SAHARA INDIA (FIRM), LUCKNOW versus COMMISSIONER OF INCOME TAX, CENTRAL-I & ANR.

Citation: [2008] 6 S.C.R. 427 · Decided: 11-04-2008 · Supreme Court of India · Bench: B.N. AGRAWAL · Disposal: Case Partly allowed

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

> 
[2008) 6 S.C.R. 427 
SAHARA INDIA (FIRM), LUCKNOW 
v 
COMMISSIONER OF INCOME TAX, CENTRAL-I & ANR. 
(Civil Appeal No. 2783 of 2008) 
APRIL 11, 2008 
[8.N. AGRAWAL, P.P. NAOLEKAR & D.K. JAIN, JJ.] 
Income tax Act, 1961 - s. 142(2A) - Special audit of 
accounts - Pre-decisional hearing - Requirement of - Held: 
A 
B 
Even in absence of express provision for affording or barring C 
an opportunity of pre-decisional hearing to assessee, the 
requirement of observance of principles of natural justice to 
be read into s. 142(2A) since the order entails civil 
consequences - It would apply prospectively - However, it 0 
would be open to assessee to question the correctness of 
material gathered on basis of audit report. 
Principles of natural justice - Concept and applicability 
of - Held: Rules of 'natural justice' implies duty to act fairly E 
- It is to secure justice or to prevent miscarriage of justice 
-
Unless statutory provision either specifically or by 
necessary implication excludes its applicability, 
requirement of giving reasonable opportunity of hearing F 
before an order is made, is generally read into the 
provisions, particularly when the order has adverse civil 
consequences - Power conferred on a statutory body or 
tribunal may be administrative or quasi-judicial - However, 
there is no general rule of universal application as to its G 
~pplicability -
With regard to its application express 
language, basic scheme of the provision conferring the 
power, nature of power conferred, its purpose and final effect 
427 
H 
428 
SUPREME COURT REPORTS 
[2008] 6 S.C.R. 
A of the exercise of that power are to be considered. 
The two Judge Bench which heard the matter earlier, 
doubted the correctness of Rajesh Kumar's case on the 
ground that it may not be necessary to afford opportunity 
B of hearing to assessee before ordering Special audit in 
+ 
terms of S.142(2A) and referred the matter to larger Bench. 
Hence, the present appeals are before the three-judge 
Bench. 
c 
Partly allowing the appeals, the Court 
HELD: 1. The exercise of power under Section 142 
(2A) of the ·Income Tax Act, 1961 leads to serious civil 
D consequences and, therefore, even in the absence of 
express provision for affording an opportunity of pre-
decisional hearing to an assessee and in the absence 
of any express provision in Section 142 (2A) barring 
the giving of reasonable opportunity to an assessee, 
E the requirement of observance of principles of natural 
justice is to be read into the said provision. (Para 24) 
[453-E-F] 
F 
Rajesh Kumar and Ors. Vs. Deputy Commissioner of 
Income-Tax and Ors 2006 (287) ITR 91 (SC) - explained and 
reiterated. 
2.1 A bare perusal of the provisions of sub-section 
G (2A) of s. 142 of the Income Tax Act, 1961 Act would show 
that the opinion of the Assessing Officer that it is 
necessary to get the accounts of assessee audited by an 
Accountant has to be formed only by having regard to: (i) 
the nature and complexity of the accounts of the 
H 
SAHARA INDIA (FIRM), LUCKNOW v. COMMISSIONER 
429 
OF INCOME TAX, CENTRAL-I & ANR. 
assessee; and (ii) the interests of the Revenue. The word A 
'and' signifies conjunction and not disjunction. In other 
words, the twin conditions of 'nature and complexity of 
the accounts' and 'the interests of the Revenue'; are 
the prerequisites for exercise of power under section 8 
142 (2A) of the Act. Undoubtedly, the object behind 
enacting the said provision is to assist the Assessing 
Officer in framing a correct and proper assessment 
based on the accounts maintained by the assessee and 
when he finds the accounts of the assessee to be C 
complex, in order to protect the interests of the 
Revenue, recourse to the said provision can be had. 
[Para 6) [ 440-F, G; 441-A, B] 
2.2 The word 'complexity' used in Section 142 (2A) is 
D 
not defined or explained in the Act. Complexity it is a 
nebulous word. Its dictionary meaning is: "The state or 
quality of being intricate or complex or that is difficult to 
understand. However, all that is difficult to understand E 
should not be regarded as complex. What is complex to 
one may be simple to another. It depends upon one's level 
of understanding or comprehension. Sometimes, what 
appears to be complex on the face of it, may not be really 
F 
so if one tries to understand it carefully." Thus, before 
dubbing the accounts to be complex or difficult to 
understand, there has to be a genuine and honest attempt 
on the p

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