Natural justice in assessment: denial of cross-examination vitiated the order and justified remand, despite limitation failing.

The assessment was not time-barred because the search assessment limitation period was extended by Covid-19 relaxation measures and notifications, so the challenge on limitation failed. Denial of cross-examination of the person whose statement and documents formed the basis of the assessment was treated as a material breach of natural justice, particularly where the authority proceeded on preponderance of probability and the witness was central to the controversy. The assessment was therefore set aside and remitted for fresh consideration after cross-examination.

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Issues: (i) whether the assessment order was barred by limitation under the search assessment provisions in the light of the relaxation measures during the pandemic; and (ii) whether denial of cross-examination of the person whose statement and documents were relied upon vitiated the assessment order for breach of natural justice.

Issue (i): whether the assessment order was barred by limitation under the search assessment provisions in the light of the relaxation measures during the pandemic.

Analysis: The limitation objection was examined with reference to the time prescribed for completion of assessment under the search assessment scheme and the statutory extensions granted during the Covid-19 period. The assessment was held to fall within the extended time available under the relaxation legislation and notifications, and therefore could not be treated as time-barred.

Conclusion: The limitation challenge failed and the assessment order was not held to be without jurisdiction on that ground.

Issue (ii): whether denial of cross-examination of the person whose statement and documents were relied upon vitiated the assessment order for breach of natural justice.

Analysis: The assessment was based on materials linked to the seized documents and the statement of the concerned person, while the petitioner had sought cross-examination. The request was declined and the final order followed immediately thereafter. In these circumstances, the denial of an opportunity to cross-examine was treated as a material infraction of natural justice, especially where the authority was required to decide the matter on the basis of preponderance of probability and the requested witness was central to the controversy.

Conclusion: The assessment order was set aside and the matter was remitted for fresh consideration after permitting cross-examination.

Final Conclusion: The challenge failed on limitation but succeeded on the denial of a fair opportunity, resulting in remand for a fresh assessment after cross-examination.

Ratio Decidendi: Where an assessment substantially relies on a third party statement or seized material, denial of a requested cross-examination can amount to violation of natural justice and justify setting aside the assessment and remand.

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