Natural justice limits best judgment tax assessments; writ jurisdiction remained available and the matter was remitted for fresh assessment.

Writ jurisdiction under Article 226 remained available despite an alternate statutory appeal or revision where the assessment was alleged to have breached natural justice, relied on untested material, or proceeded arbitrarily, and the assessee was not confined to the alternative remedy. Best judgment assessment under Section 12(3) of the Karnataka Sales Tax Act, 1957 read with Rule 18(3) had to rest on relevant material, fair reasoning and a reasonable nexus with the accounts; additions based on assumptions, unproved newspaper reports and material not properly confronted were unsustainable. The assessment order and demand notice were quashed, and the matter was remitted for fresh assessment after giving proper opportunity.

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Issues: (i) whether the writ petition was maintainable despite the statutory remedy of appeal or revision; (ii) whether the assessment additions made on the basis of over-valuation of closing stock, under-valuation of raw materials and work-in-progress could be sustained.

Issue (i): Whether the writ petition was maintainable despite the statutory remedy of appeal or revision.

Analysis: The existence of an alternative statutory remedy does not, by itself, bar the exercise of writ jurisdiction under Article 226 of the Constitution of India. Where the assessment is alleged to have been made in breach of natural justice, without confronting adverse material, or in a manner that is arbitrary or beyond fair procedure, the High Court may entertain the writ petition notwithstanding the availability of appellate or revisional remedies.

Conclusion: The writ petition was maintainable and the assessee was not relegated to the alternate statutory remedy.

Issue (ii): Whether the assessment additions made on the basis of over-valuation of closing stock, under-valuation of raw materials and work-in-progress could be sustained.

Analysis: A best judgment assessment under Section 12(3) of the Karnataka Sales Tax Act, 1957 read with Rule 18(3) of the Karnataka Sales Tax Rules must rest on relevant material, fair reasoning and a reasonable nexus with the accounts. The additions were found to be based on assumptions, misunderstanding of accounting principles, use of unproved newspaper reports and material not properly confronted to the assessee. No reliable instance of suppressed sales or other admissible evidence justified the heavy additions. The assessment therefore offended the requirements of fairness, natural justice and lawful exercise of taxing power under Article 265 of the Constitution of India.

Conclusion: The additions were unsustainable and the assessment order and demand notice were liable to be quashed.

Final Conclusion: The assessment was set aside and the matter was sent back for fresh assessment after giving proper opportunity to the assessee and keeping the legal observations in view.

Ratio Decidendi: A best judgment tax assessment must be founded on relevant material, fair procedure and observance of natural justice, and a writ petition remains maintainable where the impugned assessment is vitiated by patent arbitrariness or denial of a reasonable opportunity.

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