2026 (3) TMI 802 - AT - Income Tax

Reliance on uncorroborated third party documents cannot sustain tax additions where no corroboration or cross examination occurred.

Addition based solely on entries in a third party loose seized document that do not expressly record a cash payment, and where no corroborative evidence ... Addition u/s 69B for unexplained investment - cash payment - reliance on third-party 'dumb' documents - denial of opportunity to cross-examine witnesses violates principles of natural justice Addition made u/s 69B based on entries in a seized loose paper - HELD THAT: - The Tribunal held that the addition was founded solely on entries in a loose paper seized from a third party which did not mention that the payment was in 'cash' and was otherwise uncorroborated by any statement or evidence attributing the cash payment to the assessee. The authorities below also failed to provide the assessee an opportunity to cross-examine the person from whose possession the document was seized. Applying the ratio that reliance on such a 'dumb' document without corroboration, coupled with denial of cross-examination, vitiates the proceedings, and following co-ordinate Bench decisions on identical facts, the addition could not be sustained. [Paras 8, 9, 10, 11] The addition of the assessee's share of the alleged cash payment under section 69B is deleted. Final Conclusion: The Tribunal allowed the appeal and deleted the addition made under section 69B, finding the impugned addition rested on an uncorroborated third party document and was vitiated by the absence of opportunity to cross examine the relevant witness. Issues: Whether the addition of INR 6.25 Lakhs made as assessee's share of alleged cash payment and treated as undisclosed investment based on entries in a loose seized document (Annexure A-2) without corroborative evidence or opportunity for cross-examination is sustainable.Analysis: The addition rests solely on entries in a loose paper seized from third parties which do not expressly state that the payment was made in cash nor is there any recorded statement or corroborative evidence attributing the cash payment to the assessee. Co-ordinate bench decisions on identical facts deleted similar additions where the seized document was a 'dumb document' and no opportunity of cross-examination of the person from whose possession the document was seized was afforded; those decisions relied on the principle that reliance on uncorroborated third-party entries without cross-examination violates the principles of natural justice and cannot sustain an addition. The seized entries here are identical in nature and the assessment was completed without recording corroborative statements or providing cross-examination of the third party; therefore the factual and procedural deficiencies identified by the co-ordinate bench apply.Conclusion: The addition of INR 6.25 Lakhs is deleted and the appeal is allowed in favour of the assessee.Ratio Decidendi: An addition based solely on entries in a third-party loose seized document that does not specifically record a cash payment, and where no corroborative evidence or opportunity to cross-examine the third party was provided, is unsustainable and must be deleted.