Landmark Income Tax Cases

An appellate authority can admit additional grounds of appeal, even if not raised before, if they are purely legal in nature and all relevant facts for their adjudication are already on record. These grounds can include challenging jurisdictional issues.

Delay in filing appeals, when supported by sufficient or justifiable cause, should be condoned with a liberal approach to ensure substantial justice. This principle prioritizes the cause of justice over mere technicalities.

In a search assessment under Section 153A, additions can only be made for completed or non-abated assessment years if incriminating material relevant to those years is found during the search, although notice under Section 153A(1) is mandatorily issued for six assessment years preceding the search.

For revision under Section 263, the Assessing Officer's order must be both erroneous and prejudicial to the interests of the revenue; if either condition is not met, the revisionary jurisdiction cannot be invoked. An order is not erroneous merely because the Assessing Officer did not record the details of enquiries conducted, provided due enquiries were made.

When two equally plausible interpretations of a taxing provision are possible, or when conflicting views exist from non-jurisdictional High Courts, the interpretation that favors the assessee must be adopted.

A penalty notice issued under section 274 read with section 271(1)(c) is invalid if it fails to specify whether the penalty proceedings are initiated for concealment of income or for furnishing inaccurate particulars of income. This non-specification vitiates the penalty proceedings.

An appeal before the Income Tax Appellate Tribunal can be dismissed for non-prosecution or treated as unadmitted when the appellant fails to appear, cooperate, or show diligence, in accordance with Rule 19(2) of the Income-tax (Appellate Tribunal) Rules. The law aids the vigilant, not those who sleep on their rights.

When an assessee has sufficient interest-free funds available, and investments are made from mixed funds, it is presumed that the investments are made from the interest-free funds, thus precluding the disallowance of interest expenditure.

Penalty under Section 271(1)(c) for furnishing inaccurate particulars or concealment of income is not automatically leviable if the assessee has made a full disclosure of all particulars and the addition or disallowance arises from a difference of opinion.

A court or tribunal is not bound to answer a reference or adjudicate an appeal on its merits if the party at whose instance the proceeding is made fails to appear at the hearing or take necessary steps for its proper conduct.

The Revenue is entitled to look behind the apparent form of a transaction to discover its true nature, applying the test of human probabilities and surrounding circumstances. If transactions defy logic or are unnatural, they can be treated as bogus, even if supported by some documentation, especially in cases of cash credits or unexplained investments.

An assessee cannot raise a new claim or a claim not made in the original or revised return of income for the first time directly before the Assessing Officer during assessment proceedings.

In Section 153A proceedings, the scope of assessment extends to abated proceedings, enabling an assessee to raise fresh legal claims that could have been made in regular assessment proceedings.

The amendment to Section 200A, enabling the levy of late filing fees under Section 234E, applies prospectively from June 1, 2015. Therefore, no fee under Section 234E can be levied via an intimation issued under Section 200A for periods prior to this date.

The fee under Section 234E for late filing of TDS/TCS statements cannot be levied retrospectively by processing an intimation under Section 200A for defaults occurring before the amendment allowing such processing.

The principle of consistency dictates that if the facts and circumstances remain unchanged across assessment years, the revenue cannot adopt a divergent or adverse position on an issue that was previously allowed after due deliberation.

An appeal entails not only filing the memorandum of appeal but also actively and diligently pursuing it. Failure by the appellant to comply with notices and participate effectively in the appellate proceedings may lead to the appeal being decided ex-parte or dismissed.

An Assessing Officer cannot initiate reassessment proceedings under Section 147 of the Income Tax Act based on a mere change of opinion. Reassessment is permissible only when there is fresh tangible material leading to the belief of income escapement, not merely a review of existing facts.

Employee contributions to PF and ESIC, deposited beyond the due date under the respective Acts but within the due date for filing the income tax return under Section 139(1), are allowable deductions under Section 36(1)(va). Such disallowance cannot be made during processing under Section 143(1).

For assessments under Section 153C, a notice is legally unsustainable if there is no incriminating material correlated to the specific assessment years for which reassessment is sought.

Tax authorities must judge evidence using the test of human probabilities and consider the apparent as real until there are reasons to believe it is not. They can rely on circumstantial evidence and the preponderance of probabilities to determine the genuineness of transactions.

A disallowance under Section 14A of the Income-tax Act, 1961, for expenditure incurred in relation to exempt income cannot be made if the assessee has not earned any exempt income during the relevant previous year.

Disallowance under Section 14A is not automatic and requires the Assessing Officer to record satisfaction before applying Rule 8D. Only investments yielding exempt income are considered for disallowance, irrespective of their strategic nature.

Taxing statutes are presumed to operate prospectively unless a clear contrary intention for retrospective application is evident. The law applicable for determining tax liability is that which stands on the first day of the assessment year, following the principle that law looks forward, not backward (lex prospicit non respicit).

When purchases are unproved or presumed to be from the grey market, the entire amount of such purchases should not be disallowed; instead, income can be estimated by applying a reasonable gross profit rate to the unaccounted sales or turnover, especially in assessments arising from search proceedings involving seized documents.

Interest paid on borrowed funds cannot be disallowed merely because the assessee made interest-free advances, provided those advances were made for business purposes and commercial expediency. The Revenue cannot dictate a businessman's commercial decisions, but the assessee bears the onus to prove the business expediency.

Employee contributions to provident fund and ESI deposited by an employer beyond the due dates prescribed under the respective special Acts are not allowable as a deduction under section 36(1)(va) of the Income-tax Act, 1961. Such disallowance can be made during processing under section 143(1).

The Commissioner of Income Tax (Appeals) possesses co-terminus powers with the Assessing Officer and can direct the Assessing Officer to perform actions he failed to do, but cannot introduce a new source of income in the assessment. The appellate assessment must be confined to the items of income that were the subject matter of the original assessment.

An adverse finding based on third-party statements or documents is unsustainable if the assessee is denied the opportunity to cross-examine the witnesses. The denial of cross-examination violates natural justice and renders the statements unusable against the assessee.

When a notice under Section 148 of the Income Tax Act is issued, the Assessing Officer is bound to furnish reasons for reopening upon the assessee's request and must dispose of the assessee's objections to the notice by passing a speaking order.