Natural justice in tax reassessment requires disclosure of adverse material and opportunity to cross-examine third-party witnesses before finalisation.

A reassessment under the Tamil Nadu Value Added Tax Act was held procedurally unfair where it was based on alleged suppressed sales and adverse third-party material, but the dealer was not furnished the relied-on invoices, payment particulars and other supporting documents. The court treated the denial of those materials, together with the refusal of an effective opportunity to cross-examine the alleged purchaser's representatives, as a breach of natural justice. The reassessment order was therefore quashed and the matter remanded for fresh consideration after granting adequate opportunity, including cross-examination.

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Issues: Whether the reassessment order under the Tamil Nadu Value Added Tax Act, 2006 was vitiated for breach of natural justice by denial of copies of relied-on documents and denial of cross-examination of the alleged purchaser's representatives.

Analysis: The assessment was made on the basis of alleged suppressed sales, but the dealer had specifically sought the invoices, payment particulars and other supporting materials, and had also requested an opportunity to cross-examine the representatives of the alleged purchaser. Those requests were not complied with before completing the reassessment. In the absence of furnishing the material relied upon and without granting effective opportunity to test the adverse material by cross-examination, the reassessment procedure was found to be unfair and contrary to the requirements of natural justice.

Conclusion: The reassessment order was vitiated for violation of principles of natural justice and was quashed; the matter was remanded for fresh consideration after affording adequate opportunity, including cross-examination.

Ratio Decidendi: When a tax assessment is founded on adverse third-party material, the assessee must be supplied the relied-on material and given a fair opportunity to confront and cross-examine the adverse witnesses before the assessment is finalised.

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