Undisclosed material and denial of rebuttal opportunity vitiate an assessment for breach of natural justice.

An assessment based on undisclosed departmental material and information gathered behind the assessee's back was held invalid because the assessee was denied a fair opportunity to rebut it. The Court noted that the revenue relied on a letter and other Excise Department information to support the conclusion that the works had been destroyed and that capital expenditure had necessarily been incurred, yet those materials were not supplied despite the assessee's request. That breach of natural justice vitiated the assessment, and the disallowance of revenue expenditure was not justified.

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Issues: Whether the disallowance of the assessee's claim for revenue expenditure was justified when the assessment was influenced by information obtained from the departmental authorities without disclosure to the assessee and without giving him an opportunity to meet it.

Analysis: The assessment proceeded on the basis of a letter and other information received from the Excise Department, relied on to support the conclusion that the Government's earlier works had been destroyed and that the assessee had necessarily incurred capital expenditure. That material was not disclosed to the assessee despite his request for copies, and he was denied an opportunity to controvert it. Where a finding is reached on material received behind the back of a party and the party is prevented from challenging it, the resulting assessment is vitiated. The Court also noted that the lease terms themselves indicated that the original works had not been treated as destroyed, reinforcing the prejudice caused by the undisclosed material.

Conclusion: The disallowance was not justified. The assessment was vitiated for breach of natural justice, and the assessee succeeded on the reference.

Ratio Decidendi: An assessment based on material obtained and used behind the assessee's back, without affording an opportunity to rebut it, is invalid for breach of natural justice.

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