Natural justice in assessment requires disclosure of relied-upon material and cross-examination before adverse inference is drawn.

Assessment based on third-party statements and departmental material could not be sustained where the assessee was not furnished the relied-upon material and was denied a meaningful opportunity to rebut it or seek cross-examination. In such circumstances, reliance on adverse evidence without complying with minimum fairness requirements breached natural justice. The assessment orders were therefore set aside, and the matter was remitted for fresh assessment after supply of the material, personal hearing, and cross-examination where sought.

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Issues: Whether the assessment orders were vitiated for breach of natural justice in failing to furnish relied-upon materials and afford cross-examination before drawing an adverse inference.

Analysis: The assessment was founded on third-party statements and departmental material suggesting that the goods purchased and sold were the same and that the transactions were clandestine. However, the relied-upon statements were not furnished to the assessee, and the assessee was not given an effective opportunity to meet that material or cross-examine the persons whose statements were used against it. In these circumstances, an adverse conclusion could not be sustained without compliance with the minimum requirements of fairness, particularly when the Assessing Officer sought to rely on third-party evidence in finalising the assessment.

Conclusion: The assessment orders were unsustainable and were set aside for violation of natural justice.

Final Conclusion: The matter was remitted for fresh assessment after supplying the material relied upon, granting personal hearing, and affording cross-examination where sought.

Ratio Decidendi: When an assessment is based on third-party statements or similar adverse material, the assessee must be furnished the material and given a meaningful opportunity to rebut it, including cross-examination where reliance is placed on such statements.

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