Landmark Cases on Assessment Procedure

An assessment order passed by an officer not authorized under Section 127, or without proper authorization, is void. The Additional Commissioner is an Assessing Officer only if directed under Section 2(7A) read with other relevant provisions.

Orders of the Jurisdictional ITAT are binding on subordinate authorities.

A case concerning the jurisdiction of an Additional Commissioner, it holds that an assessment order passed by an Additional Commissioner is without jurisdiction if there is no specific order under Section 127 of the Act transferring the case to that officer.

Reassessment proceedings are liable to be quashed if the Assessing Officer relies solely on third-party information without independently applying their mind to the facts and forming a belief of escapement of income.

An assessment order framed in violation of the mandatory prescriptions of Section 144C is a nullity. This principle is supported by numerous judicial decisions, including JCB India Ltd. v. Dy. CIT.

The determination of tax liability and the issue of a demand notice are sufficient for the completion of an assessment; service of the demand notice on the assessee is not required.

Assessment orders based on defective notices under Section 147 read with Section 148 cannot be sustained. The issuance of a valid notice under Section 143(2) is also crucial before framing an assessment order, particularly when a return has been filed.

When an assessee surrenders undisclosed income during a search action, it is not mandatory to charge tax at the rate prescribed under section 115BBE of the Income Tax Act.

An Assessing Officer cannot refer a case to the Director of Valuation under section 142A without first rejecting the assessee's books of account.

An assessee is permitted to correct or modify a deduction once claimed under a particular section, as the Income Tax Act does not debar such modifications. The Assessing Officer retains the authority to examine the deduction claim and make necessary additions or disallowances.

The Income Tax Appellate Tribunal (ITAT) considers arguments regarding additions made under Section 68 of the Income Tax Act, concerning loans and share application money, and arguments against such additions on merits. The tribunal's decisions often rely on the findings of lower authorities, including the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) (CIT(A)).

A special bench of the ITAT held that an assessee can claim an enhanced deduction under Section 153A proceedings, which are comparable to Sections 147/148, even if the original return was filed under Section 139(1). This is because Section 153A proceedings provide an opportunity for making fresh claims.

The Assessing Officer can apply Rule 8D for disallowance under Section 14A only if they are not satisfied with the correctness of the assessee's claim regarding expenditure in relation to exempt income, after considering the assessee's accounts. Invocation of Rule 8D is not automatic.

Reassessment proceedings initiated based on a 'change of opinion' regarding the same facts are impermissible.

An adjustment under Section 143(1)(a) of the Income-tax Act cannot be made without providing the assessee an opportunity to respond to the exact grounds for disallowance, especially when different reasons are given at the adjustment and final intimation stages.

The case establishes that an assessment order under Section 143(3) read with Section 144 of the Income Tax Act, 1961, cannot be challenged on the grounds of an invalid notice under Section 142(1) when the assessee has not raised such a contention before the assessing officer.

An assessment order is a quasi-judicial order, and it is deemed to have been made on the date it purports to have been made, not necessarily when it is communicated to the assessee. The requirement is for the order to be made within the prescribed period, not communicated within it.

Incriminating material seized during a search must pertain to the assessment years in question for the Assessing Officer to validly assume jurisdiction to issue a notice under Section 153C of the Income Tax Act.

An assessee's objection to an Income Tax Officer's jurisdiction, if it concerns the assumption of power in contravention of CBDT instructions rather than a dispute over territorial limits, means Section 124(3) does not aid the revenue.

A taxation statute must be strictly construed, and there is no room for equity in tax provisions.

An assessee cannot claim deductions or expenses in a Section 153A assessment if they were not claimed in the original return, especially when the original assessment was already completed.

An Assessing Officer can estimate higher profits than returned if the assessee fails to justify their figures, but must disclose the basis of computation and provide a speaking order.

A question of law is substantial if it is debatable, not previously settled by law or binding precedent, and possesses substance, importance, or considerable worth. This is a prerequisite for an appeal under Section 260A.

An Assessing Officer cannot make additions to income that were not part of the original reasons for reopening the assessment.

An Assessing Officer can make additions on issues that come to notice during reassessment proceedings, even if no addition is made on the original issue that formed the basis for reopening.

The Assessing Officer cannot reopen an assessment merely because they failed to apply their mind to the facts and raise objections in the original assessment. The assessee should not suffer consequences for the AO's lapse.

Decisions from different High Courts on similar issues may be distinguishable on facts and law.

Section 2(22)(e) does not apply to transactions between a shareholder and a company that are in the nature of a current account with reciprocal money transfers, rather than loans or deposits.

An amending act can be purely clarificatory, intended to clarify a meaning already implicit in the principal Act. The word 'and' can be interpreted as 'or' in statutory interpretation if it leads to unintended results.

Section 292BB of the Income-tax Act, 1961, concerning service of notice, does not apply to the issuance of a mandatory notice under section 143(2) within the statutory period, and does not cure defects or enlarge the time limit for such issuance.

Reassessment proceedings initiated after four years from the end of the relevant assessment year require sanction from the Joint Commissioner, not merely a Commissioner, to be valid.

Where the Assessing Officer relies on the statement made by the assessee before the Settlement Commission, such reliance is permissible even if the Settlement Commission does not pass an order under section 245D(4).

A decree passed by a court that lacks inherent jurisdiction is considered void ab initio and cannot be validated even by the consent of the parties.

An assessment order that relies solely on affidavits and statements obtained under section 131(1A) without independent examination by the Assessing Officer is invalid. The Assessing Officer must provide positive material and evidence to prove their case.

An assessment order passed without giving effect to the binding directions of the Dispute Resolution Panel (DRP) under section 144C(10) within the stipulated time under section 144C(13) is null and void and must be set aside.

The Assessing Officer (AO) must conduct independent verification and inquiries before making an assessment, and failure to do so can render the assessment order erroneous and prejudicial to the revenue. When assessing long-term capital gains, the AO must examine the financials of the company whose shares were allegedly inflated and consider the pattern of share price increases and subsequent falls.

If parties to an agreement understand its terms in a particular way and act accordingly, the Assessing Officer cannot impose a different interpretation for taxation purposes.

The term 'allotment of shares' signifies the appropriation of previously unappropriated capital, and shares only come into existence upon such allotment. This principle is relevant for understanding the issuance of bonus shares.

An Assessing Officer is justified in referring a case to the Valuation Officer (DVO) under Section 142A if the cost of construction shown in the books of account is not proper or maintained improperly, especially when the assessee surrenders an amount during a search due to unaccounted funds used for construction.

The Commissioner of Income Tax (Appeals) cannot enhance an assessment beyond the subject matter of the original assessment when the assessee objects to the validity of the assessment.

Decisions of other Coordinate Benches allowing provisions for standard assets are relevant when considering similar issues, even if a specific bench affirmed the AO's view.

Reassessment proceedings are unsustainable if the reasons recorded for reopening are based on a mistaken factual premise, such as the incorrect assertion that no return of income was filed when one was actually filed.

A purely legal ground can be raised at any stage of the proceedings, including before the Income Tax Appellate Tribunal, as long as it does not require fresh evidence or investigation.

The word 'shall' in a statutory provision may not always convey a mandatory intent, and its interpretation depends on the context of the provision as a whole.

Where a provision of a taxing statute is ambiguous and admits of two interpretations, the interpretation that is favourable to the assessee must be adopted.

For an assessee to be considered in default, a notice must be served in one of the modes provided by the Income Tax Act. Acquiring knowledge of a notice's issuance is not a substitute for proper service.

The assessment officer must provide a reasoned order when rejecting books of account and determining income under Section 145(3) of the Income Tax Act.

A purchasing dealer is entitled to rely on a selling dealer's certificate of registration, and retrospective cancellation of that certificate cannot affect a person who acted on its strength when it was current.

The Tribunal can entertain a new ground before it if the legal position on an issue changes during appellate proceedings due to subsequent judgments of higher authorities, even if not raised before the lower authorities.