Cross-examination in reassessment matters is essential when third-party statements form the sole basis of addition.

Reassessment based solely on third-party statements was unsustainable because the assessee's request to cross-examine the deponents was denied. Reliance on such statements without affording cross-examination breached natural justice, and the defect was treated as going to the root of the reassessment. The reopening and resulting addition were therefore held bad in law, and the assessment was quashed in favour of the assessee.

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Issues: Whether reassessment based on third-party statements, without affording the assessee an opportunity to cross-examine the deponents, was sustainable in law and whether the resulting reassessment deserved to be quashed.

Analysis: The addition was founded purely on statements of third parties. The assessee had specifically sought cross-examination during reassessment proceedings, but the opportunity was not granted. In such a situation, reliance on those statements without allowing cross-examination violated the principles of natural justice. The defect went to the root of the reassessment, rendering the reopening and the resulting addition unsustainable.

Conclusion: The reassessment was held to be beyond jurisdiction and bad in law for denial of cross-examination, and the assessment was quashed in favour of the assessee.

Ratio Decidendi: An assessment or reassessment founded on third-party statements cannot be sustained unless the assessee is afforded a fair opportunity to cross-examine the witnesses whose statements are used against him.

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