Third-party search material cannot sustain on-money additions without corroboration, disclosure of adverse material, and cross-examination.

Third-party search material and statements, without corroborative evidence against the assessee, were insufficient to support an addition for alleged on-money payment. Where the assessment under section 153C rested on material seized from another person, but no seized document or independent evidence showed the assessee had paid cash over and above the recorded consideration, the adverse material had to be properly confronted and the assessee given an opportunity to cross-examine the deponents. In the absence of such natural justice compliance, the addition under section 69 and the consequential assessment action were not sustainable, and relief followed for the assessee.

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Issues: Whether the addition for alleged on-money payment and the assessment framed under section 153C could be sustained solely on the basis of third-party material and statements, in the absence of corroborative evidence against the assessee and without furnishing adverse material or cross-examination.

Analysis: The assessee denied any cash payment over and above the recorded sale consideration. The assessment was founded on statements recorded during search in the case of a third party and on material seized from that third party, but no seized document or independent evidence was brought to show that the assessee had made the alleged on-money payment in the relevant year. The adverse material and statements relied upon were not confronted to the assessee in a manner meeting the requirements of natural justice, and no opportunity of cross-examination of the persons whose statements were used against the assessee was provided. In these circumstances, third-party material without corroboration was held insufficient to sustain the addition.

Conclusion: The addition under section 69 and the consequential assessment action were not sustainable, and relief was granted to the assessee.

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