Section 142(3) — the law in short
What the courts have decided on section 142(3), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Sahara India (Firm) v CIT
Supreme CourtCuts both ways
The AO ordered a special audit of my books without hearing me first. Is that direction valid?
No. A direction under s.142(2A) carries serious civil consequences, so the assessee must be given a reasonable opportunity of being heard before it is issued, even though the section as it then stood said nothing about a hearing. The post-audit hearing under s.142(3) is no substitute, because it reaches only the audit material and not the validity of the direction.
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C. Vasantlal and Co v CIT
Supreme CourtHelps department
The Income-tax Officer examined witnesses behind my back and used their statements against me. Is that material evidence at all?
It can be, provided it is disclosed to you. The Supreme Court held that the Income-tax Officer is not bound by the technical rules of the law of evidence and may collect material to facilitate assessment even by private enquiry, but if he wishes to use it he must inform the assessee of the material and give an adequate opportunity to explain it. Here nothing showed the material had been withheld, and in any event the Appellate Assistant Commissioner had summoned the two witnesses and allowed cross-examination. The Tribunal was therefore free to rely on their earlier statements and to disbelieve the later ones.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.
