TMI Blog1998 (12) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax, Special Range-13, directed the petitioner to get the accounts audited in respect of points enumerated therein and furnish the report of the said special audit within a period of 150 days from March 18, 1998. It appears that prior thereto a proposal for special audit under section 142(2A) in the case of the petitioner was placed before the Chief Commissioner of Income-tax-II, on March 10, 1998, and he without granting any approval merely nominated Sri G. P. Agarwal, FCA, for the purpose of special audit on March 16, 1998. Section 142(2A) of the Income-tax Act reads thus: "If, at any stage of the proceedings before him, the Assessing Officer, having regard to the nature and complexity of the accounts of the assessee and the interests of the Revenue, is of the opinion that it is necessary so to do, he may, with the previous approval of the Chief Commissioner or Commissioner, direct the assessee to get the accounts audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, nominated by the Chief Commissioner or Commissioner in this behalf and to furnish a report of such audit in the prescribed form duly signed and verified by such acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the effect that the provisions of sub-section (2A) shall have effect notwithstanding that the accounts of the assessee have been audited under any other law for the time being in force or otherwise. The aforementioned provision by necessary implication does not contemplate audit of the books of account of the assessee in terms of the provisions of the said Act itself. Sub-section (2D) of section 142 provides that the expenses of, and incidental to, any audit under sub-section (2A) including the remuneration of the accountant shall be determined by the Chief Commissioner or Commissioner and which determination shall be final and paid by the assessee ; and in default of such payment shall be recoverable from the assessee in the manner provided in Chapter XVII-D for the recovery of arrears of tax. Sub-section (3) of section 142 requires an opportunity of hearing to the assessee where any material gathered on the basis of any enquiry under sub-section (2) or any audit under sub-section (2A) is proposed to be utilised for the purposes of the assessment. Keeping in view the nature of the controversy, the respondents were directed to produce the records and give an inspectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce in this connection may be made to Chaitnya Charan Das v. State of West Bengal, AIR 1995 Cal 336. A bare perusal of sub-section (2A) of section 142 leaves no manner of doubt that an opinion has to be formed only having regard to the nature and complexity of the accounts of the assessee and the interests of the Revenue. The word "and" signifies conjunction and not disjunction. Thus, both nature and complexity of the accounts as also interest of the Revenue are necessary ingredients for exercise of the said power. Thus, the opinion required to be formed by the Assessing Officer must be based on objective consideration and not on the basis of his subjective satisfaction. Even where a power is conferred on a public authority to exercise the same when "they are satisfied" or when "it appears to them" or when in their opinion "a certain state of affairs exists" or when powers enable public authorities to take "such action as they think fit" in relation to a subject-matter, the courts will not readily defer to the conclusiveness of an executive authority's opinion as to the existence of a matter of law or fact upon which the validity of the exercise of the power is predicated. Admini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argument has been advanced to the effect that by making such a nomination, approval will be deemed to have been granted. The answer to the said contention must be rendered in the negative. The Chief Commissioner of Income-tax before granting such approval must have before him the materials on the basis whereof an opinion had been formed. A prior approval can be granted only when the materials for appointment of the extraordinary procedure is required to be taken by the Assessing Officer. The Assessing Officer, therefore, was required to place all materials before the Commissioner of Income-tax or the Chief Commissioner of Income-tax, as the case may be, to show that he intends to take recourse to the said provision having regard to the nature and complexity of the accounts of the assessee and the interests of the Revenue. No such materials had been placed before the Chief Commissioner of Income-tax. It further appears that even no previous approval was sought for but merely a proposal was placed for perusal of the Chief Commissioner of Income-tax and for appointment of a special auditor. The Chief Commissioner of Income-tax, therefore, did not apply his mind at all as regards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had further jumped to the conclusion "it is also revealed that the assessee-company has been concealing material facts with regard to accounts and the balance sheet for various years". No material has been disclosed for arriving at the said conclusion. In fact as noticed hereinabove, he did not have any occasion to examine the books of account at all. He further took into consideration the fact that a lot of litigation is pending before the Income-tax Department by way of appeals and the writ petitions for almost every year on the issues specified in paragraph 2 of the order. An assessee is entitled to question the correctness or otherwise of an order of assessment and may. raise various contentions before the higher authority. Dr. Pal, learned senior counsel appearing on behalf of the petitioner, submitted that on all such issues the appellate authorities as also the Tribunals have held in favour of the assessee. This may be so but this court is not concerned therewith at this stage. The question, however, remains that pendency of such litigations is no ground whatsoever to take recourse to the provisions of section 142(2A). The authority opined : "The special auditors a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to expeditious and accelerated assessments and detection of evasion. The stipulation of audit by chartered accountants has a legitimate affinity to the object sought to be achieved. Learned counsel for the petitioner contended that by diverting their clientele to the corridors of chartered accountants for the purpose of audit, the petitioners lose their grip over them and there is a remote possibility of such assessees unfolding themselves from the nest of chartered accountants. This contention is farfetched and not founded upon proximity to a realistic approach. It is further contended that section 44AB is superfluous as recourse to section 142(2A) of the Act serves the purpose. Section 142(2A) enables the assessing authority to direct the accounts to be audited in the event of complexity of the accounts. This power can be exercised in respect of all assessees. The stipulation of compulsory audit is evidently conceived with the twin purposes of having vigilance of the accounts of the assessees in higher income brackets to detect evasion if any and lubricating expeditious assessment. The power under section 142(2A) can be invoked when the assessing authority finds that the acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage before an order is passed preferably during the hearing of the proceeding itself. This case depicts as to how a power can be abused. With a view to restrict such abuse of power, the court will presume that the principles of natural justice are required to be complied with. It is now well settled that the principles of natural justice shall be presumed to be necessary unless there exists a statutory interdict. It is true that the principle of natural justice is not static. The concept of the same varies from case to case. It is further required to be borne in mind that it should not be carried too far but the statute has to be construed in such a manner so that if any occasion arises it may be read down so that it Can be declared constitutional. It may be true that although no appeal is maintainable against such order, a right of judicial review exists but a power of judicial review can be exercised only when findings are arrived at on the basis of the materials on record and upon compliance of the principles of natural justice. In the celebrated case of Smt. Maneka Gandhi v. Union of India, AIR 1978 SC 597, the apex court has held : "Now, if this be the test of applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cons of the question. An ex parte determination by the Collector would expose his decision to be one sided and perhaps 'One based on an incorrect statement of facts. How, then, can it be said that his determination that a sufficient cause exists is just and fair if he has before him a one sided picture without any means to check it unless there is an opportunity to the other side to correct or controvert it." Reference in this connection may also be made to Harbans Lal v. Collector Central Excise, AIR 1993 SC 2487 ; [1993] 67 ELT 20 (SC). This aspect of the matter has also been considered by this court in Sri Hanuman Steel Rolling Mill v. CESC Ltd., AIR 1996 Cal 449 and Jenson and Nirholson (India) Ltd. v. Union of India, AIR 1997 Cal 308; [1997] 3 ICC 621. In that decision it was noticed : "In Wade's Administrative Law, 6th edition, page 497, the learned author observed : 'The hypothesis on which the courts built up their jurisdiction was that the duty to give every victim a fair hearing was just as much a cannon of good administration as of good legal procedure. Even where an order or determination is unchallengable as regards its substance, the court can at least control ..... X X X X Extracts X X X X X X X X Extracts X X X X
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