T.S. Krishnamoorthy Iyer, J.
1. The petitioner who is common in all these cases has been assessed to sales tax for the years 1965-66, 1966-67 and 1967-68. The sales tax authorities rejected his accounts and assessed him under Section 17(3) of the Kerala General Sales Tax Act, 1963. The rejection of the accounts of the assessee was because they did not include the goods alleged to have been purchased by the assessee from Janab Haji P. K. Usmankutty, Merchant at Tellicherry. The sales tax authorities came to this conclusion on a perusal of the bill books maintained in the regular course of business in the trade of Janab Haji P. K. Usmankutty, Tellicherry, and from the statement alleged to have been furnished by the assessee to the officer in charge of the check post. It is alleged that there are corresponding entries in the register kept in the Sales Tax Check Post at Koottupuzha through which the goods have to pass to the assessee's place of business. The assessee denied having made purchases from Janab Haji P. K. Usmankutty, Tellicherry, and prayed for an opportunity to cross-examine him. This was denied to the assessee. The question raised is whether this has vitiated the assessment proceedings.
2. It is necessary at the outset to reproduce Section 17 of the Kerala General Sales Tax Act, 1963, which prescribes the procedure to be followed by the assessing authority:
(1) Every dealer who is liable to pay tax under this Act shall submit such return or returns relating to his turnover in such manner and within such period as may be prescribed.
(2) If the assessing authority is satisfied that any return submitted under Sub-section (1) is correct and complete, it shall assess the dealer on the basis thereof.
(3) If no return is submitted by the dealer under Sub-section (1) within the prescribed period, or if the return submitted by him appears to the assessing authority to be incorrect or incomplete, the assessing authority 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.
3. Rule 18 prescribes the procedure for the filing of the annual return and for making the final assessment. Clause (5) of Rule 18 reads :
If no return is submitted or if the return submitted appears to the assessing authority to be incorrect or incomplete, the assessing authority may, after following the procedure prescribed in Rule 14 or 15 as the case may be, finally assess the tax or taxes payable under Section 5 or notified under Section 10 according to the best of its judgment.
4. Rule 14 prescribes the procedure for provisional assessment in cases where no return is submitted while Rule 15 prescribes the procedure for provisional assessment where return submitted is incorrect or incomplete. It is enough to extract Rule 15 for our purpose. The said rule reads:
15. Provisional assessment where return submitted is incorrect or incomplete.-If the return submitted by the dealer appears to the assessing authority to be incorrect or incomplete, the assessing authority shall, after issuing a notice to the dealer calling upon him to produce his accounts to prove the correctness or completeness of his return at a time and place to be specified in the notice and after scrutiny of 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 specified in Section 5 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.
5. Section 17(3) as well as the rules referred to provide that 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 question is what is the scope and ambit of the words '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' in the proviso to Sub-section (3) of Section 17 of the Kerala General Sales Tax Act, 1963. At the outset it has to be mentioned that what is reasonable opportunity to be granted to an assessee to enable him to prove the correctness and completeness of his return should depend upon the facts and circumstances of each case and no hard and fast rule can be enunciated regarding the same.
6. In M. Appukutty v. State of Kerala  14 S.T.C. 489, Vaidialingam, J., in a case, which arose under the Travancore-Cochin Sales Tax Act, 1125, in considering the legality of a best judgment assessment made on the basis of the secret books of another merchant which were admitted to have been not maintained in the regular and ordinary course of business, observed :
In the first place the assessing authority in my view had absolutely no justification for relying upon the books of account of a third party, much less the secret account books, as against persons like the petitioner, without affording an effective opportunity to cross-examine those persons who are supposed to have maintained the secret accounts and from whom they have been discovered. The fact that some third party maintaining, even according to the department, some secret accounts has made certain entries in his accounts which may connect a person like the petitioner, by itself will not give jurisdiction to the assessing authority to utilize that information, unless that person has been given ample opportunity in the presence of the person who has kept the secret accounts to effectively cross-examine him and elicit the necessary facts as to how exactly the relevant entries came to be made connecting the petitioner with such books of account. No such opportunity has been admittedly given to the petitioner in these proceedings.
7. The same learned Judge on an identical question observed in M/s. Kottachery Sridhara Srinivasa Shenoi & Co. v. Sales Tax Officer 1963 K.L.J. 526 thus :
But they (the authorities) have absolutely no jurisdiction to invoke into their aid the entries that may have been found in the secret account books of third persons and particularly to foist a liability merely on that basis on persons like the petitioner.... Even assuming that the department is entitled to rely upon any secret account books maintained by other traders, there is a duty and an obligation on the part of the assessing authority, if they are using information founded on these books of account, to produce those parties for cross-examination by persons against whom that information is sought to be used. In this case, no such attempt was ever made by the assessing authority, notwithstanding the strenuous attempt made by the assessee in the reply he sent to the pre-assessment notice.
8. It is not clear from the above decisions whether there was any request by the assessee for the cross-examination of the persons whose secret accounts were relied on by the assessing authorities.
9. Isaac, J., in V. S. Narayanan Nair v. Sales Tax Officer 1971 K.L.T. 256 followed the decision in M. Appukutty v. State of Kerala  14 S.T.C. 489. The head-note of the decision in V. S. Narayanan Nair v. Sales Tax Officer 1971 K.L.T. 256 is in these terms :
An assessment cannot be based on the entries found in the books account of a third party without giving to the assessee an opportunity of cross-examining that party with reference to those books, if so required. This is a requirement of natural justice.
10. The above decision shows that the request of the assessee for cross-examining the third party with reference to his accounts was disallowed and the assessment completed. *
11. The observations in M. Appukutty v. State of Kerala  14 S.T.C. 489 and M/s. Kottachery Sridahra Srinivasa Shenoi & Co. v. Sales Tax Officer 1963 K.L.J. 526 do suggest that even without such a request a duty is cast on the assessing authority to provide that opportunity to the assessee.
12. A Bench of the Gujarat High Court in Jayantilal Thakordas v. State of Gujarat  23 S.T.C. 11 dissenting from M. Appukutty v. State of Kerala  14 S.T.C. 489 stated the legal position in these words :
With utmost respect to Vaidialingam, J., we are unable to agree with the reasoning which he adopted in that case. He has proceeded on the footing that the evidence in the proceedings before the sales tax authorities or other similar authorities must mean the evidence recorded in the best judgment assessment as understood in law and what is commonly referred to as legal evidence. On the other hand, it is well-settled that for purposes of departmental tribunals, like the Sales Tax Tribunal, evidence means any material having probative value, irrespective of the manner in which the material is produced or of the mode of proving that particular piece of material. There are decisions of the Supreme Court in connection with the income-tax law and also in connection with the sales tax law laying down that so far as evidence in reassessment proceedings is concerned, the word 'evidence' has to be understood in the sense of material having any probative value.
13. In our view it is not correct to say that Vaidialingam, J., held that the sales tax authorities are bound by the technical rules of the Evidence Act. Anyhow this aspect of the matter need not detain us in view of the decision of the Supreme Court in C. Vasantlal and Co. v. Commissioner of Income-tax  45 I.T.R. 206 (S.C.), where their Lordships with reference to the Income-tax Officer observed thus:
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.
14. The above observations should apply to a Sales Tax Officer making an assessment under the General Sales Tax Act.
15. A Bench of the High Court of Orissa in Muralimohan Prabhudayal v. State of Orissa  26 S.T.C. 22 dissented from Jayantilal Thakordas v. State of Gujarat  23 S.T.C. 11 and followed the decision in M. Appukutty v. State of Kerala  14 S.T.C. 489. The learned Judge said:
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. The question is: whether he can have the right of cross-examination in certain circumstances. Take an illustration. 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. It is contended by the learned standing counsel that supply of the copy of the accounts of the third party would be sufficient material particulars and the assessee cannot be permitted to test the correctness of those accounts by cross-examination, if necessary.
We are unable to accept this contention which is abhorrent to the elementary concept of natural justice that no material should be accepted without being tested. 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 relationship. 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.
16. In Premier Motors (P.) Ltd. v. Commissioner, Sales Tax  26 S.T.C. 402, a Bench of the Allahabad High Court laid down the proposition in the following manner:
It is true that the Evidence Act as such does not apply to the proceedings under the Act and it is also true that the assessing authority may use certain materials which strictly speaking may not be admissible evidence in a court of law. But that does not mean that any material or information gathered by the Sales Tax Officer as a result of a private enquiry can be used against an assessee without disclosing to him the material and without affording him adequate opportunity to rebut the same. The question that would arise in such a case would be as to whether in the circumstances of the case the assessee can be said to have been afforded a reasonable opportunity to meet the case against him. It cannot be laid down as a matter of law that a witness examined by the Sales Tax Officer can never be summoned for cross-examination. The question would always depend upon the circumstances of each case.
17. A reasonable analogy though not a very close one to Section 17(3) of the Kerala General Sales Tax Act, 1963, is furnished by Section 23 of the Indian Income-tax Act, 1922. Sub-sections (2) and (3) of Section 23 of the Indian Income-tax Act read:
(2) If the Income-tax Officer is not satisfied without requiring the presence of the person who made the return or the production of evidence that a return made under Section 22 is correct and complete, he shall serve on such person a notice requiring him, on a date to be therein specified, either to attend at the Income-tax Officer's office or to produce, or to cause to be there produced .any evidence on which such person may rely in support of the return.
(3) On the day specified in the notice issued under Sub-section (2), or as soon afterwards as may be, the Income-tax Officer, after hearing such evidence as such person may produce and such other evidence as the Income-tax Officer may require, on specified points, shall, by an order in writing, assess the total income of the assessee, and determine the sum payable by him on the basis of such assessment.
18. In examining the scope and ambit of the content of Section 23(3) of the Indian Income-tax Act their Lordships of the Lahore High Court in Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab  12 I.T.R. 393, stated the rules in the following words :
Under the law as it stands, while proceeding under Sub-section (3) of Section 23, the Income-tax Officer is bound to hear such evidence as the assessee may produce in support of his return and, if, after hearing the evidence so produced, he still thinks that he is not satisfied on any particular point, he can require the assessee to produce further evidence on that point. To that extent he may be taken to proceed quasi-judicially, but his quasi-judicial functions begin and end here. If not satisfied with the character of the evidence produced by the assessee, he is not bound to lead evidence on his own account with a view to rebutting it. He may gather information in any manner he likes and utilise it against the assessee even if it does not in all respects satisfy the requirements of the Indian Evidence Act. The very nature of the proceedings conducted by him necessitates the use of such media for collecting information as he may not like to disclose to the assessee and he is perfectly within his right if on enquiry by the assessee he refuses to disclose the source of his information. But if he makes up his mind to reject the evidence of the assessee on any grounds which appeal to him to be sufficient for that purpose, it is but fair and just that he should acquaint the assessee with those grounds so as to enable him to disabuse his mind, if possible, by explaining them away as baseless or untenable. It is, however, impossible to hold that if once the assessee under Sub-section (3) of Section 23 leads evidence, whether reliable or unreliable, or produces any document, whether genuine or fictitious, the Income-tax Officer must base his decision on that evidence unless he is in a position to bring on the record any definite evidence to the contrary.
19. It is clear from the decision that though there is nothing in Section 23 of the Indian Income-tax Act imposing a duty on an Income-tax Officer to disclose to the assessee the material on which he proposes to act, principles of natural justice require that the authority should draw the attention of the assessee to the information collected by him so that the assessee can get an opportunity to show that the information of the officer is wrong.. The decision in Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab1, was specifically approved by the Supreme Court in Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax  26 I.T.R. 775 (S.C.). Mahajan, C.J., speaking for the court observed:.we are in entire agreement with the learned Solicitor-General when he says that the Income-tax Officer is not fettered 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 there the agreement ends; because it is equally 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). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmuhh Singh v. Commissioner of Income-tax, Punjab  12 I.T.R. 393.
20. These principles were applied by their Lordships of the Supreme Court in the decision in Raghubar Mandal Harihar Mandal v. State of Bihar  8 S.T.C. 770 (S.C.) in interpreting Section 10(2)(b) of the Bihar Sales Tax Act, 1944, which is substantially the same as Section 23(3) of the Indian Income-tax Act, 1922.
21. In dealing with the scope of Section 23(3) of the Indian Income-tax Act, 1922, a Special Bench of the Madras High Court in Gunda Subbayya v. Commissioner of Income-tax, Madras  7 I.T.R. 21, observed :
There is nothing in the Act itself which requires the Income-tax Officer to disclose to the assessee the material on which he proposes to act or to refer to it in his order but natural justice demands that he should draw the assessee's attention to it before making the order. Information which the Income-tax Officer has received may not always be accurate and it is only fair when he proposes to act on material which he has obtained from an outside source that he should give the assessee an opportunity of showing, if he can, that the Income-tax Officer has been misinformed, but the Income-tax Officer is obviously not bound to disclose the source of his information.
22. In our view, the principles stated in connection with Section 23(3) of Indian Income-tax Act, 1922, should apply in interpreting Section 17(3) of the Kerala General Sales Tax Act, 1963. Section 17(3) insists on a reasonable opportunity to be given to the assessee to prove the correctness or completeness of such return. When materials are collected by the assessing authority and when he decides to use them against the assessee to reject his accounts, the proviso implies that those materials should be brought to the notice of the assessee to enable him to disprove the same and substantiate the completeness and correctness of his return. This is possible only when the assessee is allowed an opportunity to produce evidence. Generally it is for the assessee to decide the kind of evidence he has to adduce to disprove the materials collected against him by the officer. In the case before us the assessee had been repeatedly insisting for the cross-examination of the persons whose books are sought to be used against him. We do not agree with Vaidialingam, J., that the assessing authority should produce the witnesses for cross-examination even without a request for the same from the assessee. The law is settled that when a Sales Tax Officer holds an enquiry and makes an assessment though he is not a court he should proceed in a judicial manner and come to a judicial conclusion upon the facts in accordance with the terms of the section and according to the principles of natural justice.
23. In view of these principles, we are satisfied that the refusal to comply with the request of the assessee for cross-examination of the witnesses whose books have been relied on vitiates the proceedings. We, therefore, set aside the decisions and direct the assessing authority to assess the assessee afresh in the light of the observations made above. The revision cases are allowed, but we make no order as to costs.