Landmark Cases on Assessment Procedure

Disallowance under section 14A read with Rule 8D cannot be made arbitrarily without the Assessing Officer recording specific reasons for rejecting the assessee's claim and without examining the assessee's books of account. The Assessing Officer cannot mechanically apply Rule 8D.

A draft assessment order issued to an 'ineligible assessee' invalidates the entire assessment process and all subsequent proceedings.

Section 127(2)(a) of the Income-tax Act, 1961 requires an agreement between the Commissioners of the two jurisdictions when transferring a case between Assessing Officers not subordinate to the same Commissioner.

Cases of persons with over ten years of continuous service as of April 10, 2006, must be considered for regularization.

When an assessment is reopened under Section 147 beyond four years from the end of the relevant assessment year, the Assessing Officer must have a live link between the reasons for reopening and the formation of their belief, and must find that the assessee failed to disclose fully and truly all material facts.

The Commissioner (Appeals) can pass an ex-parte assessment order under Section 251 read with Section 144 of the Income-tax Act, 1961, if the assessee fails to attend assessment proceedings or produce documents despite multiple notices and adjournments.

The dismissal of a Special Leave Petition (SLP) by the Supreme Court does not, in itself, constitute a judgment affirming the High Court's decision. It signifies that the Supreme Court did not find sufficient grounds to interfere with the High Court's findings.

The Income-tax Officer must have material to support a finding that income cannot be properly deduced from the assessee's accounting method before invoking Section 145(3) or estimating income. Merely not maintaining a stock register or finding book profits low may not be sufficient grounds.

Proceedings initiated illegally and without jurisdiction are nullities, as a jurisdictional issue goes to the root of the matter. Such defects are not curable.

The Assessing Officer must follow proper procedure when acting upon loose sheets or estimates found during a survey or search, as per established case law.

The amount treated as deemed dividend under section 2(22)(e) is calculated after deducting repayments made during the year from the amount received.

A quasi-judicial authority like an Income Tax Officer cannot pass an assessment order dictated by a higher authority, as doing so renders the order illegal and without jurisdiction. While Assessing Officers must follow statutory circulars, they cannot surrender their independent quasi-judicial function to higher authorities.

The assessment authority cannot disallow expenses solely because documentation was not provided to them directly, especially if it was later made available to the Tribunal and establishes the genuineness of transactions.

Section 292BB of the Income Tax Act is a rule of evidence concerning the service of notice, not the mandatory issuance of a notice under Section 143(2), which confers jurisdiction on the Assessing Officer.

Reassessment proceedings are impermissible if the Assessing Officer seeks to examine another facet of an issue already examined in the original assessment. Dismissal of the department's SLP by the Supreme Court upholds this principle.

Reopening of assessment is valid when the Assessing Officer takes a view that is not a permissible one at the time of original proceedings; a wrong application of law can be changed. A change of opinion defence for the assessee is only valid when the Assessing Officer has taken one of the permissible views during the original assessment.

An assessee is not precluded from canvassing a jurisdictional issue at a later stage, even if it was not raised at the first appellate stage.

A notice issued under section 142(1) of the Income Tax Act and the explanations furnished by the assessee in response are significant in tax proceedings.

Approval for issuing a notice under section 148, based on a standard phrase indicating it's a fit case, does not constitute an independent application of mind and is flawed in law.

A completed assessment under Section 143(3) cannot be disturbed under Section 153A if there were no pending assessments at the time of the search. Similarly, if there was no regular assessment under Section 143(3) prior to the search, an assessment notice under Section 153A cannot equate an intimation under Section 143(1) to a regular assessment.

A return of income filed in response to a notice under section 148 must be treated as a valid return under section 139, and the assessment must then proceed under section 143 or 144 after issuing a mandatory notice under section 143(2) within the prescribed time.

An assessment order passed beyond one month from the end of the month in which the Dispute Resolution Panel's directions were received is barred by limitation and must be set aside.

Where a co-ordinate bench of the Tribunal has decided an issue in favour of the assessee in its own case for other assessment years, the same principle applies to the current assessment year.

When a valid revised return is filed, it completely replaces the original return for all assessment purposes. The Assessing Officer must consider only the revised return.

The non-issuance of a notice under Section 143(2) of the Income Tax Act prior to the completion of reassessment proceedings does not invalidate the reassessment.

Section 124 of the Income Tax Act is confined solely to territorial jurisdiction and does not encompass inherent jurisdiction for passing assessment orders. The reasons provided by tax authorities must be cogent, germane, and have a nexus to the facts.

An income tax authority cannot dictate the method of accounting an assessee must use; the assessee has the right to adopt any recognized method, and income will be computed accordingly.

The Tribunal's decision in the assessee's own case on a specific issue is binding on the Revenue for subsequent assessment years, especially when the assessee has availed the Vivad se Vishwas scheme and appeals have been dismissed on similar grounds.

An agency relationship exists when one person is authorized to create legal relationships between a principal and a third party, making the principal answerable to third parties.

An assessee's consent to an addition by the Assessing Officer (AO) does not validate the addition if it is not made as per law. The assessee retains the right to appeal even after agreeing to an addition before the AO, and new evidence discovered later must be examined by the AO.

The Income Tax Appellate Tribunal (ITAT) cannot enhance an assessment or take back a benefit granted by the Assessing Officer.

Assessment orders passed without following due process of law are liable to be set aside. If an assessment order is quashed, other issues raised on merits become academic.

An assessee can claim a benefit they are entitled to, even if they initially failed to do so in their original return, by filing a revised return or claiming it at a later stage of the assessment proceedings.

Payment by a payer company to a recipient company with a common shareholder holding 10% or more voting power is deemed a dividend only if the benefit from the transaction is ultimately used for the shareholder's benefit.

The Income Tax Appellate Tribunal (ITAT) considered the date of actual completion of a project in relation to the date of application for completion. The ITAT affirmed the theory of relating back to the date of application.

Once a deduction has been allowed in the initial assessment year, it cannot be re-examined or disallowed in succeeding assessment years, provided the original assessment has attained finality.

The Income Tax Appellate Tribunal (ITAT) can verify whether a product is different from its raw material by visiting the assessee's industrial unit.

A High Court decision in favour of the assessee, cited alongside other Kerala and Karnataka High Court judgments, suggests a favourable ruling for taxpayers in specific tax matters.

The first appellate authority has the power to partially set aside an assessment and remand the case to the assessing officer for fresh assessment on other points.

The Supreme Court's dismissal of a Special Leave Petition affirming the Delhi High Court's decision in Addl. CIT vs. J.K. D'Costa implicitly upholds the High Court's ruling regarding the assessment procedure.

An assessee must consistently follow one method of accounting and cannot change it arbitrarily without adhering to the provisions of Section 145 of the Income Tax Act and relevant rules.

An addition to income based on a Directorate of Valuations (DVO) report is not justified if the Assessing Officer (AO) has not rejected the assessee's books of account or pointed out defects therein.

The assessee contended that an addition to income should be deleted on the grounds of consistency, as no new material fact had emerged since the prior assessment.

Revenue authorities are not estopped from correcting a mistaken view of statutory provisions in income tax assessments, even if they previously took that incorrect view.

A notice under section 148, issued by a Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO), is invalid and must be quashed as per the faceless assessment scheme under section 151A.

A review petition filed by the Revenue against the decision in Commissioner of Income-tax v. Jasjit Singh has been dismissed by the Supreme Court, reaffirming the original decision.

The High Court's decision in PCIT v. Meenakshi Overseas stands for the principle that the reopening of an assessment and subsequent additions must be based on merits, following established legal procedures.