Landmark Cases on Assessment Procedure

Questions of law decided against the Revenue are covered by CIT v. United India Insurance Co. [2019] 111 taxmann.com 217 (Madras). An order remitting back to the Tribunal does not suffer from an error apparent on the face of the record in a review application.

Section 292BB of the Income Tax Act, introduced by the Finance Act, 2008, has prospective effect and does not apply retrospectively.

An Assessing Officer cannot travel beyond the scope of issues selected for limited scrutiny during the assessment proceedings.

Assessment and penalty proceedings initiated against a deceased assessee are invalid if not made in the name of their legal heir.

Proceedings under Sections 148-A and 148 should not be issued in a faceless manner until the Supreme Court decides pending SLPs, or the Income Tax Department implements remedial steps.

The case is cited as authority for the assessment of Hindu Undivided Family (HUF) property, and how such property should be assessed, following CBDT guidelines.

Income-tax authorities are of co-ordinate jurisdiction, and the Act does not prescribe their respective jurisdictions or functions, leaving it to be decided by the Board or Commissioner. Allocation of jurisdiction is for administrative convenience and does not invalidate actions due to defects in its exercise.

Disclosure of material facts during assessment proceedings includes details beyond the return, such as explanations and additional information furnished. A taxpayer must demonstrate full and true disclosure to prevent reassessment.

Income should be taxed only once in the hands of the rightful assessee; substantive assessments cannot be made simultaneously on multiple legal heirs.

The amended Section 151 of the Income Tax Act, 1961, rather than the pre-amended version, applies when determining the 'specified authority' required for sanction under Section 148A and Section 148.

A tax demand subsists even if the assessment order is set aside, and the date of the original assessment remains the relevant date. This principle clarifies that tax payment methods do not alter the fundamental liability to pay tax based on an assessment order.

The court allows reliance on decisions like CIT vs. Geo Industries and Insecticides (1) Pvt Ltd when arguing for the Tribunal's power to consider fresh claims, particularly when other High Courts have permitted such considerations in revised computations.

The Bombay High Court noted the newly inserted Section 145A of the Income Tax Act, 1961, and the subsequent Guidance Note issued by the Institute of Chartered Accountants of India on Tax Audit under Section 44AB.

A mere lack of specific mention of an examination or verification of an issue in the assessment order does not automatically imply a lack of application of mind by the Assessing Officer on that issue.

The recording of satisfaction by the Assessing Officer (AO) of the searched person is a mandatory prerequisite for initiating proceedings under section 153C of the Income-tax Act, 1961.

Intimations under Section 143(1) of the Income Tax Act, 1961, are invalid and cannot be enforced if they have not been communicated to the assessee. Communication is a mandatory requirement for the validity of such intimations.

When the language of a taxing statute is clear and precise, it should be interpreted literally without seeking additional meaning.

A joint application or proceeding can be decided by a majority of its members, rather than requiring unanimous agreement.

A liability does not cease to be a debt merely because it is barred by limitation, and therefore, such a liability cannot be treated as income under section 41(1) of the Income Tax Act solely on grounds of limitation.

When assessing income under the mercantile system, the Income Tax Officer must determine the accounting system used by the assessee and the date the right to receive income accrued, to ascertain the correct accounting year for inclusion.

Income-tax assessments made to the best of the Assessing Officer's judgment must be legal and regular, not arbitrary, vague, or fanciful. The assessment must be based on reason and justice, following established legal principles rather than private opinion or whim.

Judgments in M/s. Shree Bhagwati Steel Rolling Mills and M/s. Fibre Boards have overruled earlier decisions, preventing assessees from relying on those overruled precedents.

A payment by a company to an assessee is a loan, and therefore potentially a deemed dividend, only if the company becomes a creditor of the assessee for that amount at the time of payment. If the company is already indebted to the assessee, the payment is merely a repayment of an existing debt.

An omission or defect in serving a notice required by procedural provisions does not invalidate a tax liability created by substantive charging sections, making the assessment irregular but not void.

Orders passed under section 148A(d) and subsequent reassessment proceedings are vitiated if the Assessing Officer fails to provide a proper opportunity of hearing to the assessee before issuing the notice.

When a statute prescribes a specific method for exercising a power, that power must be exercised only in the manner prescribed.

An assessee is entitled to the adjustment of seized cash towards advance tax liability from the date of making the application for such adjustment.

Section 153C proceedings can only be initiated for assessment years in which incriminating material is found and such material relates to the determination of total income for those years.

When an order under section 143(3) is passed, a prior order under section 143(1) ceases to be operative and merges with the final order, unless the legislature expressly provides otherwise.

A notice issued to a deceased assessee or their legal representatives beyond the period of limitation is without jurisdiction and cannot be saved by Section 292B.

Decisions of the jurisdictional High Court are binding on subordinate officers. Retrospective amendments cannot be used to make additions by way of adjustment and intimation under section 143(1).

An Assessing Officer cannot accept or entertain a revised claim in the absence of a revised return of income.

Dismissal of a Special Leave Petition (SLP) in limine by the Supreme Court does not affirm the reasoning of the lower court's judgment or cause the impugned judgment to merge with the dismissal order. It signifies that the court found the case not worth examining.

An assessment or reassessment proceeding initiated or continued against a deceased person after their demise is illegal and void ab initio, as no valid notice can be issued to a dead individual.

No addition can be made on the basis of technical electricity consumption formulas to estimate suppressed production, and unexplained investment in unaccounted purchases cannot be sustained if deleted by the CIT(A) and there is no change in facts.

The Supreme Court rejects revenue's appeal in a case concerning the assessment of income, indicating a procedural aspect or a specific issue of law was affirmed. The case involves scrutiny assessments under Section 143(2) and potentially reassessment under Sections 147/148.

Proceedings under section 148, including the notice issued, are invalid and void ab initio if reassessment is not initiated under the correct section, such as section 153C, when the basis for reopening arises from information found during a search on a third party.

An assessment order passed without a valid order of transfer under Section 120(4)(b) of the Income Tax Act, 1961, is void and without jurisdiction.

Assessments are invalid if framed without proper orders under section 120(4)(b) and section 127 of the Income-tax Act.

Orders under section 148A(d) are subject to appeal and the Supreme Court has upheld High Court decisions that considered them appealable. The dismissal of SLPs by the Supreme Court in related cases indicates a settled position on this matter.

If assessment proceedings are wrongly initiated, the court can still entertain the action, and principles of estoppel, waiver, or res judicata do not prevent this.

An assessment made based on an assessee's admission that a particular income is liable to be included in its total income is valid.

A person cannot be taxed by implication; charging sections must be interpreted strictly and must clearly bring the assessee within their ambit.

Additions made purely on a notional basis, without supporting evidence, are liable to be deleted.

An assessee waives the right to object to the Assessing Officer's jurisdiction if they participate in proceedings without challenging the notices issued.

An addition to income cannot be justified solely by relying on a valuation report. The Assessing Officer must apply their mind to the information and form a belief before reopening an assessment, as a DVO's report is not information per se for reopening under Section 147.

Failure by the Assessing Officer (AO) to dispose of objections filed by the assessee against the reopening of assessment under Section 147 of the Income-tax Act, 1961, renders the reassessment order invalid and affects the AO's jurisdiction.

A consortium formed for bidding on an infrastructure contract is not an 'association of persons' for tax purposes if it acts as a pass-through entity.

An Assessing Officer (AO) must prepare a satisfaction note before transmitting records to another AO who has jurisdiction over a different person, as this is a mandatory prerequisite for assuming jurisdiction under Section 153C of the Income Tax Act.

An Assistant Commissioner of Income Tax (ACIT) can perform the functions and exercise the powers of an Assessing Officer only if specifically directed under section 120(4)(b) of the Income Tax Act.