Non-abated search assessments cannot rely on third-party material alone when no incriminating evidence is found and cross-examination is denied.

In a non-abated search assessment, additions could not rest on third-party search material or statements when no incriminating material was found in the assessee's own search and the prescribed procedure for relying on such material was not followed. The Tribunal held the jurisdictional foundation for the section 153A additions to be invalid. It also deleted additions for alleged cash payments and unexplained investment because the relied-upon third-party material and statements were not supplied to the assessee and no cross-examination was allowed, leaving the evidence untested and uncorroborated.

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Issues: (i) whether additions made in search assessments for non-abated years could be sustained when no incriminating material was found in the assessee's own search and the assessment was based on material and statements gathered from searches in third-party cases without following the procedure applicable to such material; (ii) whether additions towards alleged cash payments and unexplained investment could be upheld when the relied-upon third-party material and statements were not furnished to the assessee and no opportunity of cross-examination was given.

Issue (i): whether additions made in search assessments for non-abated years could be sustained when no incriminating material was found in the assessee's own search and the assessment was based on material and statements gathered from searches in third-party cases without following the procedure applicable to such material.

Analysis: For both years, the assessments had attained finality before the search and the years were non-abated. The additions were not founded on any material seized from the assessee's premises, but on documents, statements and settlement-related disclosures arising from searches in the cases of other groups. The record did not show any independent incriminating material found in the assessee's search to corroborate those third-party materials. In such a situation, the procedure applicable where material belonging to or concerning a third party is relied upon had to be followed, and a search assessment under section 153A could not be sustained merely on borrowed material from third-party searches.

Conclusion: The jurisdictional challenge succeeded. The assessments were held bad in law for want of valid jurisdictional foundation, and the issue was decided in favour of the assessee.

Issue (ii): whether additions towards alleged cash payments and unexplained investment could be upheld when the relied-upon third-party material and statements were not furnished to the assessee and no opportunity of cross-examination was given.

Analysis: The additions were supported by statements of persons connected with the searched third parties and by materials said to have been found in those searches, but the assessee was not supplied the relied-upon material and was not afforded cross-examination. The Tribunal treated those statements and third-party disclosures as insufficient on a standalone basis, particularly when no corroborative evidence was found in the assessee's own search and no nexus was established between the assessee and the third-party material through admissible and tested evidence.

Conclusion: The merits-based additions were unsustainable and were deleted; the issue was decided in favour of the assessee.

Final Conclusion: All the appeals were allowed, and the additions made in both assessment years were set aside.

Ratio Decidendi: In a non-abated search assessment, additions cannot rest solely on third-party search material or statements unless supported by incriminating material found in the assessee's own search and tested through the prescribed procedure, including fair opportunity to confront and cross-examine the relied-upon evidence.

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