Natural justice in income-tax assessments permits reliance on confidential information, but requires disclosure of substance and fair opportunity to respond.

In an assessment under Section 23(3) of the Income-tax Act, the Income-tax Officer may rely on private or confidential information and material gathered through enquiries, because the provision is not exhaustive. The assessment must still comply with natural justice: the assessee must be informed of the substance of the material relied on and given a reasonable opportunity to meet it before the order is made. The Act does not require disclosure of confidential statements, supply of their copies, or production of informants for cross-examination. The Officer is not treated as a court in the ordinary sense when conducting such an enquiry.

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Issues: Whether, in making an assessment under Section 23(3) of the Income-tax Act, the Income-tax Officer may rely on information not disclosed to the assessee, and whether the assessee is entitled to copies of confidential statements or to cross-examine the informants.

Analysis: Section 23(3) was held not to be exhaustive. The Income-tax Officer may act on private and confidential information and make use of material obtained through enquiries, provided the assessment process conforms to natural justice. The assessee must be apprised of the substance of the material against him and given a reasonable opportunity to meet it before the order is made. At the same time, the Act does not require disclosure of confidential statements, supply of copies of such statements, or production of informants for cross-examination. The Officer is not a court in the ordinary sense when conducting an enquiry under Section 23(3).

Conclusion: The Income-tax Officer can rely on undisclosed information, but only after giving the assessee a fair opportunity to answer the material relied upon; the assessee has no entitlement to copies of confidential statements or to cross-examine informants.

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