Uncorroborated seized material and retracted survey statements cannot sustain additions under Section 69A.

The assessee, a key person in the Citizen Group, filed his return for assessment year 2020–21 declaring income of ₹1,74,57,470.

Following search and survey proceedings, the Assessing Officer relied on seized and impounded documents concerning alleged cash-loan transactions and added ₹3,01,59,831 as unexplained money and ₹4,46,38,775 as interest under Section 69A of the Income-tax Act, 1961.

On appeal, the Commissioner of Income Tax (Appeals) enhanced the total addition to ₹11,35,00,000.

The ITAT set aside the appellate order and directed deletion of the addition.

The Revenue appealed, proposing questions concerning the Tribunal’s deletion of the addition, its consideration of the merits, and its treatment of the seized material and the assessee’s retraction.

1. Whether the ITAT’s direction to delete the addition under Section 69A, including the enhancement to ₹11,35,00,000, raised a substantial question of law.

2. Whether the ITAT’s findings were perverse because it accepted the assessee’s retraction and allegedly ignored corroborative seized or impounded material.

Section 69A of the Income-tax Act, 1961 permits an addition where money or other specified assets are found to be owned by an assessee and are not satisfactorily explained.

Under Dhakeswari Cotton Mills Ltd. v. Commissioner of Income Tax, West Bengal, an income-tax authority is not bound by technical rules of evidence but cannot make an assessment based on pure guesswork without material.

Under Omar Salay Mohamed Sait v. Commissioner of Income-tax, Madras, a fact-finding tribunal must consider relevant evidence and cannot base findings on suspicion, conjecture, surmise, or no evidence.

Chuharmal v. Commissioner of Income Tax, M.P., Bhopal recognises that, although the Evidence Act’s strict rules do not apply to tax proceedings, its general principles—including those concerning possession and ownership—may be applied where the facts justify them.

The High Court found that the ITAT had considered the seized and impounded documents, the timing of the search, and the assessee’s retraction of his survey statement.

The Tribunal also found no substantive corroborative material establishing that the assessee had advanced cash loans or earned interest, and noted that the alleged borrowers were not examined despite contact details having been provided.

Applying the principles in Dhakeswari Cotton Mills, Omar Salay Mohamed Sait, and Chuharmal, the High Court held that the Tribunal’s assessment of the evidence was not perverse or unsupported; the Revenue’s proposed questions therefore concerned factual findings rather than substantial questions of law.

The stay application, GA No. 2 of 2026, was also dismissed; the Court noted that the delay-condonation application, GA No. 1 of 2026, had already been allowed.

No order as to costs was made.