Third-party search material cannot sustain an on-money addition without corroboration and cross-examination.

Addition for unexplained investment based on alleged on-money payment could not be sustained where it rested only on third-party search material and statements, with no independent seized evidence specific to the assessee. The tribunal held that adverse material had to be properly confronted and that reliance on untested statements without allowing cross-examination breached natural justice. In the absence of corroborative evidence linking the assessee to cash over and above recorded consideration, the addition was deleted and the appeals were allowed.

---

---

Issues: Whether the addition made as unexplained investment on the basis of alleged on-money payment, founded only on statements and material seized in the search of a third party, could be sustained in the absence of corroborative evidence and without allowing cross-examination.

Analysis: The addition rested on search material and statements recorded in the case of the builder group, while no seized material specific to the assessee was brought on record to show payment of any amount over and above the recorded consideration. The assessee consistently denied cash payment and the record did not show any independent evidence linking the assessee to the alleged on-money. The order also proceeded without confronting the adverse material fully to the assessee and without granting cross-examination of the persons whose statements were relied upon. On identical facts in connected matters, additions based solely on third-party information and untested statements had been deleted for want of corroboration and for breach of natural justice.

Conclusion: The addition was unsustainable and was deleted in favour of the assessee.

Final Conclusion: The consolidated appeals were allowed and the additions made on account of alleged on-money payments were set aside.

Ratio Decidendi: An addition cannot be sustained merely on third-party statements or seized material from another person's search unless the material is corroborated by independent evidence specific to the assessee and the assessee is afforded a fair opportunity to rebut the adverse material, including cross-examination where relied-upon statements are used.

---