Natural justice in assessment proceedings requires disclosure of relied-upon material and a fair hearing before adverse tax orders stand

Assessment orders were set aside for breach of natural justice where the assessee was denied a reasonable opportunity of hearing and was not supplied the material relied upon, including documents and assumptions used for market price and comparable sales. The court treated the fairness of the procedure as determinative, rather than examining the valuation merits in detail. As the audi alteram partem rule was not observed, the assessments could not stand and were remanded to the Assessing Officer for fresh adjudication after disclosure of the relied-upon records and grant of hearing.

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Issues: Whether the assessment orders were liable to be set aside for breach of the principles of natural justice owing to denial of opportunity of hearing, and whether the matters should be remanded to the Assessing Officer for fresh decision.

Analysis: The writ petitions concerned assessment orders creating substantial tax liability, but the assessee had not been afforded a reasonable opportunity of hearing. The record showed that the assessment proceedings proceeded on materials not supplied to the assessee and on assumptions regarding market price and comparable sales. The challenge was, therefore, not confined to the merits of valuation but to the fairness of the procedure adopted in making the assessments. Since the assessments were made without observance of the audi alteram partem rule, the orders could not stand. As the merits were not finally examined, the proper course was to set aside the assessments and remit the matters for fresh consideration after supplying the relied-upon documents and granting hearing.

Conclusion: The assessment orders were vitiated for violation of natural justice and were rightly set aside, with the matters remanded to the Assessing Officer for fresh adjudication after due opportunity of hearing.

Ratio Decidendi: An assessment order passed without affording the assessee a reasonable opportunity of hearing and without supplying the material relied upon is liable to be set aside and remanded for fresh decision in accordance with natural justice.

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