Untested survey statements cannot sustain bogus sale additions when retracted evidence and bank records support transaction genuineness.

Reassessment reasons must be furnished within a reasonable time when specifically sought, and failure to do so breaches the reassessment procedure, though that defect did not independently invalidate the reassessment here. Additions treating loose diamond sales as bogus could not stand where the revenue relied on survey statements recorded behind the assessee's back without supply of those statements or cross-examination, especially after retraction and later direct evidence confirmed the purchases through affidavit, purchase bills and banking records. The earlier untested statements were insufficient to displace the documentary and oral evidence of genuineness, so the additions were deleted.

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Issues: (i) Whether reassessment initiated under section 148 could be sustained when the reasons recorded for reopening were not furnished to the assessees on request; (ii) Whether the additions made by treating the sale of loose diamonds as bogus could be sustained on the basis of statements recorded during a survey, despite retraction, subsequent supporting statement, affidavit, purchase bill, bank evidence and denial of cross-examination.

Issue (i): Whether reassessment initiated under section 148 could be sustained when the reasons recorded for reopening were not furnished to the assessees on request.

Analysis: The reopening was challenged on the footing that the assessees had specifically asked for the recorded reasons but were not supplied them. The legal position applied was that reasons for reopening must be furnished within a reasonable time and the assessee must be enabled to object to the reopening. A statement recorded elsewhere may not, by itself, cure the failure to communicate the reasons when such communication is mandatory and specifically sought.

Conclusion: The requirement of furnishing the reasons was not complied with, but the reassessment was not set aside on this ground alone.

Issue (ii): Whether the additions made by treating the sale of loose diamonds as bogus could be sustained on the basis of statements recorded during a survey, despite retraction, subsequent supporting statement, affidavit, purchase bill, bank evidence and denial of cross-examination.

Analysis: The additions rested mainly on statements recorded during survey at the back of the assessees, which were not supplied before assessment and in respect of which no cross-examination was allowed. Those statements were subsequently retracted, and the purchaser later appeared before the Assessing Officer, confirmed the purchases, stated that payment was made by account payee cheques and supported the transaction by affidavit and documentary material. The earlier statements, not having been tested by cross-examination and having been retracted, could not be used against the assessees as conclusive evidence of a sham or paper transaction. The prior acceptance of the transactions in the original assessments and the absence of evidence of cash being returned further supported genuineness.

Conclusion: The sales were held to be genuine and the additions were deleted in favour of the assessees.

Final Conclusion: The reassessment challenge did not survive as an independent ground, but the substantive additions treating the diamond sales as undisclosed income were deleted, resulting in relief to the assessees.

Ratio Decidendi: A statement recorded behind the back of an assessee, without prior supply and opportunity of cross-examination, cannot by itself justify an addition when later retracted and contradicted by direct supporting evidence establishing the genuineness of the transaction.

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