Natural justice in reassessment: additions fail when third-party material is not confronted to the assessee.

Reassessment based on third-party material alleged to show suppression of sales could not be sustained where the underlying data, statements and related records were not furnished to the assessee. Because the Revenue relied on material that was never confronted, the basis of the addition remained untested and the assessee was denied a fair opportunity to respond, amounting to a breach of natural justice. Following the assessee's earlier case on identical facts, the reassessment proceedings were held vitiated for non-confrontation of the relied-upon material, and the additions were deleted.

---

---

Issues: Whether the reassessment proceedings and the consequent additions could be sustained when the reopening and assessment were based on third-party material that was not confronted to the assessee.

Analysis: The reassessment was founded on data allegedly recovered from another group and used to infer suppression of sales in the assessee's business. The assessee sought the underlying material, statements and related records relied upon for reopening and assessment, but those materials were not furnished or confronted. The basis of the addition therefore remained untested by the assessee, resulting in breach of natural justice. Following the earlier order in the assessee's own case on identical facts, the reassessment proceedings were held to be vitiated for non-confrontation of the material relied upon by the Revenue.

Conclusion: The reassessment proceedings were quashed and the additions were deleted in favour of the assessee.

---