Bogus gift addition fails without cross-examination and corroboration; section 234B interest also falls for want of direction.

A bogus gift addition could not be sustained where it rested mainly on a retracted statement recorded behind the assessee's back, with no independent corroboration and no opportunity for cross-examination; the addition was deleted. The surrounding material, including the foreign remittance immunity scheme and the assessee's exoneration in FERA proceedings, supported the genuineness of the gift and weakened the Revenue's case. Interest under section 234B was also held unsustainable because the assessment order contained no specific direction authorising such levy; the interest was deleted.

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Issues: (i) Whether the addition made on account of alleged bogus gift was sustainable on the basis of the donor's statement and surrounding material; (ii) Whether interest charged under section 234B could be sustained.

Issue (i): Whether the addition made on account of alleged bogus gift was sustainable on the basis of the donor's statement and surrounding material.

Analysis: The addition was based mainly on a statement recorded behind the assessee's back, which stood retracted shortly thereafter. No independent material established that the assessee had paid the alleged cash consideration. The assessee was not afforded an opportunity to cross-examine the maker of the statement. The surrounding circumstances, including the contemporaneous foreign remittance immunity scheme and the exoneration in the FERA proceedings, were treated as supporting the genuineness of the gift and weakening the Revenue's case.

Conclusion: The addition on account of bogus gift was not justified and was rightly deleted; the finding was in favour of the assessee.

Issue (ii): Whether interest charged under section 234B could be sustained.

Analysis: The interest levy was held unsustainable in the absence of a direction in the assessment order. The existing judicial view relied upon required a specific direction before such interest could be charged.

Conclusion: The interest charged under section 234B was deleted; the finding was in favour of the assessee.

Final Conclusion: The Revenue's challenge to the deletion of the bogus gift addition failed, and the assessee obtained relief against the levy of interest under section 234B.

Ratio Decidendi: An addition cannot be sustained on the basis of a retracted statement recorded behind the assessee's back without affording cross-examination and without corroborative evidence, and interest under section 234B cannot be charged absent the requisite direction in the assessment order.

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