Even Strong Suspicion Cannot Take Place of Proof: ITAT Deletes Addition Made Based on Assumptions

The Income Tax Appellate Tribunal (ITAT) deleted an addition made by the assessing officer based on suspicion and presumptions. The Tribunal held that no matter how strong the suspicion is, it cannot be treated as proof.

The assessee, Jagir Kaur’s case, was reopened by the Assessing Officer based on cash deposits made during the Financial Year 2012-13. The assessee submitted that she had a joint savings account with her daughter, Paramjit Dhillon. The assessee claimed that the said deposits were agricultural income earned and deposited by her daughter, who cultivated their agricultural land.

However, despite being asked several times, the assessee failed to submit any documentary evidence, such as mandi receipts, supporting bills, details of crops grown, etc. The AO thus treated the cash deposits as unexplained investments under section 69, adding them to the income of the assessee and initiating penalty proceedings.

The CIT(A) upheld the AO addition but gave partial relief by reducing the addition by Rs 1 lakh. Therefore, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Chandigarh.

The assessee argued that she had submitted the affidavits, which mentioned that her daughter managed the land and received the agricultural income, and another affidavit by Sh. Gurjeet Singh, claiming that he took the land on hire-purchase, cultivated it and paid Rs 12,00,000 in cash to the assessee’s daughter. The assessee contended that the Revenue did not submit any material to disprove these affidavits.

The Tribunal observed that the affidavits submitted by the assessee were not cross-examined or disputed by the Department. The court highlighted that the uncontroverted affidavit has evidentiary value and cannot be rejected based on assumptions. The Tribunal also observed that the mandi receipts or sales bills are often absent in the rural cash sales.

It was held that Section 69 is applicable when an unexplained investment is found to belong to the assessee, but in the assessee’s case, she had explained the source of deposits as belonging to her daughter, who had further received the amount from a third person. The addition under Section 69 was deleted, holding that suspicion cannot take the place of proof. The order of CIT(A) was also set aside.