Presumed tax demand without evidence cannot stand when sponsorship receipts are found only by conjecture.

An addition for alleged sponsorship receipts could not be sustained where the assessment record contained no supporting material in the books of account, bank statements, FIR, raid report, or the assessee's replies. The finding that sponsorship money must have been received was based only on assumption, and a tax demand, together with consequential interest and penalty, cannot rest on surmises or conjecture without a factual basis. The HC therefore interfered in writ jurisdiction, held the addition unsustainable, and set aside the entertainment tax, interest, and penalty attributable to that component in favour of the assessee.

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Issues: Whether the addition of Rs. 10,00,000 as sponsorship receipts, and the consequential entertainment tax, interest and penalty levied thereon, could be sustained in the absence of supporting evidence.

Analysis: The assessment order and the appellate orders did not refer to any material showing receipt of sponsorship money. The record did not disclose sponsorship details in the books of account, bank statements, FIR, raid report, or the replies filed by the assessee. The finding that sponsorship of Rs. 10,00,000 must have been received was based only on assumption and not on evidence. An assessment affecting tax, interest and penalty cannot rest on surmises and conjectures when the statute requires a factual basis for the demand.

Conclusion: The addition made on account of alleged sponsorship receipts was unsustainable and was rightly interfered with in writ jurisdiction. The levy of entertainment tax, interest and penalty on that component was set aside, and the assessment was modified to that extent in favour of the assessee.

Ratio Decidendi: A tax demand cannot be sustained on a presumed receipt in the absence of evidence, and a finding founded only on conjecture is liable to be interfered with in judicial review.

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