Natural justice in tax enquiry: cross-examination is not mandatory where material is disclosed and rebuttal opportunity is given.

Tax authorities acting in a quasi-judicial capacity may rely on material gathered in enquiry proceedings without formally proving it as evidence, provided the material is disclosed and the assessee has a fair opportunity to rebut it. Cross-examination is not an invariable requirement; it is needed only where the statute so provides or the nature of the inquiry makes it essential. On the facts, the report was disclosed, the relevant allegations were set out in the show-cause notice, inspection was permitted, objections were filed, and personal hearings were granted. No prejudice from the absence of cross-examination was shown, so reliance on the report did not breach natural justice.

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Issues: Whether the report of the Commercial Tax Department at Bombay could be relied upon without affording the petitioner an opportunity to cross-examine the officers who prepared the report.

Analysis: The dispute concerned a tax revision arising from assessment proceedings under the Andhra Pradesh General Sales Tax Act. The Court reviewed the settled law that tax authorities act in a quasi-judicial capacity, are bound by natural justice, and may rely upon material not formally proved in evidence, provided the material is disclosed and the assessee is given a fair opportunity to rebut it. The Court distinguished cases where cross-examination is expressly provided by statute or is necessary by the nature of the inquiry. Here, the Bombay enquiry report was based on records, the alleged non-supply of F-forms and the status of the alleged agents were disclosed in the show-cause notice, the report was made available for inspection, objections were filed, and personal hearings were granted. The Court held that the petitioner could have controverted the report by producing material on the existence and business activity of the agents, and no prejudice was shown from the absence of cross-examination.

Conclusion: The petitioner had no right to insist on cross-examination in the facts of this case, and reliance on the Bombay report did not violate natural justice.

Ratio Decidendi: In tax adjudication, cross-examination is not invariably required when the material relied upon is disclosed, the assessee is given a fair opportunity to rebut it, and no prejudice from the denial of cross-examination is demonstrated.

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