Third-party statement cannot sustain an on-money addition without cross-examination and independent corroboration.

An addition for alleged on-money payment on purchase of immovable property was deleted because it was founded only on a third-party statement recorded in search proceedings, without effective cross-examination and without independent corroborative material. The Tribunal held that where the Revenue relies on a statement to allege undisclosed investment, it must give the assessee a fair opportunity to test that evidence and must also bring supporting material on record. A bare, unverified statement was insufficient to sustain the addition, and the substantive challenge succeeded; the remaining grounds were not pressed.

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Issues: Whether an addition for alleged on-money payment towards purchase of immovable property could be sustained solely on the basis of a third-party statement without affording the assessee an effective opportunity of cross-examination and without independent corroborative material.

Analysis: The addition rested on the statement recorded in the course of search proceedings in the case of the builder, coupled with post-search material, while the assessee consistently denied payment of any on-money. The assessee sought the underlying material and cross-examination of the witness. The record showed that no meaningful cross-examination was provided and the assessee was instead called upon to produce the builder. The Tribunal held that when the Revenue relies on a third-party statement to fasten an undisclosed investment on the assessee, the tax authorities must provide a fair opportunity to test that statement and bring adequate corroborative material on record. A bare unverified statement of a third party, without such opportunity and corroboration, was held insufficient to sustain the addition.

Conclusion: The addition made on account of alleged on-money payment could not be sustained and was deleted; the assessee succeeded on the principal issue.

Final Conclusion: The assessment was held unsustainable to the extent it was founded only on an untested third-party statement, and the appeal was allowed on the substantive challenge while the remaining grounds were not pressed.

Ratio Decidendi: An addition based solely on an uncorroborated third-party statement cannot be sustained unless the assessee is given an effective opportunity to cross-examine and the Revenue brings independent material to support the allegation.

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