ITAT stresses evidentiary standards in tax proceedings, ruling that suspicion cannot substitute proof when verifying transactions supported by reconciliations and e-way bills.
Suspicion Cannot Take Place of Proof: ITAT
The Income Tax Appellate Tribunal (ITAT) has ruled that speculative suspicion cannot override documentary evidence in tax assessments. In a recent case, the tribunal accepted quantitative reconciliations showing over 97% of disputed transactions were supported by e-way bills or were legally exempt from such documentation.
The assessing officer had raised additions based on alleged discrepancies in outward supplies, relying on indirect indicators rather than concrete evidence of unaccounted income. The ITAT emphasized that under Section 143(3) and Section 144 of the Income Tax Act, assessment must be grounded in material evidence, and cannot proceed on conjecture alone.
"Suspicion, however strong, cannot take the place of legal proof,"the tribunal reiterated, quoting CIT v. Rajendra Prasad Agrawal. The ruling reinforces the principle of benefit of doubt in favour of the assessee when records are demonstrably complete. Tax authorities must now exercise greater restraint in making assessments based on algorithmic red flags without corroborative investigation.
