Landmark Cases on Assessment Procedure

Tax authorities are obligated to act in accordance with the law and ensure only legitimate taxes are collected, assisting assessees who have been over-assessed due to mistake or misconception.

A continuing offence is one that is capable of continuance and is distinct from an offence committed at a single point in time. It arises from a failure to comply with a rule or requirement, with liability persisting until compliance.

The decision of the jurisdictional High Court is binding on Income Tax Authorities and the Tribunal within its jurisdiction. Contrary decisions from other High Courts are not relevant, and a point decided by the jurisdictional High Court can no longer be considered a debatable issue.

The rule of strict construction applies to a taxing provision that creates a charge for tax, but machinery provisions for making assessments are interpreted liberally. This distinction ensures that while the tax burden is clearly established, procedural aspects are construed to facilitate tax collection.

Tribunals should consider questions of law arising from facts on record, even if raised for the first time, if the issue is jurisdictional and requires no further fact-finding.

The court interprets the law as it is and cannot legislate by adding or subtracting from a statutory provision. Legislative casus omissus cannot be supplied by the judicial interpretative process, as it is for the Legislature to amend the law.

The heads of income specified in the Income Tax Act are mutually exclusive, requiring any item of income to be charged and computed solely under its specific statutory head, with Section 56 (Income from Other Sources) serving as a residuary provision.

The exercise of power under Section 142(2A) of the Income Tax Act requires a pre-decisional hearing. The Income Tax Appellate Tribunal (ITAT) cannot examine the validity of such an order to contend that the assessment is time-barred.

There can be no estoppel against the statute, meaning tax cannot be levied or collected without express authority of law. An appellate authority may adjudicate additional claims or legal contentions to ensure the correct tax liability is determined.

The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, particularly when those questions are purely legal and jurisdictional.

For claiming relief under Chapter VI-A deductions like Section 80IB or 80IA, the audit report in Form 10CCB is not mandatory to be filed with the return of income, but can be submitted before the assessment is completed.

Conferment of jurisdiction is a legislative function that cannot be granted by consent or by a superior court. Any order or decree passed without jurisdiction is a nullity, rendering it void, and this issue can be raised at any stage of the proceedings, including in appeal or execution.

The requirement to file an audit report along with the return of income for claiming deductions under sections like 80-IA(7) or 80J(6A) is directory, not mandatory, and can be filed at any time before the assessment is finalized.

An element of quid pro quo is essential for an impost to be considered a fee. The distinction between a tax and a fee hinges on this principle.

The Delhi Tribunal, in Meghna Gupta v. ACIT, affirmed a consistent view previously taken by various benches of the ITAT on a similar issue, citing decisions from other tribunals and High Courts.

Regularly maintained and audited books of account, free from auditor qualifications, are presumed correct. The Revenue bears the onus to prove specific defects or unreliability to justify rejecting such books under Section 145(3) or making additions.

A statutory authority vested with discretion must exercise that power independently, based on its own judgment, and not under the dictation or instructions of a higher authority. Exercising discretion under superior direction constitutes a failure to exercise it at all.

A claim made by an assessee which requires further inquiry cannot be disallowed under section 143(1)(a)(iii) without giving the assessee an opportunity to be heard and submit supporting proof. The phrase 'prima facie inadmissible' means the claim is not admissible on the face of it and does not require further inquiry for disallowance.

A tax provision is retrospective only if legislative intent is explicit or if it is purely clarificatory and does not alter existing law. Provisions framed 'for the removal of doubts' are not presumed to be retrospective if they change the law as it stood.

The Supreme Court holds that when the Legislature does not make any amendment to a law, there is a presumption that the judicial interpretation of that law stands accepted by the Legislature.

The Assessing Officer's power to direct a special audit under Section 142(2A) requires an objective assessment of account complexity, not subjective satisfaction. Accounts are 'complex' only if they are genuinely difficult to understand, and the AO must first make a genuine attempt to comprehend them before ordering a special audit.

Tax assessments must be made according to the law in existence during the relevant assessment year. A new statutory explanation or amendment, even if effective retrospectively, does not apply to pending assessments of prior years if it takes away the vested rights of the assessees.

Dulhabhai v. State of M.P. established seven guiding principles for determining when a civil court's jurisdiction is barred, particularly concerning challenges to assessments made under special statutes that provide their own remedies. It clarifies that an express bar of jurisdiction may exist, and the adequacy of remedies provided by the special Act is relevant but not always decisive under Section 9 of the Code of Civil Procedure.

The case is cited for the principle that an amendment can be made to proceedings to correct a defective name of a party, and that procedural irregularities should not defeat substantive justice.

The requirement to file an audit report along with the return of income for claiming specified deductions, such as under Section 80J or 80-IA, is directory and not mandatory. Such an audit report can be filed at any time before the assessment is framed or completed under Section 143(1).

An assessee can make a fresh claim for deduction before the FAA, even if it was not part of the original return.

A litigant does not have a vested right in a procedure, and the legislature can provide that certain procedural provisions do not apply to a particular trial.

The assessed income can be lower than the returned income. Authorities are required to assist assessees in correcting over-assessments, even if it means reducing the income below the returned figure.

When a company is prosecuted for an offence, the persons who are in charge of and responsible to the company for the conduct of its business at the time of the commission of the offence are liable, along with the company, for the offence.

Courts must interpret statutes to avoid absurdity, meaning results that are unworkable, illogical, or unjust. This principle guides the avoidance of contradictions between different sections of the same Act.

Profits cannot be estimated by the tax authorities unless the assessee's books of account have been formally rejected.

The CBDT's guidelines issued under Section 119 of the Income Tax Act are binding on the revenue department.

A reasonable construction of a taxing statute should be followed, and a literal construction should be avoided if it defeats the manifest purpose and object of the Act.

A subsequent amendment cannot impose a new tax burden or liability for a period when such liability did not exist. Therefore, additional tax or penalty cannot be levied for non-disclosure of income made taxable retrospectively by an amendment not in force at the time of the original return.

Tax can only be levied or collected by authority of law, as mandated by Article 265 of the Constitution; consequently, any tax collected contrary to law must be refunded.

Tax litigation is not an adversarial process; the Assessing Officer and Tribunal have a duty to determine the assessee's correct taxable income. A valid claim, such as an exemption, cannot be denied merely because it was not explicitly made by the assessee.

An assessment framed under Section 143(3) is invalid if the Assessing Officer fails to issue a notice under Section 143(2) of the Income-tax Act within the specified time period, as the AO lacks jurisdiction, rendering the assessment order non-est.

Section 124(3) of the Income-tax Act, which restricts an assessee from objecting to an Assessing Officer's jurisdiction, applies only to disputes concerning territorial jurisdiction as conferred by Section 120(1) or (2). It does not apply to objections regarding the Assessing Officer's inherent jurisdiction to frame an assessment.

A decision of a Co-ordinate Bench confirmed by the Hon'ble Third Member has higher precedence than another decision of a Co-ordinate Bench. The case was decided after vividly analyzing the facts and judicial precedents.

Taxing statutes do not have all provisions as mandatory; some can be directory, and strict interpretation primarily applies to the levy of tax, not necessarily to procedural provisions. No tax can be levied on the principle of estoppel, as Article 265 mandates that tax must be authorized by law.

The mere rejection of an assessee's books of account under Section 145(3) does not automatically warrant an addition to the returned income. The Assessing Officer must consider the books alongside historical data and other collected material after confronting the taxpayer.

An assessee cannot challenge the jurisdiction of the Assessing Officer if an objection is not filed within the prescribed one-month period from the date of receiving a notice. Failure to raise a timely objection under Section 124 before the AO waives the right to dispute jurisdiction later.

Consistency must be maintained in income-tax proceedings when the facts are not different, even though res judicata does not strictly apply. A consistent view taken in a particular year should not be departed from in subsequent years without contrary material.

Protective assessments should not be deleted or disposed of by lower authorities, but rather allowed to remain in effect until the related substantive assessment proceedings attain finality before the High Court or Supreme Court.

Section 144B of the Income Tax Act does not completely divest the Jurisdictional Assessing Officer (JAO) of their power to assess or reassess, even with the introduction of the Faceless Reassessment Scheme.

Additional grounds of appeal that raise purely legal issues and do not require further fact-finding can be admitted for adjudication, even if not raised before the lower authorities, as they go to the root of the matter.

Whether an income falls under one head of income or another is to be decided according to the common notions of a practical man, as the Income-tax Act provides no specific guidance. The Income-tax Act provides no specific guidance for determining the appropriate head of income.