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When in the course of search, loose documents, not being part of returns or accounts are found, the entries found therein cannot be the basis for taxing the amount as unexplained investment emanating from an undisclosed income. In CIT v. Ranchi Medical Research & Development Foundation (P) Ltd, the Jharkhand High Court found that the assessing officer had based his presumption of unexplained investment of Rs 36 lakh from noting in a loose-sheet found in the course of search. What aroused his suspicion was against this payment, the name of one Mithlesh Singh was mentioned. Accordingly, he went on to conclude that this must represent a transaction of purchase of immovable property from Mithlesh Singh.
The High Court agreed with the Respondent that nothing turned on this entry alone without further corroborative evidence as to purchase of immovable property from out of undisclosed income. The Respondent gave the explanation that the entry in the loose sheet in fact represented the need for arrangement of margin money payable to bank for loan for purchase of diagnostic equipments from Siemens Ltd.
(The author is a New Delhi-based chartered accountant)
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