PEERLESS GENERAL FINANCE AND INVESTMENT CO. LTD. VS DEPUTY COMMISSIONER OF INCOME-TAX, 2000 PTD-CALCUTTA-HIGH-COURT-INDIA 2582 (1998)

(a) Income-tax---

----Assessment---Compulsory audit---Conditions precedent for application of S.142(2A)---Complexity of accounts and interests of Revenue---Both conditions should be fulfilled---Application of mind by Assessing Officer and Chief CIT is necessary---Mere proposal without providing material to Chief CIT---Assessing Officer forming opinion on basis of assessee's litigation with R.B.I. and Income-tax Department ---Litigations did not mean accounts were complex or that appointment of auditor was beneficial to Revenue---Appointment of auditor under S.142(2A) without application of mind-- Appointment was not valid---Indian Income Tax Act, 1961, S.142- Constitution of India, Art. 226.

Section 142(2A) of the Income Tax Act, 1961, 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. A bare perusal of subsection (2A) of section 142 leaves no manner of doubt that an opinion has to be formed having regard to the nature and complexity of the accounts of the assessee and the interest of the Revenue. The word "and" signifies conjunction. Thus both nature and complexity of the accounts as also the interests of. the Revenue are necessary ingredients for exercise of the said power. The word "complexity" means the state or quality of being intricate or complex or that it is difficult to understand. The expression "having regard to" indicates that in exercising the power, regard must be had to the factors enumerated in the provision. Where an authority is conferred with a power to exercise its discretion in a particular manner, such discretion has to be exercised bona fide and with a view to achieve the object laid down under the statute. No discretion is beyond the scope of judicial review. Principles of natural justice shall be presumed to be necessary unless there exists a statutory interdict. A prior approval is not an empty ritual. Before an. approval is sought for, the Assessing Officer must form an opinion as regards the conditions laid down therein. It further envisages application of mind on the part of the Assessing Officer as also the Commissioner or Chief Commissioner as the case may be:

Held, that a bare perusal of the Assessing Officer's order would clearly show that he had taken into consideration several litigations. between the petitioner and the Reserve Bank of India which related to a notification issued by the Reserve Bank of India limiting the operation of non-banking companies.` Such litigations had got nothing to do with the orders of the assessment. He further took into consideration the fact that a lot of litigation was pending before the Income-tax Department by way of appeals and writ petitions for almost every year: Pendency of such litigations was no ground whatsoever to take recourse to the provisions of section 142(2A). A proposal was made without placing the materials before the Chief Commissioner of Income-tax and an auditor had been appointed without any Application of mind. The impugned order was not valid and was liable to be quashed.

Assistant Collector of Customs and Superintendent, Preventive Service Customs v. Charan Das Malhotra AIR 1972 SC 689; Barium Chemicals Ltd. v. Company Law Board (1966) 36 Comp. Cas. 639 (SC); '(1966) Supply. SCR 311; Chaitnya Charan Das v. State of West Bengal AIR 1995 Cal. 336; Chandra Kumar (L.) v. Union of India (1997) 228 ITR 725 (SC); Chhugamal Rajpal v. S. P. Chaliha (1971) 79 ITR 603 (SC); CIT v. Mahindra and Mahindra Ltd. (1983) 144 ITR 225 (SC); CIT v. Walchand & CO. (Pvt.) Ltd. (1967) 65 ITR 381 (SC); Duryodhan Sahu (Dr.) v. Jitendra Kumar Mishra (1998) WBLR SC 405; Franklin v. Minister of Town and Country Planning (1947) 2 All ER 289; (1948) AC 87 (HL); Harbans Lai v. Collector of Central Excise AIR 1993 SC 2487; (1993) 67 ELT 20 (SC); Jenson and Nicholson (India) Ltd. v. Union of India AIR 1997 Cal. 308; (1997) 3 ICC 621; J. K. Woollen Manufacturers v CIT (1969) 72 ITR 612 (SC); John v. Rees (1970) 1 Ch. D 345; Maneka Gandhi (Smt.) v. Union of India AIR 1978 SC 597; Minerva Mills Ltd. v. Union of India AIR 1980 SC 1'789; Rasheed (M. A. ) v. State of Kerala AIR 1974 SC 2249; Sarnia (A. S.) v. Union of India (1989) 175 ITR 254 (AP); Shalini (Smt.) v. Union of India AIR 1981 SC 431; (1981) 1 SCR 962 and Sri Hanuman Steel Rolling Mill v. CESE Ltd. AIR 1996 Cal. 449 ref.

(b) Income-tax---

----General principles---Principles of natural justice applicable unless specifically excluded.

Dr. Debi Prosad Pal, Pronab Pal and Miss Manisha Seal for Petitioners.

Mukul Prakash Banerjee, Rupendra Nath Mitra and Jaydeb Chandru Saha for Respondents.

JUDGMENT

Interpretation of the provisions of section 142(2A) of the Income Tax Act, 1961, calls for decision in this application.

The aforementioned question arises for consideration in the following circumstances:

The petitioner is a company incorporated under the Companies Act. In terms of the provisions of section 44AB of the Income-tax Act as also under the Companies Act these are required to have their accounts duly audited by a chartered accountant. According to the petitioner, during the earlier assessment years various questions as to whether a particular receipt would be a capital receipt or a revenue receipt came up for consideration and the same had been considered and disposed of by the appellate authorities.

By an order dated March 20, 1998, the Assessing Officer being the Deputy Commissioner of 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 142f2A) 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 subsection (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 accountant and setting forth such particulars as may be prescribed and such other particulars as the Assessing Officer may require."

With a view to appreciate the rival contentions of the parties it is necessary to consider the scope and purport of the Act.

Section 142 deals with an enquiry before assessment and for the said purpose the Assessing Officer may serve a notice to a person who has either filed a return or not in relation to the matters specified therein which includes production of such accounts or documents as the Assessing Officer may require.

Section 143(1) provides that where a return has been filed under section 139, or in response to a notice under subsection (1) of section 142, a general assessment may be made. However, subsection (2) of section 143 empowers the Assessing Officer where it is considered necessary and expedient so as to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax, to serve on the assessee a notice requiring him, inter alia, to produce any evidence on which the assessee may rely in support of his return. However, such notice shall not be served after the expiry of 12 months from the end of the month in which the return is furnished.

Subsection (3) of section 143 reads thus:

"On the day specified in the notice issued under subsection (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him (or refund of any amount due to him) on the basis of such assessment. "

It is in the aforementioned backdrop of legislative policy relating to assessment, that the provisions of section 142(2A) has to be considered.

A bare perusal of the said provisions leaves no manner of doubt that before an approval is sought for, the Assessing Officer must form an opinion as regard the conditions laid down therein. It further envisages application of mind on the part of the Assessing Officer as also the Commissioner or Chief Commissioner as the case may be.

Subsection (2B) of section 142 provides for a non-obstante clause to the effect that the provisions of subsection (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. `

Subsection (2D) of section 142 provides that the expenses of, and incidental to, any audit under subsection (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.

Subsection (3) of section 142 requires an opportunity of hearing to the assessee where any material gathered on the basis of any enquiry under subsection (2) or any audit under subsection (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 inspection thereof to the petitioner. The proposal appears to have been trade in the note-sheet which is in the following term:

"Peerless General Finance and Investment Co. Ltd., C.C.I.T. II/HQ/ Asst-192/Special Audit 142(2A) of 1997-98.

Proposal for special audit under section 142(2A) in the case of Peerless General Finance and Investment Co. Ltd., has been sent by the C.I.T. WB-III, on the recommendation of the D. C.I.T. Special Range-13.

This is put up for kind-perusal of C.C.I.T.-II and for appointment of special auditor.

D. C.I.T./Splr-13Signature illegible

For consideration, please.

Signature illegible

10-3-1998

D.C.H.Q.

CCIT-II

Shri G. P. Agarwal FCA., is nominated

Signature illegible

16-3-1998.

Inform CIT-III, today.

Signature illegible

17-3-1998

ALIT HQ-II"

There cannot be any doubt whatsoever that if an order is passed under the said provision, the assessee is visited with civil consequences as not only he may have to pay a huge amount by way of fees of the special auditor as also the accountant but also has to face the difficulties in getting his books of account audited.

The formation of opinion by the Assessing Officer depends upon the nature and complexity of the account. The words "having regard to" employed in the said provision assumes significance in the matter of construction of the said provisions. The expression "having regard to" indicates that in exercising the power; regard must be had to the factors enumerated in the provision with all factors relevant for exercise of the power.

It is further well-settled that even where an authority is conferred with a power to exercise its discretion in a particular manner, such discretion has to be exercised bona fide and with a view to achieve the object laid down under the statute. No discretion is beyond the scope of judicial review. Reference in this connection may be made to Chaitnya Charan Das v. State of West Bengal, AIR 1995 Cal. 336.

A bare perusal of subsection (2A) of section 14.2 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 interest 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 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. Administrative decisions are required to be made in good faith on relevant considerations, See M. A. Rasheed v. State of Kerala, AIR 1974 SC 2249.

In CIT v. Mahindra and Mahindra Ltd., (1983) 144 ITR 225, the apex Court has held that application of mind is a must before such an action can be taken. The apex Court further held (page 237):

"By now, the parameters of the Court's power of judicial review of administrative or executive action or decision and the grounds on which the Court can interfere with the same are well-settled and it would be redundant to recapitulate the whole catena of decisions of this Court commencing from Barium Chemicals' case (1966) 36 Comp. Cas. 639 ; (1966) Suppl. SCR 311; on the point. Indisputably, it is a settled position that if the action or decision is perverse or is such that no reasonable, body of persons, properly informed, could come to or has been arrived at by the authority misdirecting itself by adopting a wrong approach or has been influenced by irrelevant or extraneous matters the Court would be justified in interfering with the same. This Court in one of its later decisions in Smt. Shalini Soni v. Union of India (1981) 1 SCR 962, 966; AIR 1981 SC 431, 434, has observed thus; 'It is an unwritten rule of the law, Constitutional and administrative, that whenever a decision making function is entrusted to the subjective satisfaction of a statutory functionary, there is an implicit obligation to apply his mind to pertinent end proximate matters only, eschewing the irrelevant and the remote'. "

In Minerva Mills Ltd. v. Union of India, AIR 1980 SC 1789, the apex Court in no unmistakable terms held that power of judicial review is a basic feature of the Constitution. This aspect of the matter has also been considered in L. Chandra Kumar v. Union of India (1997) 228 ITR 725 (SC) and Dr. Duryodhan Sahu v. Jitendra Kumar Mishra (1998) WBLR (SC) 405. Thus, administrative orders are not beyond the pale of judicial review.

The decision of the apex Court as noticed hereinbefore, make the legal position absolutely clear that no order whereby civil or evil consequence is visited on a citizen is beyond judicial review.

The factual matrix of the matter clearly shows that a proposal was made on March 10, 1998, and no prior approval there for was granted by the Chief Commissioner of Income-tax but merely one G. P. Agarwal was nominated.

An 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 provisions 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 pre-requisite for grant of previous approval and mechanically appointed Sri G. P. Agarwal, as a special auditor. The said order depicts a total non-application of mind on the part of the Assessing Officer as also the Chief Commissioner of Income-tax.

Furthermore, keeping in view the provisions of section 44AB of the Income-tax Act, provisions of section 142(2A) have to be strictly construed. The power under the aforementioned provisions should not be lightly exercised and must be based on objective criteria. The word "complexity" means the state or quality of being intricate or complex or that it is difficult to understand. However, anything which is difficult to understand need not necessarily be complex as the same would depend upon the capability of the Assessing Officer himself. He, therefore, in certain circumstances is enjoined with the duty to discuss the matter with the assessee or his representative. Furthermore, such opinion has to be formed in the proceeding itself.

No order can be passed on whims or caprice. No order can be passed on the ipse dixit of an officer. A cursory look at the books of account would not serve the purpose. In the instant case, by a notice dated November 18, 1997, received on November 24, 1997, respondent No. l requested the petitioner to appear before him on December 19, 1997. No hearing took place on the same day. The petitioner's contention that up till now no further notice had been issued and no hearing had taken place and he had no occasion to look into the accounts and/or examine the accounts of the petitioner in respect of the assessment years 1995-96 and 1996-97 is uncontroverted. How then did the Assessing Officer form an opinion about the complexity of the accounts? These facts clearly show a total non- application of mind on the part of the Assessing Officer in making a proposal. He appears to have made the said proposal mechanically which would be evident from his impugned order, dated March 20, 1998 as contained in Annexure "K" to the writ application.

A bare perusal of the said order would clearly show that he had taken into consideration several litigations between the petitioner and the Reserve Bank of India which related to a notification issued by the Reserve Bank of India limiting the operation of non-banking companies. Such litigations have got nothing to do with the orders of assessment. He had further jumped to the conclusion "it is also revealed that the assessee company has been concealing material fact 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 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 are required to verify the correctness of the claim of various allowances made by the assessee in respect of above mentioned points and to work out the income, allowances and disallowances correctly with reference to the books of account maintained by the assessee and in accordance of the provisions of Income-tax law."

The aforementioned function is that of the Assessing Officer and no that of the special auditor.

A business expenditure cannot also be a subject-matter of an audit. In CIT v. Walchand & Co. (Pvt.) Ltd. (1967) 65 ITR 381 (SC) and J. K. Woolen Manufacturers v. CIT (1969) 72 ITR 612 (SC), the apex Court has held that in applying the test of commercial expediency for determining whether an expenditure was wholly and exclusively laid out for the purpose of the business, reasonableness of the expenditure has to be adjudged from the point of view of the businessman and not of the Income-tax Department.

Without going into further details, a cursory glance at the directions made to the special auditor would show that most of them involve legal questions and the same might or might not have anything to do either with the complexity of the nature of accounts or the interests of the Revenue. A fishing or roving enquiry is not contemplated under the said provisions.

It is now a well-settled principle, of law that a prior approval is not an empty ritual. Such approval, therefore, was required to be granted only when the aforementioned proposals together 'with the books of account of the assessee were- produced before the Commissioner of Income-tax or the Chief Commissioner, as the case may be. The Assessing Officer as also the Chief Commissioner were statutorily required to apply their mind keeping in view the fact that the financial burden for appointment of such special auditor would be on the assessee.

In A. S. Sarma v. Union of India (1989) 175 ITR 254 (AP), Rama Rao, J., speaking for the Division Bench, held (page 261):

"The object of section 44AB is to have a detailed scan of accounts of assessee in higher income brackets so that the detection of evasion, if any, may yield attractive dividends regarding exigibility to tax. Further, the compulsory audit facilitates the assessing authority to get at a neat epitome of the transactions without the necessity of devoting considerable time to scrutiny of accounts and transactions: The audit report contributes 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 assessee 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(A) 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 assessee in higher income brackets to detect evasion of any and lubricating expeditious assessment. The power under section 142(2A) can be invoked when the assessing authority finds that the accounts are complicated and it must be stated that in view of section 44AB, the recourse to section 142(2A) is confined to assessee having turnover or transactions below Rs.40 lakhs or gross professional receipts below Rs.10 lakhs. The overlapping in certain situations does not render the provisions invalid or superfluous and the contentions are untenable."

It is correct to contend that this Court is denuded from exercising its jurisdiction of judicial review unless an order reaches its finality. Even in a proceedings under section 148 of the Income-tax Act, a prior approval of the Commissioner is necessary. Dealing with a similar situation in Chhugamal Rajpal v. S. P. Chliha (1971) 79 ITR 603 (SC), the apex Court considered the report of the Income-tax Officer and held that where the report has been filed with a conclusion that a case for investigation as to the truth of alleged transaction has been made out, the same cannot be said to be a reasoned notice issued under section 148 as, therefore, the Income-tax Officer must have reasons to believe that by reason of the omission or failure on the part of the assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of the assessee, the Income-tax Officer has, in consequence of information in his possession reason to believe that, income chargeable to tax has escaped assessment for any assessment year. The Income-tax Officer must arrive at a germane, (sic) for the purpose of section 148 of the Income-tax Act.

In this context a question arises as to whether the principles of natural justice have been excluded by reason of the said provision. As indicated hereinbefore, a proposal was made without placing the materials before the Chief Commissioner of Income-tax and an auditor has been appointed without any application of mind. Pursuant to or in furtherance of such previous approval, the Income-tax Officer passed an order which involves civil consequences to an assessee. Is he not entitled to some sort of opportunity for placing his case? The answer to the aforementioned question must be that he is so entitled at some 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 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 (page 626):

"Now, if this be the test of applicability of the doctrine of natural justice, there can be no distinction between a quasi judicial function and an administrative function for-this purpose. The aim of both administrative inquiry as well as quasi-judicial inquiry is to arrive at a just decision and if a rule of, natural justice is calculated to secure justice, or to put it negatively, to prevent miscarriage of justice, it is difficult to see why it should be applicable to quasi-judicial inquiry and not to administrative inquiry. It must logically apply to both. On what principle can distinction be made between one and the other? Can it be said that the requirement of 'fair play in action' is any the less in an administrative inquiry than a quasi judicial one? Sometimes an unjust decision in an administrative inquiry may have far more serious consequences than a decision in a quasi-judicial inquiry and hence the rules of natural justice must apply equally in an Administrative, inquiry which entails civil consequences."

In Assistant Collector of Customs and Superintendent, Preventive Service Customs v. Charan Das Malhotra, AIR 1972 SC 689, the apex Court while considering the provision of subsection (2) of section. 110 of the Customs Act, observed (page 692):

"There can be no doubt that the proviso to the second subsection of section 110 contemplates some sort of inquiry. The Collector, obviously, is expected not to pass extension orders mechanically or as a matter of routine but only on being satisfied that there exist facts which indicate that the investigation could not be completed for bona fide reasons within the time laid down in section 110(2), and that, therefore, extension of that period has become necessary. He cannot, therefore, extend the time unless he is satisfied on facts placed before him that there is a sufficient cause necessitating extension. The burden of proof in such an inquiry is clearly on the Customs Officer applying for extension and not on the person from whom the goods are seized. "

The apex Court further observed (page 694):

"Since the Collector has on facts to decide on the existence of a sufficient cause, although his decision as to sufficiency of materials before him may be within his exclusive jurisdiction, it is none the less difficult to comprehend how he can come to his determination unless, as the Division Bench of the High Court has said, he has before him the pros and cons of the question. An ex pane 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 of 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 Nicholson (India) Ltd. v. Union. of India, AIR 1997 Cal. 308; (1997) 3 ICC 621. In that decision it was noticed (page 318):

"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 the preliminary procedure so as to require fair consideration of both sides of the case. Nothing is more likely to conduce to good administration.

Apart from the rules of audi alteram partem, which means that no one shall be condemned unheard, corollary of which is that he should be given reasonable notice of the nature of the case to be met, there are other rules of common law to the same effect. (see Franklin v. Minister of Town and Country Planning (1948) AC 87; (1947).2 All. ER 289 (HL); John v. Rees (1970) 1 Ch. D 345. In case any person has acquired any right in any property or his right in being affected by the process he would be afforded reasonable opportunity of hearing and also to meet the cause against him.

In De Smith's Judicial Review of Administrative Action, 5th edition, at page 403, the learned authors have referred to various decisions while emphasising the need to comply with the, principles of natural justice in a case of forfeiture or deprivation of some right as also in the cases where applications are required to be filed as for example the cases of license."

For-the reasons aforementioned the impugned orders cannot be sustained. The proposal of the Income-tax Officer for nomination of a special auditor and the direction of the Income-tax Officer to the special auditor in terms of the order dated March 20, 1998, are quashed accordingly. The Assessing Officer, however, may proceed afresh in accordance with law in the light of the observations made hereinbefore.

This writ petition is- disposed of accordingly but 'without any order as to costs.

M. B. A/4157/FC,Order accordingly.