Natural justice in assessment requires disclosure of relied-upon adverse material before any effective rebuttal can be made.

An assessment based in part on an investigation report and other adverse material was vitiated because the dealer was not informed of the contents relied upon and was denied an effective chance to rebut them. Although a privileged investigation report need not be supplied as of right, any portion or substance of it used against the assessee must be disclosed to satisfy natural justice; reliance on supplier-registration cancellations and similar adverse material without such disclosure breaches the duty to hear the affected party. The assessment was therefore set aside and the matter remitted for fresh assessment after supplying the relied-upon material and granting proper hearing.

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Issues: Whether the assessment order was vitiated for breach of natural justice on account of non-supply of the investigation report and other material relied upon in assessment, and consequent denial of opportunity to rebut the adverse evidence.

Analysis: The assessment was founded, at least in part, on an investigation report and documents obtained by the authority, but the contents of those materials were not communicated to the dealer. Under the statutory scheme, the assessing authority was required to proceed in the prescribed manner, and the rules contemplated consideration of objections and material to rebut adverse findings. A privileged investigation report need not be supplied as a matter of right, but once its contents or any relied-upon portion is used against an assessee, those contents must be disclosed so that an effective rebuttal can be made. Where the authority relies on cancellation of suppliers' registrations and other adverse material without giving the dealer an opportunity to controvert them, the assessment is hit by violation of fundamental rules of justice.

Conclusion: The assessment order was rightly set aside for breach of natural justice, and the matter was permitted to be assessed afresh after supplying the relied-upon material and affording a proper opportunity of hearing and rebuttal.

Ratio Decidendi: Material relied upon in assessment, though taken from a privileged investigation report, must be disclosed to the assessee to afford an effective opportunity to rebut it; failure to do so vitiates the assessment for breach of natural justice.

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