2022 (6) TMI 1557 - AT - Income Tax

Uncorroborated search statements and inadmissible electronic evidence cannot by themselves sustain an addition against a third party.

An addition for alleged cash payment toward purchase of a flat was held unsustainable where it rested only on a promoter's search statement and seized ... Third-party statement as evidence - Corroboration for on-money addition - Admissibility of electronic evidenceThird-party statement as evidence - Corroboration for on-money addition - Admissibility of electronic evidence - The addition towards alleged cash on-money paid for purchase of flat could not be sustained when it was founded only on the builder's statement and an unproved excel sheet recovered during search at the builder's premises. - HELD THAT: - The Tribunal held that the controversy stood covered by its earlier order in the group case arising from the same search. It found that the addition had been made merely on the basis of the statement of one of the promoters of the Cosmos Group recorded under section 132(4), without any corroborative material against the assessee. It further held that the statement and material seized in the course of search could be used against the person searched, but not against the assessee in the absence of corroboration. The excel sheet allegedly recovered from the builder's office was also held to be inadmissible for want of proof under section 65 of the Evidence Act. [Paras 9]The addition sustained by the Commissioner (Appeals) was held to be unsustainable in law and was directed to be deleted.Final Conclusion: The Tribunal condoned the delay in filing the appeal and allowed the appeal on merits. The addition for alleged on-money payment in assessment year 2011-12 was deleted as it rested only on an uncorroborated third-party statement and inadmissible electronic material. Issues: Whether the addition made on account of alleged cash payment towards purchase of flat could be sustained on the basis of a search statement and seized material without corroboration.Analysis: The addition was founded mainly on the statement of a promoter recorded during search and on electronic material said to have been recovered from the builder's premises. The material was not shown to be corroborated by any independent evidence from the assessee. A statement recorded during search and seized material could not, by itself, fasten liability on a third party without supporting evidence. The electronic material was also treated as inadmissible in the absence of compliance with the requirements governing electronic evidence. On this basis, the addition sustained by the lower authorities was found unsustainable.Conclusion: The addition was deleted and the assessee succeeded.Ratio Decidendi: An addition cannot be sustained against an assessee solely on an uncorroborated search statement or unproved electronic material from a third party's premises; independent supporting evidence is required.