Third-party search material cannot support additions without disclosure and cross-examination; the disputed additions were deleted.

Additions based on digital data and statements recorded in a third-party search could not be sustained where the assessee was not given the relied-upon material and was denied an effective opportunity to cross-examine the persons whose statements were used. The assessment order itself linked the disputed entries to the assessee through those statements, but their adverse use was held inconsistent with natural justice. The additions were also found unsustainable on the merits in light of coordinate bench decisions involving similar search material. The additions were deleted and relief was granted to the assessee.

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Issues: Whether the additions of unexplained money and undisclosed income could be sustained when the material relied upon from the search of a third party was not furnished to the assessee and no opportunity of cross-examination was granted.

Analysis: The additions were founded on digital data and statements recorded during the search of a third party. The assessee was denied copies of the relied-upon material and the chance to cross-examine the persons whose statements were used against it. The assessment order itself showed reliance on those statements to link the disputed entries with the assessee. In these circumstances, the material could not be used adversely against the assessee consistently with the principles of natural justice. The additions were also found unsustainable on the merits in light of the coordinate bench decisions in similar matters arising from the same search material.

Conclusion: The additions of Rs. 26,60,000 and Rs. 200 were deleted and the relief was held in favour of the assessee.

Ratio Decidendi: A third-party statement or search material cannot be used to sustain an addition unless the assessee is supplied the relied-upon material and afforded an effective opportunity to cross-examine the persons concerned.

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