PCIT Vs Kanva Diagnostic Services Pvt Ltd (Karnataka High Court)
Karnataka HC: Search Additions Cannot Rest on Statements Alone; Corroborative Evidence Essential for Suppression of Sales and Section 69A Additions
The Karnataka High Court upheld the ITAT’s decision deleting additions made towards alleged suppression of sales and unexplained cash under Section 69A, reiterating that mere statements recorded during a search, without independent corroborative evidence, cannot justify tax additions. The Court noted that although the Revenue alleged that the assessee had suppressed sales and possessed unexplained cash based on materials gathered during a search under Section 132 and statements of employees, the Tribunal had found that no incriminating material was produced to substantiate these allegations. There was no evidence of unaccounted investments, unexplained assets, expenditure, or any material linking the cash to undisclosed income. The Tribunal also recorded a factual finding that the source of the alleged suppressed turnover had already been disclosed and the corresponding income had been offered to tax in the returns. Accepting these findings, the High Court held that the Tribunal’s conclusions were purely factual, based on appreciation of evidence, and did not give rise to any substantial question of law under Section 260A. Accordingly, the Revenue’s appeals were dismissed, affirming that search assessments cannot be sustained on suspicion or uncorroborated statements alone.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
Heard learned counsel Sri M. Dilip for Sri Y.V. Ravi Raj for the appellants-revenue and learned counsel Sri Prasanna Urala for the respondent-assessee in both the appeals.
