Tax-period-wise adjudication requires separate proceedings, effective cross-examination of relied-upon witnesses, and proof of corroborative documentary evidence.

Section 74 adjudication must be conducted separately for each relevant tax period; the notes state that combining multiple assessment years in a composite proceeding is inconsistent with the statutory scheme. They further explain that effective cross-examination is required where relied-upon witness statements underpin proposed liability, although co-noticees need not be examined against themselves. Documents offered as corroboration, including pocket diaries, require proof through their authors or responsible custodians before they can support findings. Any renewed adjudication should therefore proceed tax-period-wise, permit meaningful testing of relied-upon evidence, and establish the evidentiary basis of documentary material.

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Issues: (i) Whether a composite proceeding under Section 74 for multiple assessment years is legally sustainable; (ii) Whether denial of cross-examination of witnesses whose statements were relied upon in adjudication violated principles of natural justice; (iii) Whether pocket diaries could be relied upon without proving them through their authors or custodians.

Issue (i): Whether a composite proceeding under Section 74 for multiple assessment years is legally sustainable.

Analysis: Section 74 proceedings must relate to the relevant tax period. A composite notice and adjudication covering distinct assessment years as a block assessment is inconsistent with the statutory scheme.

Conclusion: A composite assessment under Section 74 for multiple assessment years is not legally sustainable, in favour of the assessee.

Issue (ii): Whether denial of cross-examination of witnesses whose statements were relied upon in adjudication violated principles of natural justice.

Analysis: Cross-examination is required where relied-upon witness statements form the basis of the proposed liability and the noticee seeks to test their veracity. Non-retraction of statements, the possibility that employees may be influenced, or an assumption that cross-examination may favour the noticee are not sound grounds to refuse the opportunity. Documentary material treated only as corroboration of such statements does not independently sustain the finding. The right does not extend to co-noticees penalised in the same proceedings, since requiring their examination would compel them to depose against themselves.

Conclusion: Denial of cross-examination on the stated grounds was unjustified and violated principles of natural justice, in favour of the assessee; cross-examination may be sought only in respect of persons who are not co-noticees.

Issue (iii): Whether pocket diaries could be relied upon without proving them through their authors or custodians.

Analysis: A document may be treated as relevant evidence only when it is produced or proved by its author or by a person responsible for maintaining it. The record did not disclose such proof for the pocket diaries, and the statements of the identified goldsmiths maintaining them had not been recorded.

Conclusion: The pocket diaries cannot be relied upon without proper proof through their authors or custodians, in favour of the assessee.

Final Conclusion: Any renewed adjudication must be undertaken tax-period-wise and must afford a meaningful opportunity to test relied-upon evidence and establish the evidentiary basis of documents.

Ratio Decidendi: A tax adjudication founded on relied-upon witness statements and unproved corroborative documents must comply with natural justice by allowing effective cross-examination where warranted, and separate tax periods cannot be combined into a single Section 74 assessment.

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