Landmark Cases on Assessment Procedure

This case is cited for the proposition that the High Court can consider decisions from other High Courts and the Supreme Court when deciding an appeal.

An assessment is invalid if it is made without a valid notice issued by the Assessing Officer with the correct jurisdiction. Jurisdiction assumed solely based on PAN data may not be valid.

An assessee is precluded from challenging the validity of assessment proceedings during penalty proceedings.

Tribunals can admit additional grounds of appeal if they are purely legal, and the facts are already on record and do not require fresh investigation.

An assessment order passed against a deceased person, even if initiated after death, is null and void and must be set aside, especially when the return was filed by the legal representative.

An Assessing Officer's failure to make inquiries during assessment proceedings is a ground for distinguishing a case from Bharat Overseas Bank v. CIT.

A return filed in response to a notice under Section 148 should be treated as a valid return, and an assessment made without issuing a notice under Section 143(2) is void.

Sanction for reassessment proceedings initiated after three years from the end of the relevant assessment year must be obtained from the Principal Commissioner of Income Tax (PCCIT) under Section 151(ii). The proviso to Section 151, inserted w.e.f. 01.04.2023, does not apply retrospectively to proceedings initiated before that date.

An addition to income cannot be made solely on the basis of income offered by an assessee before the Settlement Commission if there is no incriminating material. Information provided to the Settlement Commission, even if admitted under section 245D, can only be used for settlement purposes and not for other proceedings.

The share income of a partner, even if not forming part of their total income, is to be considered in determining the rate of income tax payable by the partner.

The Income Tax Appellate Tribunal (ITAT) is the final fact-finding authority. Disagreements between different benches of the ITAT on factual findings necessitate reference to a larger bench.

Additions made towards notional interest are not sustainable when the Assessing Officer does not state under what provisions of the Act such additions are being made.

The case is cited for the proposition that an assessment order can be considered invalid if the Assessing Officer has not conducted sufficient enquiries regarding the transaction of long-term capital gains, especially when the assessee's submissions fail to satisfy the Principal Commissioner of Income Tax.

The Commissioner of Income Tax (Appeals) has the power to consider evidence and make further inquiries, as long as the matter remains within the scope of the assessment and the appeal.

A revised return can only be filed under Section 139(5) if there is an omission or a wrong statement in the original return due to bona fide inadvertence or mistake.

An assessee can urge a legal ground that was not decided by the lower appellate authority, even without filing a separate appeal against that specific decision.

Assessments initiated without proper jurisdiction, such as under section 153C without the necessary foundation, are null and void and must be annulled.

Orders of the Income Tax Appellate Tribunal (ITAT) that rely on specific precedents, such as Genisys Integrating Systems India (P) Ltd. vs. DCIT, are binding on the Commissioner of Income Tax (Appeals) (CIT(A)).

The ratio decidendi, or the principle of law on which a decision is founded, has precedent value, not merely the decision itself.

Income is computed in accordance with the method of accounting regularly employed by the assessee, but this does not mean an adopted accounting system can never be changed.

The Assessing Officer has a duty to act as an investigator and not merely an adjudicator. The officer must investigate facts stated in the return when circumstances warrant further inquiry, even if the return appears to be in order.

Deemed dividend under section 2(22)(e) can be assessed only in the hands of a shareholder of the lender company, not in the hands of a non-shareholder. The expression 'shareholder' includes both registered and beneficial shareholders.

Service of notice at a place other than the assessee's registered address violates assessment procedure and renders the notice invalid.

Assessees have the right to raise legal objections and additional grounds at any stage of the proceedings, including before the Tribunal.

Section 53A of the Transfer of Property Act requires specific conditions to be met for a transferee to defend or protect possession under the doctrine of part performance. These include a written contract for transfer for consideration, signed by the transferor, with ascertainable terms, and part performance of the contract by the transferee, such as taking possession.

A reassessment is void if the Assessing Officer fails to issue a mandatory notice under Section 143(2) after a return is filed in pursuance of a Section 148 notice. Such failure renders scrutiny proceedings invalid.

Issuing notice under section 143(2) is a prerequisite for reassessment under section 147, and failure to issue this notice renders the reassessment invalid.

The satisfaction note must reveal incriminating material for the Assessing Officer to assume jurisdiction under Section 153C of the Income Tax Act, 1961. This material must be incriminating and relate to the assessment years being reopened.

Where substantial questions of law are answered against the revenue and in favour of the assessee, appeals are dismissed. The Karnataka High Court's decision in Karnataka Bank Ltd. v. Assistant Commissioner of Income-Tax, Circle 2(1) is cited as authority for answering substantial questions of law against the revenue.

Failure to dispose of assessee objections by passing separate speaking orders is a procedural irregularity, not rendering the assessment order a nullity, especially when an SLP challenging such a situation has been rejected.

A Tribunal cannot allow a party to change its stance by referring to new facts not pleaded or asserted before the Assessing Officer or Commissioner (Appeals).

An assessment order is invalid if a notice under section 143(2) was not issued, unless the assessee failed to file a return within the time specified in a notice under section 148, in which case the AO may treat the return as invalid and need not issue a notice under section 143(2).

Approval under Section 153D of the Income Tax Act is administrative in nature and does not require elaborate reasoning. The absence of detailed reasoning in the approval does not invalidate the assessment unless there is a complete lack of application of mind by the approving authority.

The word 'includes' in an interpretation clause can sometimes be restrictive, depending on the context, and may not always signify an enlargement of meaning.

Tax liability under a new provision of the Income Tax Act cannot be applied retrospectively to assessment years prior to the date the provision came into force. The date of accrual of income is relevant for determining which provision applies.

Reassessment proceedings are invalid if initiated merely on a change of opinion and without any failure on the part of the assessee to disclose material facts.

A notice issued under section 148A(b) of the Income Tax Act is vitiated if it is not accompanied by proper material, or if the information provided is incorrect. Furthermore, the submissions filed by the assessee in response to a section 148A(b) notice must be considered when passing an order under section 148A(d).

Where there is an apparent conflict between two independent provisions of law, the special provision must prevail.

When a notice is sent by registered post to the correct address, it is deemed to have been served at the time it would ordinarily be delivered, unless the contrary is proven by the addressee. This principle applies even if the notice is returned unserved.

A reference to the Valuation Officer under section 142A for valuation of assets cannot be made without rejection of books of account. However, if the valuation is made with regard to property, asset, or investment as stated in sections 69 and 69B, a reference under section 142A can be made without rejecting the books of account.

While the principle of res judicata does not strictly apply to income tax assessments, decisions in earlier years are not binding in subsequent years, there should be finality and certainty in tax litigation, and earlier decisions should be followed subject to limitations.

Each year's income tax assessment is generally final and binding only for that specific year, and a previous year's assessment does not govern subsequent years. While the strict rule of res judicata does not apply in income tax proceedings, the revenue cannot contradict its earlier stance in identical circumstances without demonstrated changed facts.

A reassessment order is bad in law if the Assessing Officer fails to dispose of the assessee's objections by way of a speaking order.

Profits earned on behalf of an association of persons (AOP) are taxable in the hands of the AOP, especially when the owners themselves would have faced chaos in their business if they claimed these profits directly.

Separate additions to income cannot be made by an Assessing Officer for the same investment if its source has already been subjected to tax, even if the addition is based on a statement recorded under Section 132(4).

Reassessment proceedings are vitiated if the Assessing Officer fails to provide the assessee with a copy of the reasons for reopening the assessment, despite a specific request.

CBDT circulars are binding on income-tax authorities. If an assessee's case is selected for scrutiny in violation of CBDT instructions, the assessee's contention may be acceptable.

Mesne profits decreed by a court are taxable income in the hands of the decree holder in the relevant assessment year they are charged to income-tax.

The assessment order merges into a subsequent order passed under Section 154 of the Act, rendering it unappealable before the CIT(A).