Third-party search material and denied cross-examination could not sustain an addition under section 69; natural justice required confrontation.

An addition under section 69 based only on third-party search material, including excel sheets and statements, could not be sustained where no independent evidence linked the assessee to any alleged on-money payment. The adverse material was not supplied to the assessee and cross-examination of the relied-upon persons was denied, which breached natural justice. Untested third-party statements and uncorroborated electronic records were held insufficient on their own, and the addition was deleted.

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Issues: Whether the addition made under section 69 on the basis of third-party search material and statements, without supplying the adverse material to the assessee and without granting cross-examination, was sustainable.

Analysis: The addition rested on documents, excel sheets and statements recovered from the premises of third parties in the course of search proceedings. No independent material was brought to link the assessee to any alleged cash payment, and no corroborative evidence was shown to establish actual payment of on-money by the assessee. The adverse material and statements relied upon were not furnished to the assessee, and the requested cross-examination was not provided. Untested third-party statements and uncorroborated electronic records, by themselves, were held insufficient to sustain the addition. The denial of confrontation and cross-examination was treated as a breach of natural justice.

Conclusion: The addition under section 69 was not sustainable and was deleted; the assessee succeeded on the substantive ground.

Ratio Decidendi: An addition based solely on uncorroborated third-party material cannot be sustained unless the assessee is confronted with the adverse material and afforded an effective opportunity to cross-examine the persons whose statements are relied upon.

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