Natural justice in capital gains additions: reliance on undisclosed material and denied cross-examination led to remand.

An addition on long-term capital gain could not be sustained where the assessee was not supplied the investigation report and related material relied upon, and was denied cross-examination of persons whose statements supported the adverse inference. The absence of these materials deprived the assessee of a fair opportunity to rebut the evidence, so the matter had to be reconsidered in accordance with natural justice. The order was set aside and the case was remitted to the Assessing Officer for fresh decision after furnishing the relevant material and allowing adequate opportunity of hearing and rebuttal.

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Issues: Whether the assessment and appellate orders sustaining the addition on account of long-term capital gain could stand when the assessee was not furnished the investigation report and related material relied upon, and was denied cross-examination of the persons whose statements formed the basis of the adverse inference.

Analysis: The absence of the underlying report and supporting details deprived the assessee of a fair opportunity to rebut the material used against it. In such circumstances, the addition could not be finally affirmed without first supplying the relied-upon material and giving a reasonable opportunity of hearing and rebuttal, including cross-examination where necessary. The matter therefore required reconsideration by the Assessing Officer in accordance with principles of natural justice.

Conclusion: The impugned order was set aside and the matter was remitted to the Assessing Officer for fresh decision after furnishing the relevant material and granting adequate opportunity to the assessee.

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