Best judgment assessment requires disclosure of departmental material and a fair chance to rebut before use against the assessee.

In best judgment assessment, the assessing authority must act honestly and comply with natural justice by disclosing all material proposed to be used against the assessee and giving an effective opportunity to rebut it. Material privately collected by the department cannot lawfully form the basis of an ex parte assessment unless it is first brought to the assessee's notice. The assessee's non-cooperation does not remove this obligation, because the authority can still communicate the material and proceed after a fair response opportunity. The HC therefore held the assessment invalid to the extent it rested on undisclosed material.

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Issues: Whether an ex parte best judgment assessment is legally valid when the assessing authority relies on material collected behind the assessee's back without disclosing it to the assessee before making the assessment.

Analysis: For a best judgment assessment, the assessing authority must act honestly and must base the assessment on material that is brought to the notice of the assessee in accordance with the principles of natural justice. Material privately collected by the department cannot be used against the assessee unless it is disclosed to the assessee and an effective opportunity is given to rebut it. The assessee's failure to cooperate does not dispense with this requirement, because the authority can still communicate the material collected and proceed after giving a fair opportunity to respond.

Conclusion: The ex parte best judgment assessment was not legally valid to the extent it was founded on undisclosed material. The question was answered in the negative, in favour of the assessee and against the revenue.

Ratio Decidendi: Even in best judgment proceedings, material gathered by the department must be disclosed to the assessee and an opportunity to rebut it must be afforded before it can lawfully form the basis of assessment.

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