Suspicion cannot replace proof in taxing seized material linked to a dissolved firm's income in an individual's hands.

Seized loose papers from a third party could not, on suspicion alone, be used to assess undisclosed income in the assessee's individual hands. The papers were not found from the assessee, were not in his handwriting, and related to an erstwhile partnership; the possibility that the abbreviation "MLA" referred to the assessee was insufficient without corroboration. The statutory scheme for taxing income of a dissolved firm and fixing liability of former partners could not be bypassed by directly fastening the firm's income on the individual assessee. Absence of dates on the papers also weakened any conclusion that the material fell within the block period.

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Issues: Whether the seized loose papers, found from a third party and containing entries alleged to relate to the erstwhile partnership, could be relied upon to assess undisclosed income in the assessee's individual hands; whether the abbreviation "MLA" could be conclusively treated as referring to the assessee; and whether, after dissolution of the firm and continuance of business by the assessee as sole proprietor, the income of the erstwhile firm could be assessed against him individually.

Analysis: The seized papers were not found from the assessee, were not in his handwriting, and related on the admitted facts to the erstwhile partnership. The mere possibility that "MLA" might denote the assessee was held insufficient, because probability cannot replace proof in the absence of corroborative material. The premises from which the papers were seized belonged to a person who was not a partner in the firm and therefore stood as a third party vis-a -vis the partnership; relatedness by family connection did not alter that legal position. Further, the Income-tax Act contains specific provisions for assessment of income of a dissolved firm and for liability of former partners, so the revenue could not bypass those provisions and fasten the firm's income directly on the assessee in his individual capacity. The absence of dates on the papers also made it unsafe to conclude that the income necessarily fell within the block period.

Conclusion: The additions in the assessee's hands were not sustainable; the income, if any, relatable to the seized papers could not be assessed individually against the assessee on the basis adopted by the revenue.

Final Conclusion: The referred questions were answered in favour of the assessee, and the deletions of the additions were upheld.

Ratio Decidendi: Suspicion, conjecture, or mere probability cannot substitute for proof to assess undisclosed income against an individual when the seized material pertains to a dissolved firm and the statute provides a specific mechanism for assessment of the firm and liability of its partners.

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