Uncorroborated seized material cannot sustain an addition for undisclosed income without a proved nexus to the assessee.

Uncorroborated seized computer data, diary entries and retracted third-party statements were held insufficient to sustain an addition for undisclosed income where no clear nexus with the assessee was proved. The material did not identify the assessee by name, nor establish the date, mode or source of any alleged payment, and the witnesses denied any cash payment in search and remand proceedings. On these facts, the addition was based only on presumptive inferences from third-party material and could not fasten tax liability on the assessee. The deletion of the addition was upheld in favour of the assessee.

---

---

Issues: Whether the addition made on the basis of seized computer data, diary entries and third-party statements could be sustained in the absence of corroborative evidence and a proved nexus with the assessee.

Analysis: The seized material was treated as an uncorroborated extract retrieved by forensic tools and did not contain a clear reference to the assessee by name or establish the date, mode or source of any alleged payment. The principal witnesses examined in search and remand proceedings retracted or denied the earlier statements and stated that the material was not part of the regular books of account and that no cash payment to the assessee had been made. The Court found that the addition rested on presumptive inferences drawn from third-party material, without independent corroboration, and that such material could not by itself fasten tax liability on a third party. The Court also relied on the consistent absence of any reliable linkage between the documents and the assessee.

Conclusion: The addition was not sustainable and its deletion was upheld in favour of the assessee.

Final Conclusion: The Revenue failed to establish, on the basis of reliable evidence, that the assessee had received the alleged undisclosed cash payments, and the relief granted by the first appellate authority was maintained.

Ratio Decidendi: Uncorroborated seized material and retracted third-party statements, without a demonstrated nexus to the assessee, are insufficient to support an addition for undisclosed income.

---