2026 (4) TMI 91 - AT - Income Tax

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 ... Unexplained investment - Third-party material relied upon - Corroborative evidence for payment of on money - Cross-examination and natural justice HELD THAT: - The Tribunal found that the addition in the assessee's hands was made merely on the basis of statements recorded in the search of M/s. RHIL group and material recovered from that group, while the assessee had denied making any cash payment. No independent or corroborative evidence was brought on record to establish that the assessee had paid on-money for the relevant years. The Tribunal further noted that the co-ordinate Benches, on identical facts concerning the same group entity, had held that an addition cannot be made solely on third-party information in the absence of evidence qua the assessee, and that denial of cross-examination when third-party statements are relied upon also vitiates the addition. As there was no change in facts or circumstances, the same view was followed. [Paras 8, 9, 10] The addition under section 69 was deleted and the assessee's appeals for all the years were allowed. Final Conclusion: Following the co-ordinate Bench decisions on identical facts arising from the same builder group, the Tribunal held that the impugned addition was unsupported by corroborative evidence and was based only on third-party material. The appeals for Assessment Years 2017-18, 2018-19 and 2019-20 were accordingly 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.