Natural justice in income-tax assessment requires disclosure of comparable case details before gross profit is estimated.

Section 142(3) requires that material gathered in enquiry and proposed for use in assessment be disclosed to the assessee, reflecting the rule of natural justice. Where gross profit was estimated by relying on comparable cases, the particulars of those comparables formed material relevant to the assessment. Failure to furnish those details deprived the assessee of a meaningful opportunity to be heard. The assessment under section 143(3) was therefore vitiated for breach of section 142(3).

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Issues: Whether the assessment made under section 143(3) of the Income-tax Act, 1961 was vitiated for non-compliance with section 142(3) because the assessee was not furnished the details of comparable cases relied upon for estimating gross profit.

Analysis: Section 142(3) gives statutory recognition to the rule of natural justice that an assessee must be given an opportunity of being heard in respect of material gathered through enquiry under section 142(2) and proposed to be used in assessment. Where the Income-tax Officer relied on gross profits disclosed by allegedly comparable cases to estimate the assessee's gross profit, the details of those cases constituted material relevant to the assessment. Since no particulars of the comparable cases were supplied, the assessee was deprived of the opportunity contemplated by the statute.

Conclusion: The assessment was vitiated for breach of section 142(3), and the question was answered in the affirmative, in favour of the assessee and against the department.

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