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2013 (3) TMI 671 - AT - Income TaxAddition based on loose sheets found during the course of survey u/s. 133A - Held that - Assessing Officer could make the addition on the basis of direct evidence on hand. If there is direct evidence on hand with the Assessing Officer for small period covering the assessment year he could use the same for estimating the income of the whole year and as such the addition cannot be made only on presumption basis. In this case the material considered by the Assessing Officer for assessment is only loose sheets containing investments made by the partners of the firm. But the Assessing Officer not taken any pains to substantiate the addition based on the loose sheets. Being so no addition can be made solely on the basis of a notebook or loose sheets which are dumb documents and the Assessing Officer is duty bound to bring on record corroborative material to show that the assessee has concealed the income. Being so in our opinion deletion of addition by the CIT(A) is justified
Issues: Deletion of addition of Rs. 1.25 crores based on loose sheets found during a survey u/s. 133A for assessment year 2006-07.
Analysis: 1. Issue of Deletion of Addition: The Revenue appealed against the deletion of addition of Rs. 1.25 crores by the CIT(A) for the assessment year 2006-07. The assessee firm, engaged in construction business, filed its return showing total income of Rs. 30,67,925. During a survey, a loose paper was found with figures against partners' names, representing projected investments. The Assessing Officer recorded statements confirming these were proposed investments. The CIT(A) deleted the addition, stating that charges based on loose sheets must be supported by clear and unambiguous evidence. The document must speak for itself or with other material found during investigation. If open to multiple interpretations, no addition should be made solely based on it. The Assessing Officer failed to conduct necessary investigations to support the inference from the document, leading to the deletion of the addition. 2. Analysis of Tribunal Decision: The ITAT Hyderabad upheld the CIT(A)'s decision, emphasizing that loose sheets are circumstantial evidence requiring substantiation. Income computation must rely on direct or conclusive evidence. The Assessing Officer should use direct evidence available to estimate income for the entire year, not just presume additions. In this case, the addition was solely based on loose sheets without corroboration. The Assessing Officer did not provide supporting material to prove income concealment. Therefore, the deletion of the addition by the CIT(A) was justified, and the ITAT confirmed the decision, dismissing the Revenue's appeal. In conclusion, the ITAT Hyderabad upheld the CIT(A)'s decision to delete the addition of Rs. 1.25 crores, emphasizing the need for concrete evidence to support income additions and the inadequacy of relying solely on circumstantial evidence like loose sheets.
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