Landmark Cases on Assessment Procedure

Where books of account are rejected or not produced, the Assessing Officer may compute profits by applying a flat rate to the turnover or gross receipts. A best judgment assessment must have a nexus to the material on record and cannot be arbitrary or capricious.

A return of income filed in response to a notice under Section 153A of the Income-tax Act is to be considered as a return filed under Section 139 of the Act for all other provisions, including the purpose of penalty under Section 271(1)(c).

In proceedings challenging the reopening of an assessment, the High Court's role is limited to examining whether the conditions for reopening existed, not to make a final decision on the merits of the disclosure. A mistake in a notice, such as non-indication of the penalty limb, will not invalidate penalty proceedings if no prejudice is caused to the assessee and they are aware of the charges.

Section 2(22)(e) of the Income Tax Act applies if a shareholder has a substantial interest in a company that receives a loan, making the loan amount a deemed dividend.

Machinery provisions in tax statutes are interpreted like any other statute, aiming to uphold the statute's purpose rather than defeat it.

Approval under section 151 for reopening an assessment is valid if the Assessing Officer records reasons strictly as per law, and the assessee cannot raise this as an additional ground at a belated stage.

Reopening of assessment is valid when the Assessing Officer (AO) receives specific information from an investigation wing, applies their mind to it, and forms a reason to believe that income has escaped assessment. This is particularly true when the assessee has not filed a return in response to a notice under Section 148.

A notice issued under section 148 is valid if the assessee treats it as valid, responds to it in letter and spirit, and participates in the proceedings, given the application of section 292B.

Approval for reassessment proceedings under Section 151 requires the sanctioning authority to be satisfied with the reasons recorded by the Assessing Officer, but does not necessitate elaborate reasoning. The sanctioning authority exercises a mechanical approval if satisfied.

The case is cited for the proposition that various other decisions, including those concerning software consultants, Anil Corporation, and Sunbeam Auto Ltd., are relevant in a tax matter.

When a statute prescribes a specific manner for fulfilling an obligation, that obligation cannot be discharged in any other way. For an Assessing Officer to assume jurisdiction to reopen an assessment under sections 147 and 148 of the Income Tax Act, it is a prerequisite that the officer must have reasons to believe that income has escaped assessment.

The powers of the Commissioner (Appeals) to enhance an assessment are limited to the assessment reached through a particular process and cannot be extended to include income that ought to have been computed under different, prescribed procedures for escaped income from new sources.

An Assessing Officer must record their satisfaction that an assessee's claim of no expenditure for earning exempt income is not in accordance with the law before invoking Section 14A and Rule 8D for disallowance.

The case establishes that the Income Tax Appellate Tribunal (ITAT) has the power to confirm, reduce, or annul the assessment or penalty, as defined under Section 251(1) of the Income Tax Act, 1961. This power extends to all the matters which the Appellate Assistant Commissioner (AAC) could have considered.

For the Assessing Officer to assume jurisdiction under Section 153C of the Income Tax Act, 1961, the formation of satisfaction must establish a prima facie nexus with the seized material in the possession of the department. A mere mention of 'satisfied' in the order or note sheet is insufficient.

A body corporate is considered a juridical person and an artificial juridical person, distinct from natural persons or an association of persons. This status is recognized by the Income Tax Department, as indicated by the format of a Permanent Account Number (PAN).

The first proviso to section 147 of the Income Tax Act applies when an assessment is re-opened within four years from the end of the assessment year. If the assessment year is within four years, the conditions of the proviso are met.

Proceedings initiated by an officer lacking proper jurisdiction are invalid, even if the assessee filed their return with a different officer.

The limitation period for passing an assessment order under Section 153 of the Income Tax Act prevails over the specific time restriction for passing a final order under Section 144C(13).

The Income Tax Appellate Tribunal (ITAT) can adjudicate a fresh claim raised for the first time before it, provided it is permissible under the law.

A jurisdictional defect cannot be rectified by a corrigendum, and mistakes in assessment orders must be faced by the concerned party.

If an Assessing Officer fails to dispose of objections filed by an assessee regarding reopening of assessment, the subsequent assessment order is invalid.

An appellant can raise an additional ground involving legal issues before the Tribunal, provided all the necessary facts are on record. This allows for the determination of the correct taxable income.

Once an addition made based on original reasons recorded for reopening is deleted, other additions not part of those original reasons cannot be sustained.

Assessment proceedings are void ab initio if initiated by an Assessing Officer lacking jurisdiction. This jurisdictional defect can be raised at any stage, even in collateral proceedings or during execution.

Punctuation marks in a statute are subordinate to the clear meaning of the statutory provision and cannot control it.

The assessee has the choice of accounting method, provided it is followed regularly, and the department must accept this choice unless the AO can demonstrate that the true income cannot be ascertained.

Statutory interpretation requires adhering to the plain meaning of the words used by the legislature to discern legislative intent, especially when the meaning is unambiguous.

The CIT(A) was correct in deleting an addition made by the AO when the circumstances and facts of the case warranted it, especially when comparing different types of business activities.

Where circumstances in a case provoke an enquiry, the Assessing Officer (AO) cannot remain passive. If the Tribunal substitutes its own reasons for those required by the AO, it should remand the matter back to the AO.

Exemption under section 54 is allowable where the assessee purchased a new property before the extended due date of filing the return as per section 139(4). Section 139(4) is a proviso to section 139(1) providing an extension for filing returns.

The duty to disclose material facts necessary for assessment, fully and truly, is confined by Explanation 1 to the relevant section. This principle applies across various provisions of the Income-tax Act.

The court's decision in Video Electronics Ltd. v. Joint CIT (2013) 353 ITR 158 is cited as authority in various subsequent judgments, indicating its relevance in income tax law discussions.

A High Court decision remains valid even if a later Supreme Court decision addresses a similar, but not identical, legal issue. A subsequent decision by a higher court does not automatically nullify a prior decision from a lower court unless the ratio decidendi is directly in conflict.

A sanction granted under section 151(2) is not rendered invalid merely because the sanctioning authority did not explicitly record its satisfaction in writing, provided the reasons for seeking sanction are unassailable.

Failure by the Assessing Officer to pass a draft assessment order under section 144C(1) before passing the final assessment order vitiates the entire proceeding, making the final order without jurisdiction, null, void, and unenforceable. This procedural lapse is not a mere irregularity but an illegality.

The structured formula in Section 163A for calculating compensation in motor accident cases, as enforced by the second schedule, has been criticized by the Supreme Court for containing errors and defects.

The Assessing Officer has a duty to grant benefits and reliefs during assessment, even if they are not claimed by the assessee in their return of income.

The ITAT decision in Chemplast Sanmar Ltd. v. DCIT is authority for the proposition that no interference is called for in an impugned order when no contrary decision has been placed on record.

The Assessing Officer must record reasons to disagree with the assessee's claim of incurring no expenditure for exempt income, as required by Section 14A and Rule 8D.

The rule of consistency in tax proceedings, an exception to the principle that each assessment year is a separate unit, is well-recognized and should not be ignored.

Returns filed pursuant to a notice under section 153A are to be treated as returns filed under section 139(1) by virtue of section 153A(1)(a).

Income can only be taxed under a head specified in Section 14 of the Income-tax Act. The Act does not permit taxing income under any other head.

Disallowance under Section 14A cannot exceed the exempt income earned by the assessee. Even if interest expenditure is considered, it cannot be solely attributed to earning exempt dividend income as investors also consider potential capital gains.

If there is a change in the assessing officer, a new notice under section 143(2) should be issued, especially after a settlement application is filed or jurisdiction is transferred.

An order transferring a case is invalid if it is not communicated to the assessee. Non-communication of the transfer order is a serious infirmity.

An Assessing Officer must accept the fair market value of shares determined by the assessee using a prescribed method like DCF or NAV, and cannot substitute their own valuation, as Section 56(2)(viib) is a deeming provision not open to broad interpretation.

If a law mandates a specific procedure, it must be followed precisely. Failure to adhere to the prescribed manner invalidates the action.

Partition of Hindu Undivided Family (HUF) property does not require physical division by metes and bounds; disruption of HUF status can be achieved by any mode, allowing parties to enjoy their shares as they desire.