Cross-examination rights bar cash addition based on third-party reply when books and vouchers support the assessee's records.

Cash addition found in excess of the cash book balance could not be sustained where the assessee produced invoices, VAT records and ledger entries showing the cash as advance receipts against sales. The department relied mainly on a third party's reply under section 133(6), but cross-examination of that person was denied without adequate justification. An adverse finding cannot rest on such third-party material unless the assessee is given a real opportunity to test it, especially when the supporting books and vouchers are not discredited. The addition was therefore deleted.

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Issues: Whether the addition of cash found in excess of the cash book balance could be sustained when the assessee had produced supporting invoices, VAT records and ledger entries, but was denied cross-examination of the third party whose reply under section 133(6) was relied upon.

Analysis: The addition was founded primarily on the reply received from the third party, while the assessee had furnished documentary material to show that the cash represented advance receipts against sales. The request for cross-examination of the person whose statement or reply was relied upon was rejected without cogent justification. A conclusion adverse to the assessee could not be reached by relying on such third-party material without affording an effective opportunity to test it, particularly when the supporting books and vouchers were not discredited.

Conclusion: The addition was not sustainable and was directed to be deleted.

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