Third-party search material cannot support a cash addition without corroboration and effective cross-examination.

A cash addition under section 69C cannot be sustained against an assessee on the basis of third-party seized material or statements unless there is independent corroborative evidence linking the assessee to the alleged expenditure. Presumptions attached to documents found during search operate only against the person from whose possession they are recovered, and cannot be extended to another person without admissible linkage. Where the addition rests on such statements, denial of effective cross-examination offends natural justice. On these facts, the addition was deleted and the revenue challenge failed.

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Issues: Whether addition under section 69C could be sustained on the basis of seized material and statements of third parties, without independent corroborative evidence and without granting effective cross-examination.

Analysis: The addition rested on digital and documentary material recovered from third-party premises and on statements recorded during search. The assessee denied the alleged cash payment and sought cross-examination of the persons whose statements were relied upon. The record did not show any independent evidence directly linking the assessee to the alleged expenditure. The seized material, by itself, only raised suspicion. The Court noted that presumption attached to seized documents operates against the person from whose possession they are found, and cannot be extended to another person unless supported by independent linkage. It was also found that denial of cross-examination, where the statements formed the basis of the addition, offended natural justice.

Conclusion: The addition under section 69C was not justified and was rightly deleted.

Final Conclusion: The revenue's challenge failed because the impugned addition was based on uncorroborated third-party material and statements, with no admissible independent linkage to the assessee.

Ratio Decidendi: A cash addition founded on third-party search material or statements cannot be sustained in the hands of an assessee unless the material is independently corroborated and the assessee is afforded effective cross-examination where such statements are relied upon.

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