Natural justice in reassessment: relied-upon affidavits must be disclosed, and third-party deponents made available for cross-examination.

A taxing authority cannot sustain reassessment on third-party affidavits unless the assessee is supplied with the relied-upon material and given a fair chance to rebut it. Where departmental action is founded on statements of dealers, denial of copies deprives the affected person of an effective reply and is inconsistent with natural justice. The assessee must also be allowed to cross-examine the deponents when their statements are used against it; the authority cannot shift the burden of securing those witnesses onto the assessee. Reassessment based on undisclosed affidavits and untested third-party statements was therefore treated as legally unsustainable.

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Issues: (i) whether reassessment could be sustained when the assessee was denied copies of the affidavits relied upon by the department; (ii) whether the assessee was entitled to have the deponents produced for cross-examination before reassessment could be made.

Issue (i): Whether reassessment could be sustained when the assessee was denied copies of the affidavits relied upon by the department.

Analysis: The reassessment proceedings were initiated on the basis of affidavits filed by six dealers stating that no purchases had been made from the assessee. The assessee sought copies of those affidavits to controvert the statements and contest the proposed action. The refusal to supply them was held to be unjustified, because material on which the authority proposed to act had to be furnished to the person affected so that an effective reply could be made. Section 26 was held to have a different purpose and could not be used to deny disclosure of documents forming the basis of departmental action.

Conclusion: The reassessment was illegal and could not be sustained against the assessee.

Issue (ii): Whether the assessee was entitled to have the deponents produced for cross-examination before reassessment could be made.

Analysis: Since the department relied on statements of third parties, fairness required that those persons be produced so that the assessee could test their version by cross-examination. The department could not shift that burden to the assessee by insisting that it should secure service of summons on the very witnesses whose statements were being used against it. The failure to provide this opportunity amounted to a violation of natural justice and further vitiated the reassessment proceedings.

Conclusion: The assessee was entitled to cross-examine the deponents, and the reassessment failed on this ground as well.

Final Conclusion: The reassessment orders and the appellate orders were set aside, and the matter was sent back for fresh proceedings in accordance with law after giving the assessee a fair opportunity.

Ratio Decidendi: A taxing authority cannot rely on third-party material to reopen or reassess a dealer's liability unless the dealer is supplied with the relied-upon material and given a fair opportunity to test it, including cross-examination where statements of third parties are used.

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