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12 Special audit of accounts — Order u/s.
142(2A) cannot be passed without giving reasonable opportunity of being heard.
[Sahara India (Firm) v. CIT, (2008) 300 ITR 403 (SC)]
This matter was placed before a three-Judge Bench in view of
a common order dated December 14, 2006, passed by a two-Judge Bench. The order
read as follows :
“When the matter was taken up, the learned counsel for the
petitioner placed reliance on a decision of this Court in Rajesh Kumar v.
Deputy CIT. According to the learned counsel for the petitioner, before
any direction can be issued u/s.142(2A) of the Income-tax Act, 1961 (in short
‘the Act’) for special audit of the accounts of the assessee, there has to be
a pre-decisional hearing and an opportunity has to be granted to the assessee
for the purpose. A close reading of the decision shows that the observations
in this regard appear to have been made in the context of the assessments in
terms of S. 158BC (block assessment) of the Act. Such assessments are
relatable to a case when a raid has been conducted at the premises of an
assessee. Had that been so, limited to the facts involved in that case, we
would have negatived the contentions of the learned counsel for the
petitioner. But, certain observations of general nature have been made. The
effect of these observations appears to be that in every case where the
Assessing Officer issues a direction in terms of S. 142(2A) of the Act, the
assessee has to be heard before such order is passed. This does not appear to
us to be the correct position of law. Therefore, we refer the matter to a
larger Bench. The records be placed before the Hon’ble Chief Justice of
India for constituting an appropriate Bench.”
Although no specific question had been formulated for
determination by the larger Bench but from the afore-extracted order it was
discernible that the Bench had doubted the correctness of the decision of this
Court in Rajesh Kumar v. Deputy CIT, to the extent that it laid down as
an absolute proposition of law that in every case where the Assessing Officer
issues a direction u/s.142(2A) of the Act, the assessee has to be heard before
such an order is passed. In other words, the Bench of two learned Judges has
felt that it may not be necessary to afford an opportunity of hearing to an
assessee before ordering special audit in terms of S. 142(2A) of the Act. The
larger Bench after noting the legal position, was in respectful agreement with
its decision in Rajesh Kumar that an order u/s.142(2A) does entail civil
consequences. The Supreme Court after taking note of the insertion of the
proviso to S. 142(2D) w.e.f. 1-6-2007 observed that even after the obligation to
pay auditor’s fees and incidental expenses has been taken over by the Central
Govt., civil consequences would still ensue on the passing of an order for
special audit and held that since an order u/s.142(2A) does entail civil
consequences, the rule audi alteram partem is required to be observed.
The Supreme Court further held that it is well settled that the principle of
audi alteram partem can be excluded only when a statute contemplates a
post-decisional hearing amounting to a full review of the original order on
merit, which was not the case here. Accordingly, the Supreme Court reiterated
the view expressed in Rajesh Kumar’s case. The Supreme Court also noted that by
the Finance Act, 2007, a proviso to S. 142(2A) has been inserted with effect
from June 1, 2007, which provides that no direction for special audit shall be
issued without affording a reasonable opportunity of hearing to the assessee.
