Income-tax addition under section 69 deleted where third-party statements were not supplied for cross-examination

5-Second Takeaway

The addition of Rs. 25,00,000 under section 69 was deleted because the Assessing Officer relied on third-party statements without supplying those statements to the assessee or allowing cross-examination. The denial of that opportunity made the addition unsustainable.

The assessment turned on an alleged cash payment said to have been admitted by two partners of M/s Lakshmi Builders and Developers in statements recorded under section 131. On that basis, the Assessing Officer treated Rs. 25,00,000 as unexplained and made an addition under section 69.

The assessee consistently denied having paid any amount over and above the declared sale consideration. He also asked for a copy of the relied-upon statements and sought an opportunity to cross-examine the persons whose statements were being used against him.

Those requests were not granted either by the Assessing Officer or by the first appellate authority. The tribunal noted that adverse material must be confronted to the assessee before it can be used to sustain an addition, especially where the case depends materially on third-party statements.

Because the statements were neither furnished nor tested through cross-examination, the addition could not stand. The tribunal therefore deleted the Rs. 25,00,000 addition under section 69.