Sahara India (Firm) Vs CIT (Supreme Court of India)
The Supreme Court considered whether a pre-decisional hearing is required before directing a special audit under Section 142(2A) of the Income Tax Act. The issue arose due to doubts expressed by a two-Judge Bench regarding the correctness of the earlier decision in Rajesh Kumar, which held that principles of natural justice must be followed before ordering a special audit.
The Court examined the statutory framework of Section 142(2A) and related provisions. It noted that the Assessing Officer can order a special audit only if two conditions are satisfied: the nature and complexity of the accounts, and the interests of the revenue. The opinion must be based on objective criteria, and the approval of higher authorities must reflect proper application of mind. The provision is intended to assist in proper assessment and cannot be used to shift the Assessing Officer’s responsibility.
The Court then addressed whether the absence of an explicit provision for hearing excludes the requirement of natural justice. It reiterated that principles of natural justice are not codified rules but are meant to ensure fairness and prevent arbitrary action. These principles apply unless expressly excluded by statute, especially where an order has civil consequences.
