Loose sheet notings and third-party diary evidence cannot sustain income additions without independent corroboration, deletion ordered.

Loose sheet notings and third-party diary entries cannot alone establish undisclosed income; additions based solely on such documents require independent corroborative evidence and enquiry. The note of cash payment over and above registered consideration, when unsupported by corroboration or circumstantial evidence and without independent investigation, does not justify an income addition and must be deleted. The document clarifies that evidentiary value of loose sheets found in third-party premises is insufficient by itself to prove on-money transactions, and revenues additions on that basis are liable to be rejected.

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Issues: (i) Whether an addition for alleged on-money over and above the registered sale consideration can be sustained against the seller on the basis of loose-sheet/diary entries and statements of a third party found during search, without corroborative evidence or independent enquiry.

Analysis: The issue examines the evidentiary sufficiency of loose or handwritten entries recovered from a third party and admissions/statements recorded under section 132(4) as a basis to treat alleged extra payments as the seller's undisclosed income. Legal framework applied includes the requirement that revenue discharge the burden of proving actual payment and establish a nexus between the seized material and the assessee, the necessity of corroborative or circumstantial evidence where seized material is not found in the assessee's premises, and the principle that conclusions cannot rest on conjecture, suspicion or untested third-party statements. Authorities require an independent enquiry into the value/under-valuation of property and other corroborative material before treating third-party notings as evidence of on-money received by the seller.

Conclusion: The addition based solely on loose-sheet/diary notings and third-party statements, in the absence of corroborative evidence or independent enquiry establishing payment to the seller, is not sustainable; the addition is to be deleted and the Revenue appeal dismissed (decision in favour of the assessee).

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