Natural justice in tax assessment requires confrontation of undisclosed material and opportunity to cross-examine adverse witnesses.

In sales tax assessment, material collected behind the dealer's back and relied upon against him must be disclosed and put to confrontation so the dealer can rebut it. If the dealer disputes the material, denial of an opportunity to cross-examine the third party or test the statement violates natural justice. The right to confrontation does not depend on whether a request was made at the investigation stage, especially where the adverse statement was first known during or after assessment.

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Issues: Whether the Tribunal was justified in holding that the assessee was not entitled to confrontation with seized books of account and a third party statement merely because no such prayer had been made at the investigation stage.

Analysis: Assessment proceedings under the sales tax law are quasi-judicial, and any material collected behind the back of the dealer and proposed to be relied upon against him must be disclosed to him and put to confrontation so that he may rebut it. Where the dealer disputes such material and seeks to test it, denial of an opportunity to confront the third party or to cross-examine the witness amounts to violation of the principles of natural justice. The right does not depend on whether a demand for confrontation was made at the investigation stage, particularly where the adverse statement itself was recorded behind the assessee's back and became known only during or after assessment proceedings.

Conclusion: The Tribunal was not justified in denying confrontation on the ground that no such prayer had been made before the investigation authority. The issue is answered in the negative, in favour of the assessee and against the Revenue.

Ratio Decidendi: Any material collected behind the back of an assessee and relied upon in assessment must be confronted to the assessee, and where its truth is disputed, a reasonable opportunity of cross-examination must be afforded.

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