Natural justice in tax assessments requires disclosure of secret statements and allows cross-examination of adverse witnesses

In quasi-judicial sales tax assessment proceedings, material gathered in a private enquiry and statements recorded behind the assessee's back cannot be used unless disclosed and a fair opportunity to rebut is given. Where the assessee specifically seeks to confront such witnesses and their evidence is material to the assessment, refusal to summon them and allow cross-examination may violate natural justice. The power to summon witnesses under the rules must therefore be exercised fairly when credibility needs to be tested. The assessee was entitled to have the witnesses examined in its presence and to cross-examine them, and the direction granting that opportunity was upheld.

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Issues: Whether, in sales tax assessment proceedings, the assessee was entitled to have witnesses whose statements were recorded behind its back summoned and examined in its presence so that it could cross-examine them before those statements were used against it.

Analysis: Assessment proceedings under the U.P. Sales Tax Act are quasi-judicial and must conform to the principles of natural justice. Although the strict rules of evidence do not apply, material collected by a private enquiry cannot be used against an assessee unless it is disclosed and a fair opportunity is given to rebut it. Where statements recorded behind the assessee's back are relied upon, and the assessee specifically seeks to confront those witnesses with documentary evidence that is inconsistent with their earlier statements, refusal to summon them may deny a reasonable opportunity of defence. The power to summon witnesses under the Rules carries with it the duty to exercise that power fairly where the circumstances require cross-examination for testing credibility.

Conclusion: The assessee was entitled to have the witnesses examined in its presence and to cross-examine them. The contrary view was incorrect, and the remand directing such opportunity was proper.

Ratio Decidendi: In quasi-judicial tax assessment proceedings, material gathered behind the assessee's back cannot be relied upon without disclosure and a fair opportunity to rebut it, and cross-examination of such witnesses must be allowed where necessary to ensure natural justice.

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