Natural justice in reassessment requires supply of relied-upon material; withholding it vitiates the additions and reopening.

Where reassessment is based on information, ledger material, or prior enquiry records in the Department's possession, those materials must be supplied to the assessee for an effective rebuttal. Mere confrontation during assessment is insufficient if copies are withheld and no meaningful opportunity to respond is given. Because the additions rested on undisclosed material, the defect was held to go to the root of the reassessment and to breach audi alteram partem. The reassessment order was quashed as arbitrary, bad in law, and legally unsustainable.

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Issues: Whether the reassessment proceedings and consequent reassessment order were vitiated because the material and documents referred to in the reasons recorded for reopening were not supplied to the assessee.

Analysis: The reassessment was founded on information, ledger material and prior enquiry records said to be in the Department's possession, but those materials were not furnished to the assessee for effective rebuttal. Mere confrontation during assessment was held insufficient where copies were withheld and the assessee was denied a meaningful opportunity to respond. Since the additions were based on such undisclosed material, the defect went to the root of the reassessment and offended the principles of natural justice, including audi alteram partem.

Conclusion: The reassessment order was quashed as being arbitrary, bad in law and legally unsustainable.

Ratio Decidendi: Where material relied upon for reopening or making additions is not supplied to the assessee for an effective reply, the reassessment proceedings are vitiated for breach of natural justice.

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