RAJESH KUMAR AND ORS. versus D.C.I.T. AND ORS.

Citation: [2006] SUPP. 8 S.C.R. 284 · Decided: 01-11-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

cites 1 · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
RAJESH KUMAR AND ORS. 
v. 
D.C.I.T. AND ORS. 
NOVEMBER l, 2006 
[S.B SINHA AND DAL VEER BHANDARI, JJ.] 
Income Tax Act, 1961--Section 142(2A)--Special audit-Proposed by 
Deputy Commissioner of Income Tax to Commissioner on grounds that for 
C same financial year, two sets of books of accounts found for same concern 
and numerous instances of transactions outside the books-Approval by 
Commissioner having regard to nature and complexity of accounts and 
interests of revenue, and firm of auditors appointed whose fees was to be paid 
by assessee-Assessee 's request for supply of a copy of reasons/or appointment 
of auditor refused, and their Writ Petition challenging the appointment, 
D dismissed-Correctness of-Held-As prejudice of assessee is apparent on 
face of order under Section 142(2A) and assessee suffers civil consequences 
thereby, principles of natural justice must be held to be implicit in it-It was 
more so as that order was not an appealable order, 'no internal remedy was 
prescribed, and judicial review was not an appropriate remedy-If assessee 
is put to notice, he could show that nature of accounts was not complex, and 
E appointment of auditor was not in interest of Revenue-However, hearing 
given to assessee need not be elaborate, notice issued may only contain 
briefly issues which assessing officer thinks necessary, and reasons assigned 
therefor need not be detailed ones-Also, approval by Commissioner was not 
to be mechanically granted, and same should be done having regard to 
F materials on record and explanation given by assessee-Order under Section 
142(2A) found to be neither administrative nor quasi judicial, but judicial 
in nature and subject to order by higher courts. 
Adjudication-Reasons-Necessity of-Held-Where an authority is 
administrative or quasi-judicial and its orders are appeal/able or subject to 
G judicial review, it should be necessary for it to spell out reasons therefor-
However, while applying principles of natural justice, theory of useless 
formality and prejudice doctrine should be· borne in mind 
Words and phrases-'Complexity' 'having regard to '-Meaning of in 
context of Section 142(2A) of Income Tax Act, 1961. 
H 
284 
... 
, 
RAJESH KUMAR v. D.C.I.T 
285 
Appellants are assessees under the Income Tax Act, 1961. A raid was A 
. conducted in their premises by respondents, Income Tax department Deputy 
Commissioner of Income Tax, mooted a proposal for special audit in terms of 
Section 142(2A) of the Act to the Commissioner of Income Tax on the grounds 
that for the same financial year, two sets of books of accounts have been found 
for the same concern in two separate computers, and that there have been 
numerous instances of transactions outside the books. The Commissioner of B 
Income Tax approved the said proposal having regard to the nature and 
complexity of the accounts and the interests of revenue. Thereupon, for 
purposes of special audit, a firm of auditors was appointed whose fees was to 
be paid by the appellants, and they were informed accordingly. Appellants 
requested for supply of a copy of the reasons for appointment of special auditor, C 
but that was refused. Thereupon, appellants challenged the appointment by 
way of Writ Petition before High Court, however, it was dismissed. Hence the 
present appeal. 
Appellants contended that principles of natural justice were inherent 
to Section 142(2A) of the Act, and application of mind on part of the assessing 'D 
officer on the factors enumerated therein was imperative. 
Respondents contended that (i) if the principles of natural justice are ' 
held to be implicit in Section 142(2A) of the Act, the extent thereof must be 
confined to the requirements of the provisions only and not a detailed hearing 
(ii) the complexity of accounts was evident in view of the fact that appellants ,E 
were maintaining two differ~nt sets of accounts and the parties being 
associated with various firms and companies (iii) Section 142(2A) contains 
sufficient safeguards including approval to be granted by a high ranking , 
officer and in the event an order passed thereunder is subjected to judicial 
review, the authorities would place the entire records to satisfy the conscience p 
of the court that same does not suffer from non-application of mind. 
Allowing the appeal, the Court 
HELD I.I. The following are relevant factors for invoking Section 142 
(2A) of the Income Tax Act, 1961 : (i) nature of accounts (ii) complexity

Excerpt shown. Read the full judgment & AI analysis in Lexace.