Income Tax Addition cannot Be based Solely on unsubstantiated Loose Slips

ITO Vs Ramachandra Setty & Sons (ITAT Bangalore)

In a significant ruling, the Income Tax Appellate Tribunal (ITAT) in Bangalore addressed the case of ITO vs. Ramachandra Setty & Sons, highlighting the necessity for solid evidence when making income tax additions. The tribunal underscored that additions cannot be based solely on unsubstantiated loose slips, stressing the importance of corroborative material evidence.

The assessee, Ramachandra Setty & Sons, argued that the statement made during the search action under Section 132(4) of the Income Tax Act held no evidentiary value. They contended that the declaration obtained from them was not supported by any material evidence, and the statement was made under significant pressure and stress during an extended search procedure. The assessee further argued that in the absence of corroborative evidence, no addition could be justified.

The primary issue in this case was the addition of Rs. 4 crores for the assessment year 2015-16, which was based on statements recorded under Section 132(4) of the Act and unsubstantiated loose slips. The assessee claimed that there was no corresponding seized material to support the addition, rendering the loose slips without evidentiary value.

The tribunal examined the circumstances under which the statements were recorded, emphasizing that statements recorded post-search do not have inherent evidentiary value unless corroborated by other tangible evidence. The tribunal referred to several judicial precedents to support its stance.

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