ivil Appeal Nos
572 574 and 575 of 1972
Appeals by Special Leave from the Judgment and Order dated 13 7 1971 of the Kerala High Court in Tax Revision Cases Nos 42 45 58 and 44 of 1970 SV Gupte In CA No 57272 K M K Nair and A CI Pudissery for the appellant in all the appeals T A Ramachandran for the respondents in all the appeals
The Judgment of PN Bhagwati and RS Sarkaria JJ was delivered by Bhagwati J section Murtaza Fazal Ali J gave a separate opinion
BHAGWATI J
The facts giving rise to these appeals are set out in the judgment about to be delivered by our learned brother section Murtaza Fazal Ali and we do not think it necessary to reiterate them
So far as Civil Appeals 572 574 of 1972 are concerned it would be sufficient to state briefly the following facts as these are the only facts necessary for appreciating the question of law which arises for determination in these appeals
In the assessments of the assessee to sales tax for three assessment years
the returns filed by him on the basis
of his books of account appeared to the Sales Tax Officer to be incorrect and incomplete since certain sales appearing in the books of account of one Haji PK Usmankutty as having been effected by the assessee in his favour were not accounted for in the books of account maintained by the assessee
The assessee applied to the Sales Tax Officer for affording him an oppor tunity to cross examine Haji Usmankutty in regard to the correctness of his accounts but this opportunity was denied to him and the Sales Tax Officer proceeded to make a best judgment assessment under section 17 sub section 3 of the Kerala General Sales Tax 1963
The assessee ap pealed but without success and this was followed by a revi sion application to 236 the High Court
The High Court took the view that the assessee was entitled to an opportunity to cross examine Haji Usmankutty before any finding could be arrived at by the Sales Tax Officer that the returns filed by the assessee were incorrect and incomplete so as warrant the making of the best judgment assessment and since no such opportunity had been given to the assessee the High Court quashed the order of the Sales Tax authorities and remanded the case to the Sales Tax Officer for making fresh assessments according to law after giving an opportunity to the assessee to cross examine Haji Usmankutty
The facts in Civil Appeal No 575 of 1972 are almost identical save that instead of Haji Usmankutty certain wholesale dealers were sought to be cross examined in that case and the opportunity to cross examine them was denied by the Sales Tax authorities
Since the High Court quashed the orders of assessments in both cases the State preferred an appeal by special leave in each case challenging the correctness of the view taken by the High Court
Now the law is well settled that tax authorities entrusted with the power to make assessment of tax discharge quasi judicial functions and they are bound to observe principles of natural justice in reaching their conclusions
It is true as pointed out by this Court in Dhakeswari Cotton Mills Ltd vs Commissioner of Income Tax West Bengal1 that a taxing officer is not lettered by technical rules of evidence and pleadings and that he is entitled to act on material which may not be accepted as evidence in a court of law but that does not absolve him from the obligation to comply with the fundamental rules of justice which have come to be known in the jurisprudence of administrative law as principles of natural justice
It is however necessary to remember that the rules of natural justice are not a con stant they are not absolute and rigid rules having univer sal application
It was pointed out by this Court in Suresh Koshy George vs The University of Kerala  Ors2 that the rules of natural justice are not embodied rules and in the same case this Court approved the following observations from the judgment of Tucker LJ in Russel vs Duke of Norfolk and Ors3 There are in my view no words which are of universal application to every kind of inquiry and every kind of domestic tribunal
The requirements of natural justice must depend on the circumstances of the case the nature of the inquiry the rules under which the tribunal is acting the subject matter that is being dealt with and so forth
Accordingly 1 do not  derive much assistance from the definitions of natural justice which have been from time to time used but whatev er standard is adopted one essential is that the person concerned should have a reasonable opportunity of presenting his case
 One of the rules which constitutes a part of the prin ciples of natural justice is the rule of audi alterem partera which requires that 1  2  3 1949 1 All
England Reports 108
237 no man should be condemned unheard
It is indeed a re quirement of the duty to act fairly which lies on all quasi judicial authorities and this duty has been extended also to the authorities holding administrative enquiries involving civil consequences or affecting rights of parties because as pointed out by this Court in AK Kraipak and Ors
vs Union of India1 the aim of the rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice and justice in a society which has accepted socialism _as its article of faith in the Constitu tion is dispensed not only by judicial or quasi judicial authorities but also by authorities discharging administra tive functions
This rule which requires an opportunity to be heard to be given to a person likely to be affected by a decision is also like the genus of which it is a species not an inflexible rule having a fixed connotation
It has a variable content depending on the nature of the inquiry the framework of the law under which it is held the constitu tion of the authority holding the inquiry the nature and character of the rights affected and the consequences flow ing from the decision
It iS therefore not possible to say that in every case the rule of audi alterem partem requires that a particular specified procedure to be followed
It may be that in a given case the rule of audi alterem partem may import a requirement that witnesses whose statements are sought to be relied upon by the authority holding the in quiry should be permitted to be cross examined by the party affected while in some other case it may not
The procedure required to be adopted for giving an opportunity to a person to be heard must necessarily depend on the facts and circumstances of each case
Now in the present case we are not concerned with a situation where the rule of audi alterem partem has to be read _into the statutory provision empowering the taxing authorities to assess the tax
Section 17 sub section 3 under which the assessment to sales tax ha s been made on the assessee provides as follows If no return is submitted by the dealer under subsection 1 within the pre scribed period or if the return submitted by him appears to the assessing authority to be incorrect or incomplete the assessing author ity shall after making such enquiry as it may consider necessary and after taking into account all relevant materials gathered by it assess the dealer to the best of its judgment Provided that before taking action under this sub section the dealer shall be given a reasonable opportunity of being heard and where a return has been submitted to prove the correctness or completeness of such return
 It is clear on a plain natural construction of the language of this provision that it empowers the Sales Tax Officer to make a best judgment assessment only where one of two condi tions is satisfied 1 238 either no return is submitted by the assessee or the return submitted by him appears to the Sales Tax Officer to be incorrect or incomplete
It is only on the existence of one of these two conditions that the Sales Tax Officer gets the jurisdiction to make a best judgment assessment
The ful filment of one of these two pre requisites is therefore a condition precedent to the assumption of jurisdiction by the Sales Tax Officer to make assessment to the best of his judgment
Now where no return has been submitted by the assessee one of the two conditions necessary for the applicability of section 17 subsection 3 being satisfied the Sales Tax Officer can after making such inquiry as he may consider necessary and after taking into account all relevant materials gathered by him proceed to make the best judgment assessment and in such a case he would be bound under the proviso to give a reasonable opportunity of being heard to the assessee
But in the other case where a return has been submitted by the assessee the Sales Tax Officer would first have to satisfy himself that the return is incorrect or incomplete before he can proceed to make the best judgment assessment
The decision making process in such a case would really be in two stages though the in quiry may be continuous and uninterrupted the first stage would be the reaching of satisfaction by the Sales Tax Officer that the return is incorrect or incomplete and the second stage would be
the making of the best judgment assessment
The first part of the proviso which requires that before taking action under sub section 3 of section 17 the assessee should be given a reasonable opportunity of being heard would obviously apply not only at the second stage but also at the first stage of the inquiry because the best judgment assessment which is the action under section 17 sub section 3 follows upon the inquiry and the reasonable opportunity of being heard must extend to the whole of the inquiry including both stages
The requirement of the first part of the proviso that the asses see should be given a reasonable opportunity of being heard before making best judgment assessment merely em bodies the audi alterem partem rule and what is the content of this opportunity would depend as pointed out above to a great extent on the facts and circumstances of each case
The question debated before us was whether this opportunity of being heard granted under the first part of the proviso included an opportunity to cross examine Haji Usmankutty and other wholesale dealers on the basis of whose books of accounts the Sales Tax Officer disbelieved the account of the assessee and came to the finding that the return submit ted by the assessee were incorrect and incomplete
But it is not necessary for the purpose of the present appeals to decide this question since we find that in any event the assessee was entitled to this opportunity under the second part of the proviso
The second part of the proviso lays down that where a return has been submitted the assessee should be given a reasona ble opportunity to prove the correctness or completeness of such return
This requirement obviously applies at the first stage of the enquiry before the Sales Tax Officer comes to the conclusion that the return submitted by the assessee is incorrect or incomplete so as to warrant the making of a best judgment assessment
The question is what is the content 239 of this provision which imposes an obligation on the Sales Tax Officer to give and confers a corresponding right on the assessee to be afforded a reasonable opportunity to prove the correctness or completeness of such return
Now obviously to prove means to establish the correctness or completeness of the return by any mode permissible under law
The usual mode recognised by law for proving a fact is by production of evidence and evidence includes oral evi dence of witnesses
The opportunity to prove the correct ness or completeness of the return would therefore neces sarily carry with it the right to examine witnesses and that would include equally the right to Cross examine witnesses examined by the Sales Tax Officer
Here in the present case the return filed by the assessee appeared to the Sales Tax Officer to be incorrect or incomplete because certain sales appearing in the books of Hazi Usmankutty and other wholesale dealers were not shown in the book s of account of the assessee
The Sales Tax Officer relied on the evi dence furnished by the entries in the books of account of Hazi Usmankutty and other wholesale dealers for the purpose of coming to the conclusion that the return filed by the assessee was incorrect or incomplete
Placed in these circumstances the assessee could prove the correctness and completeness of his return only by showing that the entries in the books of account of Hazi Usmankutty and other whole sale dealers were false bogus or manipulated and that the return submitted by the assessee should not be disbelieved on the basis of such entries and this obviously the assessee could not do unless he was given an opportunity of cross examining Hazi Usmankutty and other wholesale dealers with reference to their accounts
Since the evidentiary material procured from or produced by Hazi Usmankutty and other wholesale dealers was sought to be relied upon for showing that the return submitted by the assessee was incor rect and incomplete the assessee was entitled to have Hazi Usmankutty and other wholesale dealers summoned as witnesses for cross examination
It can hardly be disputed that cross examination is one of the most efficacious methods of establishing truth and exposing falsehood
Here it was not disputed on behalf of the Revenue that the assessee in both cases applied to the Sales Tax Officer for summoning Hazi Usmankutty and other wholesale dealers for cross examina tion but his application was turned down by the Sales Tax Officer
This act of the Sales Tax Officer in refusing to summon Hazi Usmankutty and other wholesale dealers for cross examination by the assessee clearly constituted in fraction of the right conferred on the assessee by the second part of the proviso and that vitiated the orders of assessment made against the assessee
We do not wish to refer to the decisions of various High Courts on this point Since our learned brother has dis cussed them in his judgment 
We are of the opinion that the view taken by the Orissa High Court in Muralimohan Prabhudayal vs State of Orissa1 and the Kerala High Court in M Appukutty vs State of Kerala2 and the present cases represents the correct law on the subject
We accordingly dismiss the appeals with no order as to costs
1 26 STC 22
2 14 STC 489
240 FAZAL ALl J
These appeals by special leave involve an interesting question of law as to the interpretation of section 173 of the Kerala General Sales Tax 1963 hereinafter referred to as the Act  and the proviso thereof read with r 15 framed under the Act
The assessment years in question are 1965 66 1966 67 and 1967 68
in the case of the re spondent KT Shaduli in Civil Appeals Nos 572 574 of 1972 and 1967 68 in the case of Nallakandy Yusuff in Civil Appeal No 575 of 1972
But both the cases involve an identical question of law
In this view of the matter we propose to deal with all these appeals by one common judg ment
The assessee in Civil Appeals Nos
572 574 of 1972 filed his sales tax returns before the Sales Tax Officer who on an examination of the accounts found that the returns submit ted by the assessee were both incorrect and incomplete inasmuch as certain entries in the books of account of Haji PK Usmankutty revealed Certain transactions which were not accounted for in the assessee s book s of account
The Sales Tax Officer after hearing the assessee made an assessment to the best of his judgment under section 173 of the Act read with r 15 made under the Act
The Sales Tax Officer thus rejected the accounts of the assessee as they did not re flect the goods said to have been purchased by Haji PK Usmankutty
The assessee sought an opportunity to cross examine Haji Usmankutty with respect to the correctness of his accounts which were relied upon by the Sales Tax Offi cer but this opportunity was refused to him by the Sales Tax Officer as also the other appellate authorities
Simi larly in the case of the respondent Nallakandy Yusuff in Civil Appeal No 575 of 1972 the return filed by the asses see was rejected by the Sales Tax Officer on the ground that certain transactions shown in the accounts of some wholesale dealers were not reflected in his books of account and the opportunity asked for by the assessee for cross examining the said wholesale dealers was refused to him
The order of the Sales Tax Officer was confirmed by the Appellate Author ities under the Act
Both the assessees then filed a revi sion application before the High Court which allowed the application of the assessees quashed the orders of the Sales Tax Authorities and remanded the cases to the Sales Tax Officer for giving an opportunity to the respondents for cross examining the wholesale dealers concerned and then making assessments in accordance with the law
The State having obtained special leave from this Court hence these appeals before us
The short question that fell for determination before the High Court was whether under the provisions of the Act the opportunity of being heard which was to be given to the assessees would include within its sweep the right of cross examination of a third party whose accounts were the basis of the best judgment assessments made by the Sales Tax Officer and the examination of which later on showed that the returns filed by the assessees were incorrect and incom plete
The High Court on a consideration of section 173 and the Rules made under the Act came to the conclusion that the assessees were entitled to a fair hearing and the opportuni ty of being heard could not be said to be complete unless in the circumstances of these cases the as 241 sessees were allowed to cross examine Haji PK Usmankutty and other wholesale dealers on whose accounts reliance was placed by the Sales Tax Authorities
A provision of law authorising the Taxing Authorities to make a best judgment assessment in default of the assessee complying with the legal requirements is not a new one but existed in section 234 of the Income tax Act 1922 as amended by the Indian Income tax Amendment Act 1939 the relevant part of which runs thus If any person fails to make the return required by any notice given under sub section 2 of section 22 and has not made a return or a revised return under sub section 3  of the same section or fails t6 comply with all the terms of a notice issued under sub section 4 of the same section or having made a return fails to comply with all the terms of a notice issued under sub section 2 of this section the Income tax Officer shall make
the assessment to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment and in the case of a firm may refuse to register it or may cancel its registration if it is already registered Provided x x x x Describing the nature and character of a best judgment assessment Lord RuSsell of Killowen in delivering the judgment of the Privy Council in Income tax Commissioner vs Badridas Ramrai Shop Akola1 observed as follows The Officer is to make an assessment to the best of his judgment against a person who is in default as regards supplying informa tion
He must not act dishonestly or _vindic tively or capriciously because he must exer cise judgment in the matter
He must make what he honestly believes to be a fair estimate of the proper figure of assessment and for this purpose he must their Lordships think be able to take into consideration local knowledge of previous returns by and assessments of the assessee and all other matters which he thinks will assist him
in arriving at a fair and proper estimate and though there must necessarily be guess work in the matter it must be honest guess work These observations were quoted with approval by this Court in Raghbar Mandal Harihar Mandal vs State of Bihar2
Mr Gupte learned counsel for the appellant submitted that the main object of the best judgment assessment was to pena lise the 1 1937 64 IA
102 114 115
2 8 STC770
242 assessee for either not filing a return or for filing a return which was defective and if at this stage he is given a full fledged hearing including the right to summon and cross examine witnesses then this would amount to condoning the default committed by the assessee
It was also argued that as the Income tax authorities are not bound by the technical rules of evidence the assessee cannot claim cross examination of witnesses as a matter of right
In support of his submission he relied upon a decision of this Court in Dhakeswari Cotton Mills Ltd vs Commissioner of Income Tax West Bengal1 where agreeing with a similar argument put forward by the Solicitor General in that case this Court observed thus As regards the second contention we are in entire agreement with the learned Solici tor General when he say s that the Income tax Officer is not lettered by technical rules of evidence and pleadings and that he is entitled to action material which may not be accepted as evidence in a Court of law but there the agreement ends because it is equal ly clear that in making the assessment under sub section 3 of section 23 of the Act the Income tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all
There must be something more than bare suspicion to support the assessment under section 23 3
 There can be no doubt that the principle that as the tax proceedings are of quasi judicial nature the Sales Tax authorities are not strictly bound by the rules of evidence which means that what the authorities have to consider is merely the probative value of the materials produced before them
This is quite different from saying that even the rules of natural justice do not apply to such proceedings so as to deny the right of cross examination to the assessee where the circumstances clearly justify such a course and form one of the integral parts of the materials on the basis of which the order by the Taxing Authorities can be passed
The admissibility of a document or a material in evidence is quite different from the value which the authority would attach to such material
The Privy Council has held that the Taxing Authorities can even base their conclusion on their private opinion or assessment provided the same is fully disclosed to the assessee and he is given an opportu nity to rebut the same
In these circumstances therefore we do not agree with Mr Gupte that merely because the technical rules of evidence do not strictly apply the right of crossexamination cannot be demanded by the assessee in a proper case governed by a particular statute
This Court further fully approved of the four proposi tions laid down by the Lahore High Court in Seth Gurmukh Singh vs Commissioner of Income tax Punjab2
This Court was of the opinion that the Taxing Authorities had violated certain fundamental rules of 1  2 243 natural justice in that they did not disclose to the asses see the information supplied to it by the departmental representatives
This case was relied upon by this Court in a later decision in Raghubar Mandal Harihar Mandal s case supra where it reiterated the decision of this Court in Dhakeswari Cotton Mills Ltd s case supra and while further endorsing the decision of the Lahore High Court in Seth Gurmukh Singh s case pointed out the rules laid down by the Lahore High Court for proceeding under sub section
3 of section 23 of the Income tax Act and observed as follows The rules laid down in that decision were these 1  While proceeding under sub section 3 of section 23 of the Income tax Act the Income tax Officer is not bound to rely on such evidence produced by the assessee as he considers to be false 2 if he proposes to make an estimate in disregard of the evidence oral or documentary led by the assessee he should in fairness disclose to the assessee the material on which he is going to found that estimate 3 he is not however debarred from relying on private sources of informa tion which sources he may not disclose to the assessee at all and 4 in case he proposes to use against the assessee the result of any private inquiries made by him he must commu nicate to the assessee the substance of the information so proposed to be utilised to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and should further give him ample opportunity to meet it if possible
 It will thus be noticed that this Court clearly laid down that while the Income tax Officer was not debarred from relying on any material against the assessee justice and fair play demanded that the sources of information relied upon by the Income tax Officer must be disclosed to the assessee so that he is in a position to rebut the same and an opportunity should be given to the assessee to meet the effect the aforesaid information
We however find that so far as the present appeals are concerned they are governed by the provisions of the Kerala General Sales Tax Act the provisions of which are not quite identical with the provisions of the Income tax Act and the Kerala Act appears to have fully incorporated all the essen tial principles of natural justice in section 173 of the Act
In these circumstances therefore the answer to the ques tion posed in these appeals would have to turn upon the scope interpretation and content of section 173 of the Act the proviso thereto and r 15 framed under the Act
It is true that the words opportunity of being heard are of very wide amplitude but in the context the sales tax pro ceedings which are quaSi judicial proceedings all that the Court has to see is whether the assessee has been given a fair hearing
Whether the hearing would extend to the right of demanding cross examination of witnesses or not would naturally depend upon the nature of the materials relied upon by the sales tax 244 authorities the manner in which the assessee can rebut those materials and the facts and circumstances of each case
It is difficult to lay down any hard and fast rule of universal application
We would therefore first try to interpret the ambit of section 173 and the proviso thereof in order to find out whether a right of cross examination of witnesses whose accounts formed the basis of best judgment assessment is conferred on the assessee either expressly or by necessary intendment
Section 173 of the Act runs thus If no return is submitted by the dealer under subsection 1 Within the prescribed period or if the return submitted by him appears to the assessing authority to be incorrect or incomplete the assessing author ity shall after making such enquiry as it may consider necessary and after taking into account all relevant materials gathered by it assess the dealer to the best of its judgment Provided that before taking action under this sub section the dealer shall be given a reasonable opportunity of being heard and where a return has been submitted to prove the correctness or completeness of such re turn
 An analysis of this provision would show that this sub section contemplates two contingencies 1 where the asses see does not file his return at all and 2 where the assessee files his return which however is found to be incorrect or incomplete by the assessing authority
The sub section further enjoins on the assessing authority a duty to consider the necessary materials and make an enquiry before coming to its conclusion
The proviso expressly requires the assessing authority to give to the assessee a reasonable opportunity of being heard even if the assessee had committed default in not filing the return
Since the statute itself contemplates that the assessee should be given a reasonable opportunity of being heard we are not in a position to agree with the contention of the learned counsel for the appellant that if such an opportuni ty is given it will amount to condonation of default of the assessee
The tax proceedings are no doubt quasi judicial proceedings and the Sales tax authorities are not bound strictly by the rules of evidence nevertheless the authori ties must base their order on materials which are known to the assessee and after he is given a chance to rebut the same
This principle of natural justice which has been reiterated by this Court in the decisions cited above has been clearly incorporated in section 17 3 of the Act as men tioned above
The statute does not stop here but the second part of the proviso confers express benefit on the assessee for giving him an opportunity not only of being heard but also of proving the correctness or completeness of such return
In view of this provision it can hardly be argued with any show of force that if the assessee desires the wholesale dealers whose accounts are used against him to be cross examined in order to prove that his return is not incorrect or incomplete he should not be conceded this opportunity
Apart from anything else the second part of the proviso itself confers this specific right on the asses see
It is difficult to conceive as to how the 245 assessees would be able to disprove the correctness of the accounts of Haji PK Usmankutty or the other wholesale dealers unless he is given a chance to cross examine them with respect to the credibility of the accounts maintained by them
It is quite possible that the wholesale dealers may have mentioned certain transactions in their books of account either to embarrass the assessees or due to animus or business rivalry or such other reasons which can only be established when the persons who are responsible for keeping the accounts are brought before the authorities and allowed to be croSs examined by the assessees
This does not mean that the assessing authority is bound to examine the whole sale dealers as witnesses in presence of the assessees it is sufficient if such wholesale dealers are merely ten dered by the sales tax authorities for cross examination by the assessees for whatever worth it is
In view of the express provision of the second part of the proviso we are fully satisfied that the respondents had the undoubted right to crosS examine the wholesale dealers on the basis of whose accounts the returns of the assessees were held to be incor rect and incomplete
We are fortified in our view by a decision of this Court in C Vasantilal and Co vs Commis sioner of Income tax Bombay City1 where this Court observed as follows The Income tax Officer is not bound by any technical rules of the law of evidence
It is open to him to collect materials to facilitate assessment even by private enquiry
But if he desires to use the material so collected the assessee must be informed of the material and must be given an adequate opportunity of explaining it
 It will be noticed that if the Sales tax authorities refused the prayer of the assessees to cross examine the wholesale dealers then such refusal would not amount to an adequate opportunity of explaining the material collected by the assessing authority
Mr Gupte learned counsel for the appellant relied on a decision of the Gujarat High Court in Jayantilal Thakordas vs Stale of Gujarat2
In the first place the Gujarat High Court in that case was concerned with the Bombay Sales Tax Act which did not contain any express provision like the one which is to be found in the second part of the proviso to s173 of the Kerala General Sales Tax Act and there fore any decision given by the Gujarat High Court would have no application to the facts of the present appeals
In Jayantilal Thakordas s case supra the Court was merely called upon to interpret the import of the words reasonable opportunity of being heard and the Judges held that as ample opportunity was given to the assessee therefore concerned to show cause why the sales said to have been suppressed 1  209
2 23 STC 11
3 14 STC 489
246 by him should not be included in his turnover the rules of natural justice were duly complied with
The Court further pointed out that the sales tax authorities were not strictly bound by the rules of evidence nor did the Act require the assessing authorities to do more than what they had done in that case
The Gujarat High Court seems to have dissent ed from the view taken by a single Judge of the Kerala High Court in M Appukutty vs State of Kerala3
Finally it does not appear from the facts mentioned in the judgment of the Gujarat High Court that the assessee had at any time made a specific prayer for cross examining the representa tives of the firm of Ms A Alibhai  Co In these circum stances therefore Jayantilal Thakordas s case supra does not appear to be of any assistance to the appellant
We might however state that we are not prepared to go to the extent to which the Gujarat High Court has gone even in interpreting the content and ambit of an opportunity given to the assessee of being heard so as to completely exclude the right of cross examination
We have already held that whether the reasonable opportunity would extend to such a right would depend upon the facts and circumstances of each case
We feel that the correct law on the subject has been laid down by a Division Bench of the Orissa High Court in Muralimohan Prabhudayal vs State 07 Orissa1 where the High Court while adumbrating the 4th proposition namely as to how the assessee was to rebut the  material used by the Department against him observed as follows It is the amplitude and ambit of this fourth proposition which needs examination
There cannot be any controversy that the assessee can adduce independent evidence of his own to disprove the particulars proposed to be used against him  
A third party s accounts are proposed to be used against the assessee and if such accounts are relied on the assessee s accounts are to be discarded  
If the assessee gets an opportunity by cross examination he can establish that the accounts of the third party are wrong and manipulated to suit the interest of the third party or that they were intended to be adversely used against the assessee with whom the third party had inimical rela tionship
It is difficult to accept the contention in such a case that the ample and reasonable opportunity to be given to the assessee would not include within its sweep the right of cross examination The High Court in the present appeals has relied on its earlier decision in Appukutty vs State of Kerala supra where a single Judge of the Kerala High Court pointed out that the fact that a third party maintaining some secret accounts had made certain entries in his accounts which may connect the assessee will not give jurisdiction to the assessing authority to use that information unless the assessee has been 1 26 STC 22
247 given an opportunity to Cross examine him effectively
As no such opportunity was given the Court held that the proceedings stood vitiated
In our opinion the decision of the Kerala High Court was substantially correct and in consonance with the language of section 173 and the proviso thereto
Other cases have also been cited before us which howev er are based on the peculiar language of the statutes which the Courts were construing and which are different from the language used in the Act
Finally apart from the provisions of section 173 and the proviso thereto the rules further reiterate what the provi so contemplates
Rule 15 which deals with provisional as sessment where a return is incorrect and incomplete runs thus If the return submitted by the dealer appears to the assessing authority to be incorrect or incomplete the assessing author ity shall after issuing a notice to the dealer calling upon him to produce his ac counts to prove the correctness or complete ness of his return at time and place to be specified in the notice and after scrutiny of all the accounts if any produced by the dealer and after taking into account all relevant materials gathered by it determine the turnover of the dealer to the best of its judgment and fix provisionally the annual tax or taxes payable at the rate or rates speci fied in Section or notified under Section 10
Before determining the turnover under this rule the dealer shall be given a reasonable opportunity of being heard and also to prove the correctness or completeness of the return submitted by him
 The Rule clearly shows that where the return of the assessee is incorrect or incomplete he must be called upon to prove the correctness or completeness of the same
It also en joins that a reasonable opportunity of being heard should be given to the assessee to prove the correctness or complete ness of the return submitted by him
Thus the requirement of the second part of the proviso to section 173 is reiterated in r 15
We understand that such a provision in the Act is peculiar to the Kerala Act and is not to be found in other sales tax statutes which provide for best judgment assess ment
Thus on a true interpretation of section 173 the proviso thereto and r 15 the inescapable conclusion would be that the assessee has been given stationary right to prove the correctness of his return by showing that the materials on the basis of which his return is found to be incorrect or incomplete are wrong and if for this purpose the assessee makes an expire prayer for cross examining the wholesale dealers whose accounts formed the sheet anchor of the notice issued to the assesee he is undoubted ly entitled to cross examine such wholesale dealers
In view of the language in which the Rules are couched it seems to us that a determinative issue arises in this case the Department taking the stand that the returns filed by the assessees are incorrect and incomplete whereas the assessees contend that the 17 240SCI77 248 returns are correct and that the accounts of the wholesale dealers which formed the basis of the information of the Sales tax Authorities were wrong and incorrect
Such an issue can only be determined after examination of  the accounts of both the parties and after affording the asses sees the right to cross examine the wholesale dealers con cerned particularly when the assessee makes a specific prayer to this effect
For these reasons therefore we are convinced that the judgment passed by the High Court in all these appeals is correct in law and the High Court has rightly decided the issues involved
The appeals accordingly fail and are dismissed with no order as to costs
PBR Appeals dismissed


Summary:
Section 173 of the Kerala General Sales Tax Act 1963 provides that if the return submitted by an assessee appears to be incorrect or incomplete
the assessing authority may assess the dealer to the best of its judgment
The proviso to the sub section enacts that before taking action under the sub section the dealer shall be given a reasonable opportunity of being heard and where a return has been submitted to prove the correctness to completeness of such return
Relying on the evidence furnished by entries in the books of account of some other dealers the Sales Tax Officer disbelieved the assessee s accounts and came to the conclusion that the return field by him was incorrect and incomplete and made a best judgment assessment under section 173
The assessee s request to cross examine the deal ers in regard to the correctness of their accounts was rejected by the Sales Tax Officer
In revision the High Court quashed the order of the Sales Tax Officer
Dismissing the State s appeal Per Bhagwati and Sarkaria
JJ HELD 
The assessee was entitled to cross examine the dealers under the second part of the proviso to section 173
The Sales Tax Officer s refusal to summon the dealers for cross examination by the
assessee constituted infraction of the right conferred on the assessee by the second part of the proviso and that vitiated the order of assessment made against him
239 F 1 The rule which requires an opportunity to be heard to be given to a person likely to be affected by a decision is not an inflexible rule having a fixed connotation
It has a variable content depending on the nature of the in quiry the framework of the law under which it is held the constitution of the authority holding the inquiry the nature and character of the right affected and the coil sequences flowing from the decision
The rule of audi alterem partem does not require in every case a specified procedure to be followed
In a given case the rule of audi alterem partem may import a requirement that witnesses whose statements are sought to be relied upon by the author ity holding the inquiry should be permitted to be cross examined by the party affected while in some other cases it may not
The procedure required to be adopted for giving an opportunity to a person to be heard must necessarily depend on the facts and circumstances of each case
237 B D 2 a It is only on the existence of one of two condi tions namely that no return is submitted by the assessee or the return submitted appears to be incorrect or incom plete that the Sales Tax Officer gets the jurisdiction to make a best judgment assessment
237 H 234 b The second part of the proviso lays down that where a return has been submitted the assessee should be given a reasonable opportunity to prove the correctness or complete ness of such return
To prove means to establish the correctness or completeness of the return by any mode per missible under law
The opportunity to prove would there fore necessarily carry with it the right to examine wit nesses and that would include equally the right to cross examine witnesses examined by the Sales Tax Officer
238 G H In the instant case the assessee could prove the cor rectness and completness of his return only by showing that the entries in the books of account of the dealers on which the Sales Tax Officer relied were false bogus or manipu lated and that his return should not be disbelieved on the basis of such entries
This could not be done unless an opportunity to cross examine the dealers was given
239 B Murlimohan Prabhudayal vs State of Orissa 26 STC 22 and M Appukutty vs State of Kerala 14 STC 489 approved
Fazal Ali J concurring
Section 173 with the proviso thereto and r 15 have given a statutory right to the assessee to prove the cor rectness of his return and the assessee was entitled to cross examine the wholesale dealers relying on whose ac counts the Sales Tax Officer made a best judgment assess ment
247 E 1 The well settled rules in regard to best judgment assessment are i The taxing authority must not act dis honestly or vindictively or capriciously
He must make what he honestly believes to be a fair estimate of the proper figures of assessment and for this purpose he must be able to take into consideration all matters which he thinks will assist him in arriving at a fair and proper estimate
Though it must necessarily be guess work it must be honest guess work
241 E ii Although tax proceedings are quasi judicial and the Sales Tax Officer is not bound strictly by rules of evi dence yet he must base his order on materials known to the assessee and after he has been given a chance to rebut the same
244 E iii Admissibility of a document or material in evi dence is quite different from the value which the authority would attach to such material
The tax authority can even base its conclusion on private opinion or assessment provid ed the same is fully disclosed to the assessee and he is given an opportunity to rebut the same
242 E Income tax Commissioner vs Badridas Ramrai Shop Akola 1937 64 IA 102 114 115 and Dhakeswari Cotton Mills Ltd vs Commissioner of Incometax West Bengal  followed
Raghubar Mandal Harihar Mandal vs State of Bihar 8 STC 770 and C Vasantilal  Co vs CIT Bombay City 45TR 206 referred to
Seth Gurmukh Singh vs Commissioner of Income tax Punjab approved 2a The words opportunity of being heard in section 173 are of very wide amplitude
All that the court has
to see is whether the assessee had been given a fair hearing
Whether the hearing would extend to the right of demanding cross examination of witnesses or not would depend upon the nature of the materials relied upon by the tax authorities the manner in which the assessee can rebut those materials and the facts and circumstances of each case
234F G 235 The second part of the proviso confers benefit on the asses see for giving him an opportunity not only of being heard but also of proving the correctness or completeness of his return
Secondly r 15 clearly shows that where the return of the assessee is incorrect or incomplete he must be called upon to prove
the correctness or completeness of the same
It also enjoins on the Sales Tax Officer that a reasonable opportunity of being heard should be given to the assessee to prove the correctness and completeness of the return
The requirement of the second part of the proviso to section 173 is reiterated in r 15
D In the instant case if the assessee desired the dealers whose accounts were used against him to be cross examined to prove that his return was not incorrect or incomplete he could not be denied this opportunity
The dealers might have made the entries to embarrass the assessee or they might have animus or business rivalry with the assessee
The assessee could establish the correctness of his return only if he was allowed to cross examine the dealers
244 H Jayantilal Thakordas vs State of Gujarat 23 STC 11 dis tinguished
M Appukutty vs State of Kerala 14 STC 489 and Muralimohan Prabhudayal vs State of Orissa 26 STC 22 approved