Natural justice requires cross-examination before third-party statements can support tax additions against an assessee.

Additions based on third-party statements and enquiry material cannot be sustained where the assessee is not supplied the material and is denied an opportunity to cross-examine the witness. When the Revenue relies on a broker's statement to support an adverse finding, the principles of natural justice require disclosure of the material and a fair chance to test it through cross-examination before it is used against the assessee. On that basis, the additions were held unsustainable on the existing record and the matter was sent back for fresh adjudication with cross-examination allowed.

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Issues: Whether additions based on statements and enquiries from third parties could be sustained without furnishing the material to the assessee and without affording an opportunity to cross-examine the third party witness.

Analysis: The addition rested substantially on the broker's statement and related enquiry material. Such material was used against the assessee, but the assessee was not given an opportunity to cross-examine the broker. Where the Revenue relies on third-party evidence, principles of natural justice require that the assessee be supplied the material and given a fair chance to test it by cross-examination before it is used to make an adverse finding.

Conclusion: The additions could not be sustained on the existing record and the matter was required to be restored for fresh adjudication after granting the assessee an opportunity to cross-examine the broker.

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