Third-party digital records and denied cross-examination cannot support an unexplained investment addition without corroboration.

An addition for alleged unexplained investment in a shop purchase cannot be sustained merely on a third-party Excel sheet and a statement of a key employee where no receipt, diary, acknowledgement, or other contemporaneous document links the assessee to any cash payment. The evidentiary value of such material depends on independent corroboration, and adverse third-party evidence must be reliable, cogent, and capable of rebuttal. Where the assessee seeks cross-examination of the person whose statement is relied upon and that opportunity is denied, the assessee suffers serious prejudice and principles of natural justice are violated. On these facts, the addition was deleted.

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Issues: Whether the addition for alleged unexplained investment in the purchase of a shop could be sustained solely on the basis of third-party digital records and statements, without independent corroboration and without effective cross-examination of the person whose statement was relied upon.

Analysis: The impugned addition rested on an Excel sheet recovered from a third party during search and the statement of a key employee who explained the entries. No receipt, diary, acknowledgement, or other contemporaneous document was found from the assessee linking the assessee to any cash payment. The evidentiary material did not independently prove actual payment by the assessee and derived its force from the explanation of the very person whose statement was relied upon. The assessee had specifically sought cross-examination, but that opportunity was denied. In income-tax proceedings, though strict rules of evidence do not apply, adverse third-party material used against an assessee must still be reliable, cogent, and capable of rebuttal. The absence of corroboration and denial of cross-examination caused serious prejudice and violated the principles of natural justice.

Conclusion: The addition could not be sustained and was rightly deleted.

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