The Tribunal held that additions in a search assessment cannot survive without incriminating material. Mere repetition of an annulled earlier assessment was found legally unsustainable.
The decision reiterates that the Revenue must prove that borrowed funds were actually used for non-business purposes. In absence of such proof, interest paid to banks remains allowable.
It was ruled that once books are accepted, expenses supported by ledgers, vouchers, and bank payments cannot be disallowed on suspicion. Ad-hoc estimation without rejecting books was held invalid.
The ruling emphasizes that statements relied upon by the Revenue must be confronted to the assessee with an opportunity of cross-examination. Failure to do so renders additions legally unsustainable.
The ruling clarifies that mere reproduction of third-party information alleging disproportionate assets is insufficient. The Assessing Officer must clearly identify escaped income and apply independent reasoning.
The Tribunal noted that no construction investment occurred during the year under appeal. Accordingly, no addition for unexplained investment could be sustained in that assessment year.
It was ruled that under-reported revenue cannot be inferred solely from service tax data when no defects are found in regularly maintained books. Income must be assessed on real income principles supported by enquiry and evidence.
It was ruled that section 80G(5B) expressly permits limited religious expenditure up to 5% of total income. Denial of approval without examining actual expenditure was held to be legally unsustainable.
Tribunal held that unsecured loans cannot be treated as unexplained where confirmations, bank statements, and tax returns establish identity, creditworthiness and genuineness through banking channels.
The Court held that misclassification of ITC between CGST/SGST and IGST does not result in excess claim if the credit is otherwise admissible. Once the error is rectified through annual returns, no demand can survive.
