Landmark Cases on Assessment Procedure

Failure to serve a notice under section 143(2) renders an assessment irregular but not null and void.

An appellate court's powers are limited to the subject matter of the appeal as presented by the appellant.

A defective return of income, once the defects are rectified within the permitted time, becomes a valid return and relates back to the original date of filing.

An appeal does not lie against an addition made to income when the assessee has agreed to such addition. The assessee cannot challenge an assessment order based on their prior agreement.

The principle of consistency in tax matters should be followed, meaning the revenue should not take a contrary view if there is no material change in circumstances justifying it.

Where the Assessing Officer (AO) of the 'person searched' under section 153A is the same as the AO for the 'other person' covered under section 153C, there is no requirement for the AO to record satisfaction under section 153C.

A legal representative can be substituted for a deceased assessee in assessment proceedings, including those related to block assessments. This substitution is necessary for the continuation of the proceedings against the estate of the deceased.

The case is cited for the ratio laid down in the decision.

An assessment framed without jurisdiction is liable to be quashed, irrespective of Section 292BB of the Act, as the proviso to that section is not applicable in such circumstances.

The word 'served' in the proviso to Section 143(2) should be interpreted as 'issued' within the prescribed time limit. The date of service of a Section 143(2) notice is not relevant if it was issued within the statutory period, even if served later.

An Assessing Officer must record their dissatisfaction with the assessee's claim regarding expenditure or non-expenditure before applying Rule 8D(1)(b) for disallowance under Section 144.

The Supreme Court's inherent jurisdiction to punish for contempt of subordinate courts is protected, but its power to suspend an advocate's licence under contempt jurisdiction is limited.

The expression 'any previous year' refers to the previous year relevant to the assessment year concerned, not all previous years.

The approval granted by statutory authorities for reassessment proceedings must be furnished to the assessee along with the reasons to believe. Reassessment proceedings cannot be initiated until the Assessing Officer records reasons, places them before a specified authority for approval, and this approval is provided to the assessee.

A claim for exemption or deduction can be entertained even if it was not made in the Income Tax Return, and income should be assessed and tax collected in accordance with Article 265 of the Constitution.

Failure of the Assessing Officer to provide the assessee with materials proposed to be relied upon is a statutory requirement, and its non-compliance is fatal to the assessment.

An Assessing Officer cannot refer a matter to the Valuation Officer without first rejecting the assessee's books of accounts. This principle applies even when assessing unexplained investments.

The crucial date for the completion of assessment proceedings is the date the Assessing Officer makes the order, not the date it is served on the assessee, for the purpose of limitation under Section 153B.

Current account transactions between group companies do not constitute deemed dividend under section 2(22)(e) as they are not loans or advances.

The principle of res judicata does not apply to income tax proceedings, meaning previous year's assessments are not binding on subsequent years, though they can serve as evidence.

The High Court confirms that the rejection of books of accounts is not a mandatory prerequisite for an enquiry under Section 142A of the Income Tax Act.

A 'best judgment assessment' is invalid if the Assessing Officer fails to issue a show-cause notice to the assessee or specify the grounds for default under Section 144(1)(a) to (c). Such an assessment order is liable to be quashed or annulled for non-compliance with statutory requirements.

A statement recorded during a survey under Section 133A of the Income Tax Act, 1961 cannot, by itself, be the basis for an addition to income, as Section 133A does not empower authorities to examine persons on oath. Corroborative evidence is required for such additions.

An assessee cannot be held to its original voluntary disallowance if it was made under a wrong belief, especially after a tribunal has ruled in its favor, as the Income Tax Act aims to tax real income.

Interest on enhanced compensation accrues year after year from the date of possession until the date of the order granting such compensation, not just on the date of the order.

The Income-tax Officer must form a belief that income has escaped assessment, record reasons for this belief, and obtain necessary sanctions before reopening a concluded assessment. Reopening based on an incorrect section of the Act or without proper justification is invalid.

Issuing a valid notice under Section 143(2) is a mandatory prerequisite for framing a reassessment order under Section 143(3)/148. Failure to issue such a notice renders the reassessment order illegal and the omission is not curable.

Assessments under section 143(3) and 144 have distinct and different consequences. An assessment under section 143(3) involves reviewing the income tax return and requesting evidence of income and expenditures.

A statutory notice issued in the name of a non-existing entity renders the entire assessment void ab initio. This principle is not curable under section 292B.

An order is not invalidated by the mention of a wrong provision or the omission of a provision if the court or statutory authority possessed the requisite jurisdiction.

Where an Assessing Officer is not satisfied with the correctness of an assessee's claim for expenditures incurred to earn exempt income, the AO is bound to apply the provisions of Rule 8D.

An order of the ITAT Ahmedabad Bench in DCIT v. Kalpataru Power Transmission Ltd. ([2016] 68 Taxmann.com 237) has been overruled by a later judgment of the same bench in the same case.

A search conducted by the Director of Enforcement is a valid mode for assessment proceedings, provided it adheres to the principles of natural justice.

Non-maintenance of a day-to-day stock register is not, by itself, a sufficient ground for rejecting an assessee's books of account.

Penalty proceedings do not fall within the ambit of Section 245E of the Income-tax Act, and the Settlement Commission exceeds its jurisdiction if it drops penalty proceedings while deciding a settlement application.

An appellate authority can lift the bar of time limitation to give effect to directions regarding escaped income or claims allowable in different assessment years. This power is derived from Section 153(3) of the Income Tax Act.

Reassessment proceedings under Section 147 are invalid if the Assessing Officer's belief is not based on new tangible material not available during the original assessment. The Assessing Officer cannot reopen a case on the same issues that were already considered and discussed in the original assessment.

A fair hearing requires that a person be served with a proper, clear, and precise notice to enable them to make an effective defence. Ambiguity in notice denies the right to fair and judicious proceedings, and the adequacy of notice is determined on a case-by-case basis.

Failure by the Assessing Officer to provide information to the assessee, which is a statutory requirement, can be fatal to the assessment.

An Assessing Officer's rejection of an assessee's books of account is baseless if the books, even if audited, contain income and expenditure details, and the Assessing Officer was not unable to compute income from them.

A reassessment order is invalid if the assessee was not served with a notice under section 143(2) of the Income Tax Act, 1961. The amended proviso to section 148 does not apply in such cases.

Section 292B of the Income Tax Act, 1961, which deals with the rectification of certain mistakes, does not extend to correcting errors in the recording of reasons for reassessment proceedings. Invalid proceedings for assuming jurisdiction cannot be rectified under this section.

Reassessments are not valid on the principle of merger.

An assessee can challenge tax liability arising from special charging provisions, such as Section 115QA, by filing a separate appeal under Section 246A. Dividend Distribution Tax (DDT), as an additional tax not linked to the computation of total income, must be appealed independently.

The term 'assessed' in income tax law requires proper construction. 'Assessment' can encompass computation of income, determination of tax, or the entire procedure for imposing tax liability.

When an appellate authority sets aside an assessment without giving specific directions to redo the assessment, the Assessing Officer cannot proceed further in the matter.

An estimated net profit, if supported by material on record, is a question of fact and does not raise a substantial question of law.

For the doctrine of merger to apply, the appellate authority must have considered and decided upon the grounds of the lower authority's decision. If the appellate authority has not dealt with any part of the assessment order, the doctrine of merger does not apply.

An assessment order passed against a deceased assessee without bringing on record all legal representatives is null and void. Reopening notices and reassessment orders issued in the name of a deceased person after their demise is communicated to the AO are invalid.