Landmark Cases on Assessment Procedure

An Income Tax Officer does not need to explicitly state that an assessee's method of accounting is improper; it is sufficient if the assessment order implies this finding, allowing for rejection of books and best judgment assessment.

In a best judgment assessment, an Assessing Officer can make a bona fide estimate of income based on a rational basis, even if there is no concrete proof, when the assessee fails to provide proper accounts or respond to notices.

Documents seized from employees cannot be relied upon for making additions in the hands of the assessee if the employee's actions were outside the scope of their employment.

When assessing officers have made findings, the appellate authorities can support the orders of the assessing officer and CIT(A) to the extent they favour the revenue, after considering rival contentions and judicial rulings.

The case is cited as authority for the proposition that tax authorities may inadvertently tax the same receipt twice. This can lead to an over-assessment of income for the assessee, and appeals on such grounds should be allowed.

Communications not conforming to a specified circular are invalid and deemed never issued. The mandatory requirement of mentioning a Document Identification Number (DIN) in penalty orders is upheld.

When an assessee follows the mercantile system of accounting, a statutory liability is incurred and becomes deductible at the time it is raised or accrued, irrespective of whether a dispute is raised later. An appellate authority admitting additional evidence must record reasons and provide an opportunity for the Assessing Officer to respond.

If an Assessing Officer reopens an assessment based on specific reasons but makes no additions related to those reasons, the AO cannot then make additions based on entirely different grounds not initially recorded. Such a reassessment order is unsustainable and liable to be quashed.

The Assessing Officer's power to make adjustments is restricted, particularly concerning actuarial valuations, and this power is bound by principles laid down by the Supreme Court.

The consistent treatment of a matter across different assessment years should not be changed without new facts justifying the change.

The Assessing Officer cannot substitute their own valuation for a valuation determined using projections and the DCF method, especially when the taxpayer has adopted these methods.

Machinery provisions in tax law are interpreted to fulfill legislative intent and make charges effective. When conflicting interpretations arise, the view that aligns with judicial conscience prevails.

An Assessing Officer lacks the power under Section 143(1)(a) to make prima facie adjustments of a controversial nature, as doing so can amount to overstepping jurisdiction and incorrectly determining income.

Disallowance of employees' contribution to ESI and PF made under section 143(1)(a) is valid if paid beyond the due date prescribed by the respective Acts, even if paid before the due date for filing the return of income under section 139(1).

A claim for deduction made via a note appended to the original return of income, along with a duly filed audit report in Form No. 10CCB certifying such claims, forms an integral part of the return and is admissible.

Central Board of Revenue (now CBDT) circulars that confer a benefit on the assessee are binding on income-tax officers and must be followed, even if they deviate from the strict interpretation of the law.

The Assessing Officer (AO) is not required to refer the valuation to the District Valuation Officer (DVO) if the AO has conducted a detailed inquiry and is satisfied with the cost of construction. Strict adherence to procedural requirements is essential; failure to comply with mandatory conditions renders the assessment based on such non-compliance invalid.

An assessment order and demand notices are set aside if the Assessing Officer fails to explain the absence of a mandatory endorsement as required by a circular, and the matter is remanded for fresh consideration.

Issuance of a notice under section 143(2) of the Income-tax Act is mandatory for assessments framed under sections 143(3) and 144, and also in reassessment proceedings under section 147. The absence of such a notice is a jurisdictional defect and not a procedural irregularity.

Grounds raised by the assessee against the validity of approval granted under section 153D of the Income Tax Act are dismissed.

The Assessing Officer cannot make additions based on an estimation of suppressed/unaccounted sales if there is no incriminating material or evidence seized that relates to the assessment year in question.

The Assessing Officer must provide an opportunity to the assessee to substantiate their claim regarding share allotment on premium, KYC, sources of funds, and creditworthiness before invoking Section 56(2)(viib).

The Commissioner (Appeals) cannot enhance an assessment by including income that was not considered by the Assessing Officer, either expressly or by necessary implication.

A notice issued under section 153C of the Income-tax Act, 1961, for assessment years beyond the ten-year period stipulated in the section is barred by limitation.

The approval required under Section 153D of the Income Tax Act is akin to the approval under Section 274(2), and the latter is considered a procedural requirement that does not affect the Assessing Officer's jurisdiction to levy penalty.

When a statutory power is conferred to be exercised in a particular manner, it must be exercised only in that manner, and not otherwise. A delegated power must be provided by statute, and a delegating authority cannot sub-delegate its powers unless expressly permitted by law.

The distinction between the passing of an order and its issuance/communication is a relevant consideration in tax proceedings.

The absence of Joint CIT's approval under section 274(2) does not inherently deprive the Assessing Officer of jurisdiction, and the matter can be decided afresh after obtaining the necessary approval.

Reasons recorded for reassessment must be based on material that has a live nexus with the belief of escapement of income.

The High Court concurs with the ITAT's decision to uphold the rejection of an assessee's books of account when they are not properly maintained.

The rule of consistency should not be applied to perpetuate an anomaly or a patently wrong view taken in the past.

Income-tax authorities are bound by the sales tax authorities' acceptance of an assessee's sales tax returns and cannot scrutinize them without a difference or variation in closing stock by the competent sales tax authority.

A reference to the Director of Valuation under section 142A is invalid if the Assessing Officer has not first rejected the books of account. The report of the Director of Valuation cannot form the basis for rejecting books of account if the rejection does not precede the reference.

An amending legislation's scope and retrospectivity are discussed, holding that vested rights exist in substantive law, but not in procedural law. Laws concerning forum and limitation are procedural, while the right of appeal is substantive.

Assessments under Sections 153A and 153C of the Income Tax Act are now affirmed by the Supreme Court, following the object and purpose of their insertion.

The Delhi High Court in CIT v. Lahsa Construction P. Ltd. is cited as a precedent by other courts and tribunals when deciding similar circumstances in favor of the assessee.

The legal position regarding assessments under sections 153A and 153C, as enunciated by various High Courts, has been affirmed by the Supreme Court.

An Assessing Officer who has allowed a deduction under section 80-IB cannot later withdraw or withhold it in a subsequent assessment year. The Assessing Officer is restricted from re-examining the question of eligibility for relief once it has been granted.

Rejection of books of account under Section 145(3) is not required for making additions to income that arise from transactions outside the books of account. Such additions can be made without disturbing the book results.

Non-compliance with notices issued under section 133(6) alone is not a sufficient basis to deny the genuineness of expenditure incurred by a company. The assessee's obligation extends to providing correct names and addresses of parties, not ensuring their response.

An addition towards the cost of construction of a building under section 153A, based solely on a valuation report from the DVO obtained under section 142A, is invalid if no incriminating material was found during the search.

An assessment framed by an officer not empowered to exercise the functions of an Assessing Officer is illegal and void ab initio, especially in the absence of a specific order under Section 120(4)(b) authorizing concurrent jurisdiction.

Where an assessee provides a computation of inadmissible expenditure under Section 14A, the Assessing Officer (AO) must discuss this computation in the assessment order. If the AO fails to do so, their disallowance based on Rule 8D may be considered unsustainable.

An appellate authority cannot re-characterize an addition made by the Assessing Officer under one section of the Act to another section without issuing a show cause notice. A reference to the Departmental Valuation Cell for determining investment in construction cannot be deemed to be without the authority of law.

Where an initial assessment is processed under section 143(1), the Assessing Officer is not required to find fresh tangible material to form a belief that income has escaped assessment for the purpose of reopening.

Amendments to Section 153C of the Income Tax Act do not affect substantive vested rights, and proceedings initiated in accordance with law after a show cause notice are valid.

A revised return cannot be used to rectify a deliberate omission or wilful mistake made in the original return.

A penalty notice under section 271(1)(c) is not invalid solely because the assessing officer failed to strike off the inappropriate portion of the notice describing the alleged offense, provided the assessee understood the nature of the offense.

A notice for reassessment issued in the name of a deceased person is void ab initio and cannot be validated by curative provisions like Section 292B or 292BB, as issuing notice to the correct person is a fundamental jurisdictional requirement.

The signing of an assessment order by the Assessing Officer is a mandatory requirement and failure to do so constitutes a curable procedural defect.