Natural justice bars additions based on third-party statements when material is withheld and cross-examination is denied.

Additions based exclusively on third-party statements and search material cannot stand unless the assessee is supplied the relied-upon material and given an effective opportunity to cross-examine the witnesses. Where the Revenue relies on statements recorded in search proceedings but withholds the supporting material and denies cross-examination, the assessment is vitiated for breach of natural justice. On these facts, the disputed additions were deleted and the impugned order was treated as unsustainable in law.

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Issues: Whether the additions sustained on the basis of third-party statements and search material could stand when the assessee was not supplied the relied-upon material and was denied cross-examination of the witnesses.

Analysis: The assessment was founded on information from the Investigation Wing and on statements recorded in the search proceedings of the builder group, alleging payment of on-money by the assessee. The assessee consistently denied the allegation, sought copies of the reasons and supporting material, and requested cross-examination of the persons whose statements were relied upon. The material sought was not furnished and no opportunity of cross-examination was provided. Where the Revenue proposes to rely on such statements, the material must be supplied and the assessee must be given a fair opportunity to test the evidence. Denial of these safeguards amounts to a violation of natural justice and renders the assessment unsustainable.

Conclusion: The additions based solely on the third-party statement could not be sustained, and the impugned order was held to be bad in law for breach of natural justice.

Final Conclusion: The assessee obtained relief on the core challenge, and the appeal was allowed to the extent of deleting the disputed additions on the ground of procedural unfairness.

Ratio Decidendi: An addition founded exclusively on a third-party statement cannot be sustained unless the relied-upon material is supplied and effective cross-examination is afforded to the assessee.

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