Uncorroborated loose-sheet entries cannot by themselves justify additions for on-money, unexplained expenditure, or unexplained assets.

Uncorroborated loose-sheet and scribbling-pad notings were treated as insufficient to support additions for alleged on-money, unexplained expenditure, or undisclosed assets. The note records that, for section 69C, actual expenditure must first be shown before source can be questioned; mere estimates or rough entries do not establish liability without independent evidence. It also notes that cash and jewellery found in search may be explained through admitted income, company funds, streedhan, gifts, or telescopic adjustment, and such explanations should not be rejected absent contrary material. The stated principle is that additions cannot rest solely on unverified papers.

---

---

Issues: (i) whether additions made towards alleged on-money payment for purchase of plots could be sustained merely on the basis of loose-sheet notings without corroborative evidence; (ii) whether additions towards alleged unexplained expenditure under section 69C of the Income-tax Act, 1961 could be sustained on the basis of scribbling-pad entries without proof of actual expenditure; (iii) whether cash and jewellery found during search could be added as unexplained income when telescopic benefit and customary/previously explained sources were claimed.

Issue (i): whether additions made towards alleged on-money payment for purchase of plots could be sustained merely on the basis of loose-sheet notings without corroborative evidence.

Analysis: The additions were founded on rough notings found in seized loose sheets, but the writings did not specify essential particulars such as plot number, payer, payee, or the exact nature of the alleged cash component. The registered sale deeds recorded the consideration and there was no independent material to establish payment over and above the documented value. In the absence of tangible corroboration, the loose sheets were treated as insufficient to fasten undisclosed consideration on the assessees.

Conclusion: The additions on account of alleged on-money payment were not sustainable and the deletion by the first appellate authority was upheld.

Issue (ii): whether additions towards alleged unexplained expenditure under section 69C of the Income-tax Act, 1961 could be sustained on the basis of scribbling-pad entries without proof of actual expenditure.

Analysis: Section 69C applies only where actual expenditure incurred by the assessee is shown and the source remains unexplained. Here, the department relied on scribbling-pad notings, but no independent evidence was found to prove that the assessees had incurred expenditure of the magnitude estimated. The entries were explained as records of cash inflow and outflow of the company, and the department did not bring material to rebut that explanation. Mere estimates and notings in loose papers, without corroboration, were held inadequate to support the addition.

Conclusion: The additions under section 69C were unsustainable and the appellate relief was upheld.

Issue (iii): whether cash and jewellery found during search could be added as unexplained income when telescopic benefit and customary/previously explained sources were claimed.

Analysis: The cash found at the residence was explained as belonging to the company and available from income already admitted in earlier proceedings, and no evidence was found showing that such funds had been applied elsewhere. As to jewellery, the assessee explained part of it as streedhan and gifts, and the balance gold was linked to the company with a telescopic claim against admitted income. The record did not contain contrary evidence sufficient to reject those explanations.

Conclusion: The cash and jewellery additions were not warranted and the deletions were sustained.

Final Conclusion: The appeals failed on all substantive issues because the Revenue could not establish undisclosed consideration, unexplained expenditure, or unexplained assets with corroborative material, and the cross objections became infructuous once the Revenue appeals were rejected.

Ratio Decidendi: Additions based solely on uncorroborated loose-sheet or scribbling-pad notings cannot be sustained unless the Revenue establishes actual undisclosed expenditure or consideration by independent evidence; where the assessees' explanation of source is plausible and unrebutted, telescopic relief may be granted.

---