Landmark Cases on Assessment Procedure

A procedural irregularity, such as failing to dispose of objections before completing an assessment, does not automatically render the assessment order void or non-est, and can potentially be cured.

The requirement to furnish an auditor's report (e.g., under Section 80J(6A), 80-IA(7), or Form 10B/10IC) along with the return of income is directory, not mandatory. Such a report can be filed at a later stage, provided it is submitted before the completion of the assessment proceedings.

The application of mind by the approving authority is essential for the validity of approval granted under section 153D of the Income Tax Act. Failure to apply mind renders the approval invalid.

Decisions of non-jurisdictional High Courts can be followed by tribunals in the absence of contrary decisions from the jurisdictional High Court. Tribunals should follow decisions of higher judicial authorities.

Failure to issue an assessment order through the designated ITBA portal, or issuance of an order without a valid pre-existing Document Identification Number (DIN), renders such an order invalid and non est in the eyes of law. A subsequent intimation or post-dated DIN does not cure this substantive breach.

The Assessing Officer is bound by the rule of consistency and cannot take a contrary or different stand on an issue in a subsequent assessment year if the factual position remains identical to previous years where a deduction was allowed.

Approval for assessments under Section 153D must demonstrate application of mind to the facts of the case and be obtained separately for each assessment year.

Taxing provisions imposing new liabilities or affecting substantive rights are presumed to operate prospectively unless the statute expressly or necessarily implies retrospective application. Retrospective operation is generally not given if it impairs existing rights, creates new obligations, or imposes new liabilities, except for procedural matters.

Guidelines issued by the Central Board of Direct Taxes (CBDT) under Section 119 of the Income Tax Act, which relax the rigour of law, are binding on all income tax officers responsible for implementing the Act, who must follow these orders and instructions.

Income cannot be taxed twice unless expressly provided by law. Income accrued in a particular year must be included in that year's total income and cannot be ignored to be taxed in a subsequent year based on receipt.

The Assessing Officer must record satisfaction under section 153C before making additions in assessments that fall under that section. Failure to do so renders the assessments invalid.

An income tax officer making a best judgment assessment must act honestly, not dishonestly, vindictively, or capriciously. They must make a fair estimate of the assessment, considering local knowledge, repute, and previous assessments.

The law applicable to an assessment year is the law in force during that assessment year, unless the statute provides otherwise expressly or by necessary implication. Amendments to tax laws are generally prospective.

When interpreting statutes, courts strive to avoid conflicting provisions and interpret the law in a manner that is not absurd, unworkable, illogical, futile, pointless, artificial, or disproportionate.

A best judgment assessment must be based on wisdom, truth, and legal principles, not arbitrary caprice. While it involves estimation and guesswork, this must have a reasonable nexus to available material and the case's circumstances.

The strict rule of construction applies only to taxing provisions that create a charge for tax liability. It does not apply to machinery provisions that facilitate the assessment, collection, and recovery of tax.

Under Rule 27 of the ITAT Rules, an assessee can raise an additional ground to support an order in their favour from the lower appellate authority, but not to obtain further relief or annul the assessment, thus adversely affecting the appellant.

Reopening assessment based on a mere re-look of accounts already furnished and assessed under section 143(3) is not permissible if there was no failure on the part of the assessee to make a true and full disclosure. The assessment cannot be reopened on the ground that income has escaped assessment merely by re-examining previously filed accounts.

A decree passed by a court or authority without inherent jurisdiction over the subject matter is a nullity, can be challenged at any stage including execution, and does not operate as res judicata, as such a fundamental defect cannot be cured by consent.

An illegality occurring after assessment proceedings have been lawfully initiated does not nullify the entire proceedings; instead, the proceedings are restored to the stage where the illegality occurred.

A statute prescribing a procedure using negative language (e.g., 'in no other manner') imposes absolute requirements, and failure to comply will invalidate the entire proceeding.

The assessee must consistently follow one method of accounting and cannot arbitrarily change it, particularly in contravention of Section 145 of the Income Tax Act. This principle prohibits changes in accounting methods that are not in conformity with the law.

Service of notice through the ITBA portal is not a valid method of service under section 282(1) of the Income-tax Act, 1961, and Rule 127(1) of the Income-tax Rules, 1962. Consequently, matters where notice was deemed invalidly served via ITBA portal are remanded to the Assessing Officer for a de novo disposal to uphold principles of natural justice.

The Income Tax Department should not expend significant time and energy on tax-neutral issues that do not affect the overall tax collection, particularly when determining the year of taxability of income where tax rates remain constant.

Substantive law is concerned with the ends of justice, while procedural law deals with the means to attain them. Procedural changes do not affect substantive rights.

Circulars issued by statutory authorities are binding on tax administrators and cannot be disregarded in a manner that prejudices the assessee.

An Assessing Officer is bound by the rule of consistency and cannot make a 'U-turn' in their assessment unless the revenue brings contrary facts on record.

The Supreme Court's decision in Nemi Chand Kothari v. CIT is cited to support arguments in subsequent tax cases.

Circulars issued by the Central Board of Direct Taxes under Section 119 of the Income Tax Act are binding on all officers and persons employed in the execution of the Act, even if such circulars deviate from the provisions of the Act.

An Income Tax Officer assessing income must determine the assessee's system of accountancy and, for the mercantile system, ascertain when the right to receive the income legally accrued.

The appellate authority must decide an appeal on its merits after giving the assessee an opportunity to be heard, and should not dismiss it solely for non-prosecution.

The Allahabad High Court in Pr. CIT v. Mehndipur Balaji takes a view contrary to the Gujarat High Court's decisions in Saumya Construction regarding the interpretation of Section 153A of the Income Tax Act, 1961, particularly when a search under Section 132 has taken place.

An assessee is entitled to raise additional grounds of appeal before the appellate authorities, including the Tribunal or High Court, provided such grounds are purely legal in nature and arise from facts already available on record.

Failure to issue a draft assessment order under Section 144C(1) makes the final assessment order illegal and beyond jurisdiction. Non-compliance with Dispute Resolution Panel (DRP) directions renders the final assessment order bad in law.

Reopening a concluded assessment is invalid if based solely on a change of opinion and not on fresh tangible material, especially when the reassessment notice is issued after four years without evidence of failure by the assessee to disclose material facts.

An Assessing Officer acts in a quasi-judicial capacity during assessment and must follow elementary rules of judicial procedure, conducting the case personally without interference from superiors.

If additional grounds are raised for the first time before the Tribunal, the matter should be remanded to the CIT(A) for adjudication.

Assessment is an integrated process that encompasses the determination of both income and tax. Therefore, any statutory approval required for an assessment, such as under Section 153D, must cover both the income computation and the tax computation, not merely one aspect.

When interpreting statutes or notifications, specific words in one clause should be read in the context of specific words in other clauses, thereby restricting the general words to the same kind as the specified words. The object and purpose of the legislation and the notification must also be considered.

Under Indian income-tax law, the Income-tax Officer must compute income and profits according to the method of accounting regularly employed by the assessee, such as the cash or mercantile system. This distinguishes Indian law from English legislation where the tax authority is not bound by the assessee's chosen method.

Assessing Officers and appellate authorities must consider and grant correct deductions for fresh legal claims or revised computations made during assessment or appellate proceedings, subject to due verification.

Section 292B of the Income Tax Act applies only to procedural irregularities and cannot cure fundamental jurisdictional defects, such as the non-issue of a mandatory Section 148 notice for reassessment or framing an assessment against a non-existing or dead person.

The issuance of a notice under Section 143(2) is mandatory, and its non-service or invalidity is not a curable procedural irregularity, rendering subsequent assessment proceedings void. Objections regarding non-service of notice, being a jurisdictional issue, can be raised for the first time before the Tribunal.

The books of account cannot be rejected under Section 145(3) of the Income-tax Act, 1961, without the Assessing Officer pointing out specific material defects. A mere fall in the Gross Profit rate or the non-maintenance of a stock register, by itself, is not a sufficient ground for rejection if complete and quantitative details are furnished.

The principle of res judicata or estoppel does not apply to income tax proceedings, as each assessment year is a distinct unit. Mere entries in the accounts of a third party are not sufficient proof to make additions to an assessee's income.

When specific words of a class or category are followed by general words, the general words are interpreted to include only things of the same kind as the specific words. This principle is known as ejusdem generis.

The law declared by a High Court is binding on all subordinate authorities and tribunals within its territorial jurisdiction.

Income tax authorities cannot deduce the nature of a document from purported intention, go behind the document, consider the substance over form, or rewrite it merely to suit the revenue's purpose.

Additions made in assessment proceedings cannot be based solely on computations provided by external agencies like the police, without independent application of mind by the Assessing Officer.