Landmark Cases on Assessment Procedure

Income tax authorities have a duty to assist assessees who are over-assessed due to mistake or misconception, ensuring that only legitimate taxes permitted by law are collected.

Section 282 of the Income Tax Act, 1961 specifies the modes for serving notices, including by post or summons under the Code of Civil Procedure. A valid service of notice is essential for assessment or reassessment proceedings, and its absence renders such proceedings bad in law.

The scope of proceedings before the Income-tax Settlement Commission under Chapter XIX-A is sui generis, primarily for disclosure and akin to arbitration, and not an appellate forum to examine complex legal disputes.

The corporate veil may be lifted to prevent fraud, improper conduct, or evasion of a taxing statute, or when associated companies are inextricably connected. It also clarifies that 'sanction' implies prior permission, while 'approval' confirms an act already done.

Where the shares of beneficiaries in a trust are determinate, trustees must be assessed separately for each beneficiary's share, treating each beneficiary as an individual. The income is then taxed at the marginal rate applicable to individuals, not at the maximum rate for an association of persons.

The restriction under Section 124(3) of the Income-tax Act on an assessee to object to an Assessing Officer's jurisdiction is triggered only when the dispute concerns the territorial jurisdiction vested under Section 120(1) or (2).

An assessment notice issued under section 143(2) is invalid if it is not issued by the Income Tax Officer (ITO) as per CBDT Instruction No. 1/2011, even if issued by an Assistant Commissioner of Income Tax (ACIT). Such an invalid notice renders the subsequent assessment void.

The time limit for objecting to an Assessing Officer's territorial jurisdiction under Section 124(3) does not apply when an assessee claims the officer acted wholly without jurisdiction or outside the authority of law. Objections to jurisdiction not relating to territorial matters are not subject to these time limits.

When a statutory provision is unambiguous and capable of only one meaning, it must be given effect in its own terms, and nothing should be added to or taken away from the plain language of the Act by way of interpretation.

An assessee has no fundamental right to be assessed by a particular Assessing Officer or at a specific place. Orders transferring a case are administrative, for better revenue administration, and are not justiciable unless mala fides or clear prejudice is proven, with inconvenience not being a valid ground.

Previous approval of the Additional CIT is required to pass an assessment order under Chapter XIV-B of the Income Tax Act. The Additional CIT is a competent authority to grant this approval.

A coordinate bench of the Tribunal, in the case of ACIT Vs JSW Steel Limited, has inter alia made observations that are being relied upon by subsequent benches in their decisions.

Reasons recorded for initiating an assessment or other statutory action cannot be supplemented by subsequent explanations or affidavits; only the reasons existing at the time of recording are valid and can be considered.

The Allahabad High Court in Pr. CIT v. Mehndipur Balaji (2022) has taken a contrary view to the Gujarat High Court's decision in Saumya Construction regarding the interpretation of Section 153A of the Income Tax Act, 1961.

A higher authority's approval for an income tax proposal must reflect an application of mind to the facts and cannot be deemed from a mere nomination. An assessment made without providing reasonable opportunity to the assessee violates principles of natural justice and is therefore invalid.

The absence of Joint CIT's approval under Section 274(2) does not render the Assessing Officer's order void ab initio; the matter can be decided afresh after obtaining the required approval.

Cases cited together with Arun Kumar Maheshwari v. ITO, including Dharam Pal Singh Rao v. ITO and Smt. Maya Rastogi v. CIT, are used to support a finding that there is no merit in an appeal, indicating a consistent legal position across multiple High Court judgments.

Failure to issue a notice under Section 143(2) within the prescribed time or after the time for completing reassessment under Section 153(2) has expired renders the entire assessment proceedings invalid. Section 292BB does not waive the requirement for such statutorily mandated notices.

A procedural irregularity that occurs at a later stage of assessment proceedings, and does not involve an inherent lack of jurisdiction, is a curable defect and does not lead to the nullity of the assessment order.

Combined approvals under Section 153D vitiate assessment proceedings as they are contrary to specific statutory requirements.

Procedural or administrative irregularities during an assessment, including those related to Section 153D approval or assessee non-compliance, do not annul the entire assessment. Instead, such defects are curable, requiring proceedings to be restored to the point of irregularity for rectification and due opportunity.

Amendments to procedural law that are procedural or beneficial, intended to remove hardship, are generally retrospective and apply from their enforcement date.

The absence of JCIT's approval under Section 274(2) is a curable procedural irregularity that does not render the Assessing Officer's order void ab initio, but rather requires the matter to be decided afresh after obtaining the necessary approval.

When books of account are rejected under Section 145(3) of the Income-tax Act, income must be estimated on best judgment, using the assessee's past history as the primary guide for such estimation.

A wrong name in a notice, when determined to be a mere clerical error in the peculiar facts of a case, does not invalidate the notice or the subsequent assessment proceedings. This principle, applying Section 292B, was affirmed by the Supreme Court.

Subsequent explanations or affidavits cannot supplement the reasons provided in an original satisfaction note.

The disallowance of delayed employee contributions to provident fund and ESI under section 36(1)(va) read with section 2(24)(x) cannot be made as an adjustment during the automated processing of an income tax return under section 143(1)(a).

Income tax proceedings initiated or an assessment order passed in the name of a deceased person are void ab initio, as such proceedings are without jurisdiction. Section 159 of the Income Tax Act does not apply if proceedings were not initiated during the assessee's lifetime.

Where the National Faceless Assessment Centre (NFAC) and the Joint Assessing Officer (JAO) have concurrent jurisdiction, a notice issued by the JAO under Section 148 of the Income Tax Act is valid, provided no prejudice is caused to the assessee.

The Income Tax Appellate Tribunal cannot substitute its own reasons for those that the Assessing Officer failed to record or adequately inquire into; it must instead remand the matter back to the Assessing Officer for proper adjudication.

Non-response to Section 133(6) notices or the assessee's inability to compel third parties to reply cannot be the sole or sufficient ground for rejecting books of account under Section 145(3).

The phrase "if considers it necessary or expedient" or "considered necessary" in a statutory provision, such as Section 143(2) of the Income-tax Act, requires an active application of mind and consideration of all relevant aspects. The opinion formed, even if subjective, must be based on existing circumstances and not imaginary grounds.

When books of account are rejected and income is estimated, tax authorities cannot simultaneously rely on those rejected books to make specific additions, such as unexplained cash credits forming part of the balancing scheme of accounts, or to disallow specific expenses.

If the Revenue accepts the Tribunal's decision for earlier years without challenge, it cannot assail the same decision in subsequent years, provided the facts are similar.

An issue or fundamental aspect settled in one assessment year cannot be disturbed or reconsidered by the Revenue in subsequent assessment years if there is no change in the underlying facts or circumstances.

Section 41(1) of the Income Tax Act applies only where there is remission or cessation of a trading liability during the previous year relevant to the assessment year, and not merely because the assessee cannot provide confirmations for sundry creditors.

The Supreme Court declined to stay assessment proceedings, even when there was divergence of opinion among High Courts and reservations about the correctness of prior judgments concerning the validity of orders under Section 142(2A) and extended limitation under Section 153(3).

When a rule is substituted for an old rule, the old rule ceases to exist as the first step of the substitution process. Even if the new substituted rule is later declared invalid, the old rule does not revive.

An order is not rendered invalid, but merely irregular, if the initiation of the proceeding was valid but its completion contained a curable defect or irregularity. Procedural technicalities should not be allowed to defeat justice where the defect is not fundamental.

Failure to mention DIN in an assessment order is an irregularity, not an illegality, and does not automatically invalidate the order, especially when the matter is under review by higher courts regarding the significance of DIN.

An assessment becomes invalid if the notice under Section 143(2) of the Income-tax Act is not issued within the time limit prescribed by the proviso to Section 143(2).

Retrospective amendments cannot be invoked to make additions or adjustments under section 143(1)(a) of the Income Tax Act. The clarification by the Finance Act 2021 regarding employee contributions under sections 36(1)(va) and 43B is prospective and not applicable for assessment years prior to A.Y. 2021-22.

The Supreme Court's decision in Pr. CIT vs. Jay Ambey Aromatics is referenced in conjunction with other prominent Supreme Court rulings from 2023 concerning income tax matters, suggesting it addresses key aspects of tax litigation.

Assessment orders passed by an Assessing Officer are liable to be set aside if they disregard binding instructions or circulars issued by the Central Board of Direct Taxes (CBDT), especially concerning the selection of returns for scrutiny. The CBDT circulars are binding on all officers of the Income-tax department.

An assessment order is invalid if it is based on a notice issued under section 143(2) by an Assessing Officer who lacked jurisdiction at the time the notice was issued, even if the case was subsequently transferred to an officer with jurisdiction.

Approvals for assessment orders must be granted with independent application of mind by the approving authority, not mechanically, to be valid. Each assessment under section 153D for each assessee and each assessment year must be approved separately.

The absence of prior approval from the Joint Commissioner of Income Tax (JCIT) under section 274(2) does not inherently deprive the Assessing Officer (AO) of jurisdiction, and the matter can be decided afresh after obtaining the required approval.

A best judgment assessment is valid if the estimate made by the Assessing Officer is not arbitrary, has a nexus with discovered facts, and cannot be questioned. The Assessing Officer is considered the best judge of the situation.

When a provision of an Act is omitted and simultaneously re-enacted with substantial overlap, section 24 of the General Clauses Act applies, meaning the re-enacted provision is treated as a continuation of the old one unless otherwise specified.