Undated Loose Sheets ‘Dumb Documents’ in Search Assessment: ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has deleted additions exceeding Rs. 2.10 crore made against Shri Dheeraj Chaudhary for Assessment Year (AY) 2015–16, holding that rough, undated loose sheets seized during search proceedings could not form the basis of taxable additions. The Bench of Yogesh Kumar Us (Judicial Member) and Naveen Chandra (Accountant Member) has placed reliance on the Supreme Court’s ruling in Supreme Court of India in Common Cause (A Registered Society) v. Union of India, where it was held that entries in loose sheets are not admissible evidence under Section 34 of the Indian Evidence Act unless they are part of regularly maintained books of account and supported by independent evidence. The appeal, filed against the order of the Commissioner of Income Tax (Appeals) challenged the assessment framed under Section 153A of the Income-tax Act, 1961. The Tribunal delivered its order on February 11, 2026. A search and seizure operation was conducted on the Karan Luthra Group on March 14, 2014, during which certain documents allegedly relating to Shri Chaudhary were found. Consequent to this, a search was carried out at the assessee’s premises on April 29, 2014. Pursuant to notices issued under Sections 153A and 142(1), the assessee filed a return declaring total income of ₹10.04 lakh. However, the Assessing Officer (AO) completed the assessment at ₹2.21 crore, primarily on the basis of entries recorded in loose sheets marked as Annexure A-1. The Commissioner (Appeals) upheld the additions, leading to the appeal before the Tribunal. The Tribunal observed that the additions of ₹2.10 crore were made solely on the basis of various loose sheets containing handwritten jottings of figures. Upon detailed examination of the seized pages, the Bench found several sheets did not contain dates, signatures, or the name of the assessee. Many entries appeared to be rough estimates relating to property transactions. In cases where dates were mentioned, they pertained to financial years other than the relevant AY 2015–16. The Assessing Officer had not established that the handwriting belonged to the assessee. There was no corroborative evidence linking the entries to actual income. The Tribunal held that undated and unsigned loose sheets, without independent corroboration, could not justify additions. Applying the same principle, the Tribunal concluded that the seized documents in the present case were “wholly irrelevant” and could not be treated as conclusive evidence of undisclosed income. Accordingly, it directed the deletion of the entire addition of ₹2,10,63,277 made on the basis of Annexure A-1. The Tribunal also deleted an addition relating to a loan obtained from Muthoot Finance Ltd. The addition had been sustained by the Commissioner (Appeals) on the ground that details of security were not furnished. The Tribunal noted that the loan was stated to have been taken against jewellery and that neither the Assessing Officer nor the CIT(A) had properly verified whether the loan was reflected in the books of account. In absence of such verification, the addition was held to be unsustainable. An ad-hoc addition of ₹1 lakh as deemed house property income was also struck down. The AO had made the addition on the premise that the assessee had declared house property income in the previous year but not in the year under consideration. The assessee explained that an inventory flat had been rented out earlier and sold during the previous year, and therefore no house property income arose in the relevant assessment year. The Tribunal observed that the explanation had not been properly examined and held that such ad-hoc addition without factual verification was unjustified. While granting relief on the additions, the Tribunal dismissed grounds challenging the validity of proceedings under Section 153A, holding that the Assessing Officer had validly assumed jurisdiction based on incriminating material found during search. Case Details Case Title: Shri Dheeraj Chaudhary Versus ACIT Case No.: ITA No.6217/DEL/2018 Date: 11.02.2026 Counsel For Appellant: Ruchesh Sinha, Adv Counsel For Respondent: Sumer Singh Meena,CIT-DR Click Here To Read Order Read More: TDS Credit Can’t Be Allowed to Go Waste Due to CA’s Lapse: Delhi High Court

Undated Loose Sheets ‘Dumb Documents’ in Search Assessment: ITAT

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