Natural justice in best judgment assessment requires disclosure of adverse material and a real chance to rebut it.

Best judgment assessment under section 17(3) of the Kerala General Sales Tax Act, 1963 must be based on reasonable conclusions and not arbitrary inference, and the principles of natural justice apply with full force. Where the assessing authority relies on adverse inspection materials or alleged transaction links, those materials must be disclosed and the assessee given a meaningful opportunity to rebut them, including cross-examination where relevant. Because the assessee was not effectively allowed to meet the material relied upon, the assessment was found procedurally unfair and unsupported by proper reasoning. The assessment and connected appellate orders were set aside and the matter was remitted for fresh decision in compliance with natural justice.

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Issues: Whether the best judgment assessment was vitiated for breach of natural justice because the assessee was not given an effective opportunity to meet the materials relied upon by the assessing authority.

Analysis: Under section 17(3) of the Kerala General Sales Tax Act, 1963, a best judgment assessment must rest on reasonable conclusions and not on arbitrary inference. The principles of natural justice apply to such proceedings, and where the authority relies on materials adverse to the assessee, those materials must be disclosed and the assessee must be given an opportunity to explain them. The assessment in this case was based on presumptions drawn from inspection materials and alleged links between transactions and the assessee, but the assessee's request to rebut the material and cross-examine relevant parties was not effectively considered. The conclusions reached were held to be arbitrary and unsupported by proper procedural fairness.

Conclusion: The assessment and the connected appellate orders were set aside, and the matter was remitted to the assessing officer for fresh decision after complying with natural justice.

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