Law:

Section:

Section 142(2A) of the Income-tax Act, 1961 - Special audit - Assessment year 1987-88 - Order passed under section 142(2A) directing special audit and nominating an accountant without giving an opportunity of hearing to assessee was bad in law - Assessment year 1987-88 For the subject assessment year, the petitioner-assessee had filed its return declaring loss along with audited annual report, as well as tax audit report. A provisional assessment in respect of the petitioner's return was made under section 141A and the Assessing Officer had directed refund of a sum. The petitioner claimed to have furnished its response to the notice dated 29-12-1989 by which it was called to furnish certain information but the authorities were not satisfied with such response. On 27-8-1990, another notice was issued detailing the particulars on which the income-tax authorities wanted further information/clarification. Eventually by a communication issued on 27-2-1991, the petitioner was informed that audit had been proposed in the case of the petitioner in accordance with the provisions of section 142(2A) and 'P' a chartered accountant, was being appointed as the nominated accountant under the said provisions of the Act. The petitioner challenged said order passed under section 142(2A) on ground that the order under section 142(2A) was passed without complying with the principles of natural justice, i.e., without giving opportunity of hearing to the petitioner and, therefore, same was patently bad. Held that from the minutes of the proceeding before the income-tax authorities, it appeared that the proceeding was confined to the aspects of furnishing all details but no effective hearing took place. What was recorded was that the case was heard and discussed. Admittedly, the proposal was not given to the petitioner before hearing took place before the Chief Commissioner of Income-tax. No material was found from where it could be inferred that it was made known to the petitioner as to what led the Deputy Commissioner to form an opinion that all relevant factors including the ones mentioned in section 142(2A) stood satisfied. In the absence of these materials being made available,…

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