SVS Projects India Private Limited Vs ACIT (ITAT Hyderabad)
The ITAT Hyderabad held that additions based solely on documents seized from a third party, without corroborative evidence, are unsustainable. In this case, the Assessing Officer relied on a diary and pen drive found during a search of another entity to allege unaccounted cash receipts by the assessee, even inflating figures by adding two zeros based on later-retracted statements of third-party employees. The Tribunal observed that such documents neither belonged to nor were found with the assessee, and therefore presumptions under sections 132(4A) and 292C could not be applied. It further emphasized that statements of third parties, especially when retracted and uncorroborated, lack evidentiary value. The CIT(A)’s estimation of 10% profit was also rejected as being based on assumptions rather than evidence. Accordingly, the Tribunal deleted the entire addition, holding that suspicion and conjecture cannot replace proof in tax proceedings.
Core Issue: Whether additions towards alleged unaccounted cash receipts could be sustained when such additions were based solely on documents (diary and pen drive) seized from a third party (Vamsiram Group), without any independent corroborative evidence linking the assessee to those transactions. A further issue was whether estimation of profit at 10% on such alleged receipts by the CIT(A) was justified.
