Third-party seized material cannot justify additions in another person's hands without corroboration or cross-examination.

Additions based on seized papers found from a third party and a third party's statement were held unsustainable where no incriminating material was found from the assessee's premises, the assessee denied receipt, and cross-examination was not allowed. The Tribunal held that the search presumption applies against the person from whom the documents were seized, not automatically against another person, and that uncorroborated third-party material was insufficient to prove undisclosed income in the assessee's hands. Reliance on deemed taxation under section 56(2)(vi) also failed because receipt itself was not established. The additions were deleted.

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Issues: Whether the additions of Rs. 1 crore for assessment year 2006-07 and Rs. 20 crores for assessment year 2007-08, made on the basis of seized papers found from a third party and statements of a third person, were sustainable in the assessee's hands.

Analysis: The seized papers were found from the premises of a third party and the assessee consistently denied receipt of the amounts. No incriminating material was found from the assessee's premises to show actual receipt of cash, and the assessee's request for cross-examination of the third party was not granted. The statement of the third party was not treated as sufficiently reliable in the absence of corroborative evidence linking the entries specifically to the assessee. The presumption arising from search material could operate against the person from whom the documents were seized, but not automatically against a third party. On the facts, the material was not enough to establish that the assessee had received undisclosed income, and the alternative reliance on deemed taxation under section 56(2)(vi) also failed once the receipt itself was not proved.

Conclusion: The additions were not sustainable and were deleted in favour of the assessee.

Ratio Decidendi: A third-party seized document and a third-party statement, without corroborative evidence and without opportunity of cross-examination, cannot by themselves justify addition in the hands of another person.

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