Cross-examination of adverse third-party statements is essential before they can support an alleged on-money addition.

Addition for alleged cash on-money paid for a flat cannot rest solely on adverse third-party statements that were neither supplied to the assessee nor tested through requested cross-examination; the article states that such material cannot validly support the addition, which was deleted. The claimed deduction of interest income requires verification of the relevant income and applicable statutory conditions; it is to be allowed if eligibility is established. The stated principle is that denying access to and cross-examination of adverse third-party statements prevents their use as the sole basis for an addition.

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Issues: (i) Whether addition for alleged cash on-money paid towards purchase of a flat could be sustained solely on third-party statements not supplied to the assessee and without cross-examination; (ii) Whether the assessee's claim for deduction of interest income required verification for eligibility.

Issue (i): Whether addition for alleged cash on-money paid towards purchase of a flat could be sustained solely on third-party statements not supplied to the assessee and without cross-examination.

Analysis: The addition was founded principally on statements of the builder's partners alleging receipt of cash from flat buyers. The assessee consistently denied making any payment beyond the recorded consideration and sought copies of the statements and an opportunity to cross-examine their makers. As the adverse statements were neither furnished nor tested through cross-examination, the material could not validly support the addition.

Conclusion: The addition for alleged on-money payment is deleted in favour of the assessee.

Issue (ii): Whether the assessee's claim for deduction of interest income required verification for eligibility.

Analysis: Eligibility for the claimed deduction depends upon verification of the relevant interest income and statutory conditions.

Conclusion: The deduction claim is directed to be verified and allowed if the assessee is eligible, in favour of the assessee.

Final Conclusion: The addition based on untested third-party material does not survive, while the deduction claim remains to be determined upon statutory verification.

Ratio Decidendi: An addition founded on adverse third-party statements cannot be sustained where the statements are not supplied to the assessee and a requested opportunity to cross-examine their makers is denied.

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