Natural justice requires supply of relied-upon documents and statements before reply to a show cause notice.

Material relied upon in a show cause notice cannot be withheld from the person proceeded against on the ground that it was gathered during search or derived from foreign sources. The basic requirement of natural justice is that a person facing coercive proceedings must be furnished copies of the documents and statements used against them, and merely allowing inspection is not an adequate substitute. Article 26(2) of the OECD Model Tax Convention was noted as permitting disclosure to persons concerned with assessment or prosecution. The petitioners were therefore entitled to copies of all relied-upon documents, seized material, and statements before filing their replies.

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Issues: Whether the petitioners were entitled to copies of the documents and statements relied upon in the show cause notice to enable an effective reply.

Analysis: The material relied upon in a show cause notice cannot be withheld from the person proceeded against merely on the ground that it was obtained during search or that it is said to contain information from foreign sources. Article 26(2) of the OECD Model Tax Convention permits disclosure to persons concerned with assessment or prosecution, and the basic requirement of natural justice is that a person facing prosecution or other coercive proceedings must be furnished copies of the documents and statements used against them. The Court held that being merely shown the material is not an adequate substitute for supply of copies, and this entitlement extends to the petitioners' statements, seized documents, and other relied upon records.

Conclusion: The petitioners were entitled to receive copies of all documents and statements referred to and relied upon in the show cause notices, and the respondents were directed to furnish them before the replies were filed.

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