Third-party diary entries cannot justify estimated additions without corroboration, confrontation, or cross-examination of the broker.

Third-party loose diary entries, without matching the assessees' registered sale deeds, books of account, or independent corroboration, could not sustain additions based on alleged suppressed sale consideration; the estimated rates were treated as unsupported guesswork and the deletions were upheld. Registered sale deeds were public documents already forming part of the record, so their consideration by the appellate authority did not attract Rule 46A or require a remand report, and the objection failed. A separate disallowance of development charges was also deleted because the extra area and related consideration were already accounted for. Denial of cross-examination of the broker further vitiated the additions.

---

---

Issues: (i) Whether additions made by estimating higher sale consideration for plots on the basis of seized diary entries found from a third party were sustainable. (ii) Whether the first appellate authority erred in relying upon registered sale deeds without following Rule 46A and without calling for a remand report. (iii) Whether the disallowance of excess development charges in the case of one assessee was justified. (iv) Whether denial of cross-examination of the broker vitiated the additions.

Issue (i): Whether additions made by estimating higher sale consideration for plots on the basis of seized diary entries found from a third party were sustainable.

Analysis: The additions were founded only on loose diary entries seized from the broker's premises, while the assessees' sales were supported by registered sale deeds and books of account. The seized notings did not match the actual plot numbers, buyers, dates, areas, or consideration reflected in the registered transactions. No incriminating material was found from the assessees' premises, no corroborative evidence was brought to establish receipt of on-money, and no independent enquiry with the buyers or other connected persons was made. The estimated rates adopted by the assessing authority were not supported by valuation evidence and were treated as pure guess work.

Conclusion: The additions on alleged suppressed sale consideration were not sustainable and were rightly deleted, in favour of the assessee.

Issue (ii): Whether the first appellate authority erred in relying upon registered sale deeds without following Rule 46A and without calling for a remand report.

Analysis: The material relied upon consisted of registered sale deeds, which are public documents and were part of the legal record of the transactions. Such documents were not treated as new or extraneous private evidence requiring admission under Rule 46A. The appellate authority was competent to examine them in the exercise of co-terminus powers, and the Revenue's objection that a remand report was mandatory was rejected.

Conclusion: There was no violation of Rule 46A, and the Revenue's objection failed, in favour of the assessee.

Issue (iii): Whether the disallowance of excess development charges in the case of one assessee was justified.

Analysis: The supplementary development arrangement showed that additional developed area was allotted in lieu of development charges, and the corresponding sale consideration for the extra area had already formed part of the gross sales and profit offered to tax. The ledger and year-wise payments to the developer did not show any excess payment beyond the agreed commercial arrangement. The disallowance was therefore based on an incorrect assumption of excess expenditure.

Conclusion: The disallowance of development charges was not justified and was rightly deleted, in favour of the assessee.

Issue (iv): Whether denial of cross-examination of the broker vitiated the additions.

Analysis: The assessees had specifically sought an opportunity to cross-examine the broker whose diary entries formed the sole basis of the additions, but that request was not granted. Since the broker's material was used against the assessees without confrontation, the addition was contrary to the principles of natural justice. This procedural infirmity further undermined the Revenue's case.

Conclusion: Denial of cross-examination vitiated the additions, in favour of the assessee.

Final Conclusion: The Revenue's appeals were unsuccessful, the assessee's cross objections succeeded, and the relief granted by the first appellate authority was sustained in full.

Ratio Decidendi: A third-party loose document cannot sustain an income addition unless its contents are independently corroborated and confronted to the assessee, and registered sale deeds supported by the books of account cannot be displaced by mere estimates or surmises.

---