Uncorroborated seized paper cannot justify unexplained expenditure addition where surrounding evidence negates the alleged cash payment.

An addition for unexplained expenditure based solely on a seized paper could not be sustained where the assessee produced the agreement to sell and supporting material showing the agreed land price, prior cheque payments, and recorded cash entries. The surrounding circumstances also indicated that the transaction was never registered because the property was stated to be in a no-development green zone, and the seller denied receipt of any further cash. In the absence of corroborative evidence, the seized document was treated as insufficient to prove the alleged cash payment, and the impugned addition was deleted.

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Issues: Whether the addition of Rs. 8,00,000 as unexplained expenditure, said to be based on a seized document, was justified.

Analysis: The seized paper was treated by the revenue as evidence of cash payment towards purchase of land, but the assessee produced the agreement to sell and supporting material showing that the agreed purchase price was Rs. 35,00,000 and that substantial payments had already been made through cheques and recorded cash entries. The assessee also established that the transaction did not culminate in registration because the property was stated to be in a no-development green zone and the seller denied receipt of any further cash. In the absence of any corroborative evidence beyond the seized paper, the addition rested on conjecture rather than proved material.

Conclusion: The addition of Rs. 8,00,000 was not sustainable and was deleted in favour of the assessee.

Final Conclusion: The assessments for both years were set aside to the extent of the impugned addition, and the assessees' appeals succeeded.

Ratio Decidendi: An addition cannot be sustained merely on the basis of an uncorroborated seized paper where the surrounding circumstances and supporting evidence negate the alleged cash payment.

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