had incurred the above-mentioned expenditure, since the assessee had not commenced the commercial production and there was no revenue earned by the assessee. There was no possibility that the assessee would have incurred the said expenditure.

The Tribunal further noted that the information found in the loose sheet did not match the information available with the assessee. Since the paper found did not have any signature and is undated, for what purpose the same was prepared also not clear.

The Tribunal noted that the CIT(A) had listed the chart comparing the figures mentioned in the loose sheet together with contentions of the AO and assessee. Based on the comparison, CIT(A) had observed that none of the figure’s tallied with the ledger nor the balance in the bank statement of Bank. Since the figures were not authentic or matched with the actuals, reliance on the above loose sheet and its information by the AO was uncalled for. Also, AO had not brought on record any cogent material or collaborative evidence to establish a case which matches with the information contained in the loose sheet.

The Tribunal also noted that the CIT(A) relied on the CBDT instructions as per which the AO should make diligent efforts to detect the modus operandi and the manner in which the undisclosed income was generated by the assessee. There is no room for presumption or multiplication formula. With the above observations, the CIT(A) came to the conclusion that the paper found were dumb.

The Tribunal held that since the information contained in the loose papers was not corroborated with the assessee, there was absolutely no room for presumption that it is belong to the assessee.

As a result, the Tribunal dismissed the appeal of the Revenue. 

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