February 12, 2026 : In a significant ruling, the Delhi Bench of the Income Tax Appellate Tribunal has deleted additions exceeding ₹2.10 crore made against Shri Dheeraj Chaudhary for Assessment Year 2015–16, holding that rough, undated loose sheets seized during search proceedings cannot form the sole basis for taxable additions.

The order was passed by the Delhi ‘F’ Bench comprising Judicial Member Yogesh Kumar U.S. and Accountant Member Naveen Chandra in ITA No. 6217/DEL/2018, pronounced on 11 February 2026.

Background of the Case

A search and seizure operation was conducted on the Karan Luthra Group on 14 March 2014, during which certain documents allegedly relating to the assessee were found. Consequential search action was later carried out at the premises of Shri Dheeraj Chaudhary. Proceedings under Sections 153A and 142(1) of the Income-tax Act, 1961 were initiated, and the assessee filed a return declaring total income of ₹10.04 lakh.

However, the Assessing Officer assessed the income at ₹2.21 crore, primarily on the basis of handwritten loose sheets marked as Annexure A-1. The Commissioner of Income Tax (Appeals) upheld the additions, leading to the present appeal before the Tribunal.

Loose Sheets Held Inadmissible

The Tribunal examined multiple seized pages forming part of Annexure A-1 and found that:

• Several sheets contained only handwritten jottings of figures.
• Many pages did not contain any date, signature, or name of the assessee.
• In some instances where dates were mentioned, they pertained to financial years other than A.Y. 2015–16.
• The Assessing Officer had not established that the handwriting belonged to the assessee.
• There was no corroborative evidence linking the figures to actual undisclosed income.

The Bench observed that such documents were merely rough estimates, often appearing to relate to property transactions, and could not justify additions in the absence of independent verification.

Reliance on Supreme Court Precedent

The Tribunal relied on the Supreme Court’s ruling in Common Cause v. Union of India, where it was held that loose sheets of paper are not admissible under Section 34 of the Indian Evidence Act unless they form part of regularly maintained books of account and are supported by independent evidence.

The Supreme Court had clarified that even entries in properly maintained books are only corroborative in nature and cannot by themselves fasten liability without proof of authenticity. Applying this principle, the ITAT held that the seized loose sheets in the present case were “wholly irrelevant” and inadmissible as evidence of undisclosed income.

Accordingly, the Tribunal directed deletion of the entire addition of ₹2,10,63,277 made on the basis of Annexure A-1.

Other Additions Also Deleted

The Bench also granted relief on two additional issues:

1. Loan from Muthoot Finance Ltd.
An addition relating to a loan allegedly obtained from Muthoot Finance Ltd. was deleted. 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 verified whether the transaction was reflected in the books of account. In the absence of such examination, the addition was held to be unsustainable.

2. Ad-hoc House Property Addition
An ad-hoc addition of ₹1 lakh as deemed house property income was also struck down. The assessee had explained that an inventory flat rented out earlier had been sold during the preceding year, and therefore no house property income arose in the relevant year. The Tribunal observed that this explanation had not been factually verified and held that such addition without examination was unjustified.

Validity of Section 153A Proceedings Upheld

While granting substantive relief, the Tribunal dismissed the grounds challenging the validity of proceedings under Section 153A. It held that the Assessing Officer had validly assumed jurisdiction under Section 153A on the basis of incriminating material found during the search.

Key Takeaway

The ruling reinforces a settled legal principle: rough, undated loose sheets lacking authorship, signatures, dates, and independent corroboration cannot be treated as conclusive evidence of undisclosed income. Additions based solely on such “dumb documents” are legally unsustainable.

Cause Title: Shri Dheeraj Chaudhary v. ACIT
Case No.: ITA No. 6217/DEL/2018 (A.Y. 2015–16)
Coram: Judicial Member Yogesh Kumar U.S. and Accountant Member Naveen Chandra
Date of Pronouncement: 11 February 2026