Income-tax additions need evidentiary support; conjecture and unproved estimates cannot sustain undisclosed income findings.

An income-tax addition cannot rest on suspicion, conjecture, or unproved estimates. The Assam HC noted that taxing authorities may draw reasonable inferences from material on record under section 23(3) of the Indian Income-tax Act, but a finding of fact is open to interference in reference where it lacks evidentiary support or is perverse. Although unexplained remittances could justify an inference of undisclosed receipts, there was no material to sustain the further assumptions of an undisclosed business turnover of Rs. 4 lakhs or profit at 5 per cent. The addition of Rs. 20,000 was therefore unsupported by proved material and the reference was answered for the assessee.

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Issues: Whether there was any material before the Tribunal to sustain the addition of Rs. 20,000 as the undisclosed income of the assessee firm for the assessment years 1954-55 and 1955-56.

Analysis: In an assessment under section 23(3) of the Indian Income-tax Act, the taxing authority may draw reasonable inferences from material on record, but it cannot base an addition on pure suspicion or guesswork. A finding of fact may be interfered with in reference only if it is unsupported by evidence or is perverse. On the materials shown, some unexplained remittances could justify an inference of undisclosed receipts, but there was no material to support the further conclusions that the assessee carried on an undisclosed business with a turnover of Rs. 4 lakhs or that the profit therefrom was 5 per cent. The figure of Rs. 20,000 was therefore not traceable to any proved material.

Conclusion: The question was answered in the negative. There was no material before the Tribunal to hold that Rs. 20,000 represented the undisclosed income of the assessee firm, and the reference was decided in favour of the assessee.

Ratio Decidendi: An income-tax addition cannot rest on conjecture or unproved estimates; a finding is assailable in reference where it lacks evidentiary support or is perverse, even if some basic unexplained facts are established.

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