Best judgment assessment must disclose relied-on material; undisclosed evidence and no rebuttal opportunity vitiate the assessment.

A best judgment assessment cannot be sustained where the Assessing Authority relies on material collected behind the assessee's back without disclosing it or giving an opportunity to rebut it. Even in such an assessment, the proposed basis and supporting material must be placed before the assessee to satisfy natural justice and allow an effective explanation. Undisclosed local enquiries and other extraneous material cannot lawfully be used to fasten tax liability. The assessment was therefore liable to be quashed for breach of fair hearing requirements and violation of natural justice.

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Issues: Whether a best judgment assessment could be sustained when the material collected by the Assessing Authority behind the back of the assessee was not disclosed to him and no opportunity was given to rebut it.

Analysis: The assessment was based on local enquiries and other material collected by the Assessing Authority, but that material was never brought to the notice of the assessee. Even in a best judgment assessment, the basis of the proposed assessment and the material relied upon must be disclosed so that the assessee has a fair opportunity to explain or rebut it. Burdening a dealer with tax on the strength of undisclosed material offends the principles of natural justice.

Conclusion: The assessment order could not be sustained and was liable to be quashed in favour of the assessee.

Ratio Decidendi: A best judgment assessment must be founded on material disclosed to the assessee, and failure to afford an opportunity to rebut material collected at the back of the assessee violates natural justice and vitiates the assessment.

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