Natural justice requires prior notice before Income-tax prosecution, and failure to hear the proposed accused invalidates the proceedings.

Before launching prosecution for offences under sections 276C and 277 of the Income-tax Act, a proposed accused must be given a prior show-cause notice and an opportunity of hearing, because natural justice is read into statutory action carrying adverse civil consequences unless expressly excluded. The text states that the requirement applies particularly where prosecution is a discretionary option and compounding may also be available. On that reasoning, prosecution initiated without such notice is treated as invalid, and the stated conclusion is that the prosecution could not be sustained.

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Issues: Whether a person proposed to be prosecuted for offences under sections 276C and 277 of the Income-tax Act, 1961, is entitled to a show-cause notice and opportunity of hearing before initiation of prosecution, and whether absence of such notice vitiates the prosecution.

Analysis: The prosecution was launched without any prior show-cause notice. The Court preferred the view that, unless expressly excluded, the principles of natural justice are read into statutory ions having adverse civil consequences. Reliance was placed on the approach that the option to prosecute, especially where compounding is also contemplated, requires fair opportunity to the proposed accused before sanction and institution of criminal proceedings. The contrary view that no notice was necessary was not accepted.

Conclusion: The accused is entitled to notice before initiation of prosecution, and prosecution without such notice is bad.

Final Conclusion: The acquittal was upheld and the appeal was dismissed.

Ratio Decidendi: Where prosecution under the Income-tax Act is not expressly exempted from natural justice, a prior opportunity of hearing by way of show-cause notice must be afforded before initiating prosecution, and failure to do so invalidates the prosecution.

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