On-money addition based on third-party material fails without confrontation, cross-examination, or independent corroboration.

An addition for alleged on-money payment on immovable property purchase could not be sustained where it rested on third-party pen drive entries and statements that were neither confronted to the assessee nor tested through cross-examination, and where no independent corroboration linked the alleged cash payment to the assessee. The ITAT held that such unverified third-party material, without observance of natural justice and reliability checks, could not constitute credible evidence. The addition was deleted in favour of the assessee.

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Issues: Whether an addition towards alleged on-money payment for purchase of immovable property could be sustained when the assessment rested on third-party pen drive data and statements that were not confronted to the assessee and were not corroborated by independent evidence.

Analysis: The assessment was founded on information said to have been received from a search in another group case, including pen drive entries and statements recorded from third parties. The assessee consistently denied having made any cash payment over and above the agreement value. The material relied upon by the assessing authority was not supplied or confronted to the assessee, and no opportunity for cross-examination of the persons whose statements were used against the assessee was shown to have been provided. The recorded material also was not tested for veracity or reliability and no independent corroboration linked the alleged cash payment to the assessee. In these circumstances, the adverse material could not be treated as credible evidence for sustaining the addition.

Conclusion: The addition could not be sustained and was directed to be deleted in favour of the assessee.

Ratio Decidendi: An addition based on third-party search material and statements cannot be upheld unless the material is confronted to the assessee and is supported by independent corroboration and observance of natural justice.

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