Unexplained expenditure addition fails without corroboration where only third-party loose papers and receipts link the assessee to payment.

Addition for unexplained expenditure under section 69C could not be sustained on the basis of third-party seized receipts and impounded diary entries alone. The Revenue's papers were found from premises of other persons, were neither signed nor acknowledged by the assessee, and were not backed by corroborative evidence linking the assessee to any alleged on-money payment. As the registered sale deed and sale agreement reflected the same consideration, the presumption under sections 132(4A) and 292C was inapplicable because the documents were not found from the assessee's possession. The deletion of the addition was therefore upheld and the Revenue's challenge failed.

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Issues: Whether the addition of Rs. 2,17,00,000 made as unexplained expenditure under section 69C of the Income-tax Act, 1961 was justified on the basis of third-party seized receipts and impounded diary entries.

Analysis: The receipts and diary relied upon by the Revenue were found from the premises of third parties and were neither signed nor acknowledged by the assessee. The material was not supported by corroborative evidence linking the assessee to payment of any on-money, and the registered sale deed and sale agreement reflected the same consideration. In these circumstances, the presumption under sections 132(4A) and 292C of the Income-tax Act, 1961 was held inapplicable because the documents were not found from the assessee's possession. The addition could not rest on uncorroborated third-party papers alone.

Conclusion: The deletion of the addition was upheld and the Revenue's challenge failed.

Ratio Decidendi: An addition for unexplained expenditure cannot be sustained merely on the basis of third-party loose papers or receipts unless there is reliable corroborative evidence connecting the assessee to the alleged payment.

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