Natural justice in block assessment requires confrontation of adverse material and cross-examination before additions can stand.

A block assessment cannot rest on third-party statements or adverse material gathered behind the assessee's back unless the assessee is given a fair opportunity to rebut it, including cross-examination where sought. The Tribunal found that the material was not properly confronted, the cross-examination request was denied, and some additions resulted in double addition. It therefore held that the assessment was vitiated by breach of natural justice and set it aside for fresh framing after granting proper opportunity. The block assessment must remain confined to undisclosed income established from search material and tested through fair procedure.

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Issues: Whether the block assessment was vitiated for denial of proper opportunity, including non-confrontation of statements and denial of cross-examination, so as to warrant setting aside of the assessment.

Analysis: The assessment was founded on statements of third parties recorded behind the assessee's back and on material not properly confronted to him. The assessee had sought cross-examination, but the request was not granted. The Tribunal held that adverse material collected at the back of the assessee could not be relied upon without affording an effective opportunity to rebut it. It further noticed that some additions reflected double addition and that the scope of block assessment must remain confined to undisclosed income established from search material and tested through fair procedure.

Conclusion: The assessment was vitiated by breach of natural justice and was set aside to be reframed after giving proper opportunity to the assessee.

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