In the case of Shakuntala Agencies Pvt. Ltd. vs. ITO, search and seizure operations at the premise of a third party uncovered incriminating material related to the assessee. The AO and CIT(A) both rejected the assessee’s request to cross examine the relevant person.

Tribunal holding:

• Addition made to the income of an assessee on the basis of statements made by or documents obtained from a third party cannot be sustained unless the assessee had been given an opportunity to cross examine the said party.

Case cited: 

• The Tribunal cited the Supreme Court’s decision in Andaman Timber vs. CIT to hold that denial of opportunity of cross examining was a violation of the principles of natural justice and hence the additions were liable to be deleted.

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