Qualified offer in return cannot prove undisclosed income without independent evidence of nexus and taxability

A qualified offer in a return, made only to buy peace and later retracted, could not by itself sustain an addition as undisclosed income. The Revenue was still required to independently prove that the seized material belonged to the assessee and that the alleged income was taxable in law. Because the record did not establish ownership of the floppies or provide evidentiary support for the computation, the addition rested on an erroneous premise and was deleted, with consequential relief on interest.

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Issues: Whether the addition of Rs. 3,02,46,840 as income from undisclosed sources could be sustained on the basis of a conditional offer made in the return and the seized floppies.

Analysis: The return was accompanied by detailed caveats making it clear that the offer of Rs. 1 crore was only to buy peace and did not amount to an admission that the floppies belonged to the assessee or that the data represented taxable income. The assessee later retracted the offer during assessment proceedings. An admission is relevant evidence, but it is not conclusive and cannot substitute for proof where the Revenue must establish that the income actually belongs to the assessee and is taxable in law. The record did not show any material to establish ownership of the floppies by the assessee or to support the computation of the addition. The assessment was therefore made on an erroneous premise and without evidentiary support.

Conclusion: The addition was not sustainable and was deleted.

Final Conclusion: The appeal succeeded and the assessee obtained relief against the entire disputed addition, with consequential relief on interest also following.

Ratio Decidendi: A qualified offer in a return, especially when expressly made to buy peace and later retracted, cannot by itself justify an income addition unless the Revenue independently proves taxability and nexus with the assessee by material evidence.

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