Landmark Cases on Assessment Procedure

Circulars issued by the CBDT are binding on Income Tax Authorities.

In search and seizure assessments under section 153A, if the assessment is unabated, the assessee cannot make fresh claims that were not made in the original return.

Best judgment assessments under Section 144 must be a fair and rational estimation of income by the Assessing Officer, not capricious or arbitrary. Appellate authorities should accept clarificatory evidence to test the fairness of such assessments, even if produced for the first time.

CBDT circulars, instructions, or directions issued under Section 119 cannot override or detract from the provisions of the Income-tax Act, as a delegated authority lacks the power to amend law enacted by Parliament.

A tax cannot be collected or recovered if the law does not provide a machinery for its collection and recovery. If a statutory provision has multiple interpretations, the court must choose the one that reflects the legislature's true intention.

The Assessing Officer must genuinely record satisfaction or receive proper approval before passing an assessment order, as mechanical or perfunctory approval invalidates the assessment.

The Assessing Officer must consider fresh claims made during assessment proceedings, as income tax proceedings are not adversarial and income should be computed according to law, unless a statutory bar exists. The Supreme Court's decision in Goetze (India) Ltd. does not restrict appellate authorities from entertaining new claims.

A deduction under Section 80P can be claimed by an assessee even if the return of income is filed belatedly under Section 139(4), provided a return has been filed.

The purpose of income tax assessment is to correctly determine the taxable income of the assessee in accordance with the provisions of the Act. An admission made by an assessee, if based on an incorrect or erroneous impression, is relevant but not conclusive and can be clarified or withdrawn later.

An intimation issued under Section 143(1)(a) cannot make adjustments for debatable issues that require detailed scrutiny, such as the disallowance of delayed employee contributions to ESI/PF. Appellate authorities also have the power to entertain fresh claims made by an assessee, even if these were not raised in the original or revised return of income.

Each assessment year constitutes a separate unit of assessment under the Income-tax Act, and findings or decisions for one assessment year do not operate as res judicata for subsequent assessment years.

CBDT administrative instructions and circulars are binding on income tax authorities and departmental officers, who must follow them during the assessment process and cannot act in contravention, even though these instructions are not binding on courts or assessees.

A tax or fee can be levied based on multiple entries in the VII Schedule of the Constitution, not just a single entry.

Approval for issuing a notice under Section 148 is flawed if it merely endorses the language of Section 151 without demonstrating an independent application of mind by the approving authority.

Issuance of notice under Section 143(2) is a mandatory prerequisite for valid assessment proceedings, which are void ab initio if such notice is not issued. If an assessee denies receiving the notice through an affidavit, the burden of proof shifts to the Revenue to demonstrate that the notice was properly served within the prescribed time.

The principle of res judicata or estoppel does not apply to income tax proceedings. Each assessment year's assessment is final only for that specific year and does not bind or govern assessments for subsequent years.

The Commissioner (Appeals) has the power to enhance an assessment under section 251(2) of the Income Tax Act, 1961, provided the assessee has been given a reasonable opportunity of being heard.

An assessment under section 153A is not justified if the documents relied upon by the Assessing Officer pertain to a subsequent period and not the assessment years under consideration. Any estimation of gross profits must be based on valid material, which was absent in this case.

The incomplete disposal of an assessee's objections by the Assessing Officer makes the reassessment proceedings invalid. The Assessing Officer must dispose of the objections by a speaking order.

A High Court decision is binding on subordinate authorities like the Assessing Officer. The Assessing Officer erred in not following a prior jurisdictional High Court ruling and a Madras High Court ruling.

Adjustments under Section 143(1)(a) are limited to arithmetical errors or incorrect claims that are prima facie apparent from the information provided in the income tax return itself. The Assessing Officer cannot embark on an inquiry beyond the face of the return during summary assessment proceedings.

An order dismissing all grounds of appeal based on a single issue, in violation of Section 250(6), is an unlawful adjudication and renders the order irregular, making it a fit case for remand.

The Income Tax Appellate Tribunal cannot enhance an assessment or take back a benefit granted to an assessee by the Assessing Officer. The Tribunal's power under section 254(1) is not to enhance the assessment.

Section 292BB of the Income Tax Act, 1961, is a rule of evidence that validates service of notice in certain circumstances. It introduces a deeming fiction that if an assessee appears in any proceeding or cooperates in any inquiry relating to assessment or reassessment, it shall be deemed that any required notice was duly served, precluding objection to such service.

Even if statutory language appears merely enabling, courts infer a duty to exercise such power when it aids a citizen's right. Public authorities cannot decline to act when circumstances warrant help, nor can they act to a person's detriment without justification.

An irregularity in granting approval under Section 158BG of the Income Tax Act, such as the failure to provide a hearing to the assessee by the supervisory officer, is not necessarily fatal to the assessment order.

When a valid revised return is filed under Section 139(5), it replaces the original return, and the assessment must be completed based on the correct and complete information provided in the revised return, not the original.

A 'direction' issued by an appellate or revisional authority under Sections 150(1) or 153(3) of the Income-tax Act must be a specific, clear, and mandatory positive command requiring action, and not merely an observation or finding, to be legally effective.

Assessments that have attained finality prior to a search and seizure operation cannot be reopened under Section 153A if no incriminating material is found during the search.

The ITAT distinguishes the case of Pawan Kumar v. PCIT (2024) 159 taxmann.com 61 (Del.-Trib.) in the context of assessing interest on enhanced land acquisition compensation.

An appellate authority cannot travel beyond the provisions of law when adjudicating matters, as doing so is barred by jurisdiction and renders the action otiose.

Once books of account are rejected under section 145(3), the income should be estimated, and no further additions can be made by disallowing expenditure or referring to unsubstantiated statements.

The Supreme Court holds that words in a statute, particularly a fiscal one, must be construed strictly according to their ordinary and natural meaning, irrespective of the provision's object. If the statutory language is unambiguous, it must be given effect, as the legislature is deemed to intend and mean what it says, only resorting to legislative intent if there is ambiguity.

The sanctioning authority must apply its mind to the reasons recorded by the Assessing Officer before granting approval for reassessment or other proceedings, and cannot grant such approval in a mechanical manner by merely rubber-stamping "Yes".

The requirement of prior approval from the Chief Commissioner or Commissioner under Section 142(2A) is a crucial safeguard against arbitrary assessment, placing a significant responsibility on the approving authority to ensure its genuine application and prevent it from becoming a mere formality.

A question of law concerning the root of jurisdiction can be raised for the first time before the Income Tax Appellate Tribunal. A defect of jurisdiction is incurable, and jurisdiction, which cannot be conferred by default or agreement, is determined by its initiation date and operates prospectively, not retrospectively.

Additions made under Section 153A need not be restricted to incriminating material found during a search, as earlier interpreted by the ITAT.

In Section 153A proceedings, findings from seized material can be applied to unrelated transactions for a short period, especially within the same financial year and scheme.

The case is cited for various issues including the definition of capital assets, reassessment procedures under sections 153A and 153C, and the effect of clarificatory amendments.

A consolidated satisfaction note for issuing notices under section 153C of the Income-tax Act is valid if it substantiates, through tabulation and analysis, that the Assessing Officer has referred to incriminating material pertaining to each assessment year.

Beneficial statutes, especially procedural provisions, can be given retrospective effect if they are enacted for the benefit of the community as a whole, applying the doctrine of fairness, even without an explicit retrospective provision.

The Assessing Officer cannot make a prima facie adjustment to the total income under Section 143(1)(a) if the adjustment involves a debatable issue.

An appellate authority cannot sustain or reclassify an addition made by the Assessing Officer under a specific section of the Income Tax Act by invoking a different section, especially if the alternative section was not the original subject matter of the dispute.

The Income Tax Appellate Tribunal is justified in deciding against the assessee when faced with bogus purchases, and the High Court's decision to add the entire income on account of such purchases is confirmed by the Apex Court.

The department cannot improve upon the Assessing Officer's case by changing the basis of additions without issuing a show cause notice to the assessee.

Assessment orders passed without valid approval under section 153D of the Income Tax Act are void ab initio, as the lack of approval is a substantive and incurable defect.

The principle of res judicata or estoppel does not strictly apply to Income Tax authorities, including the Tribunal. However, an earlier decision on the same question should not be reopened if it was arrived at after due inquiry, was not arbitrary or perverse, and no fresh facts are presented.

When income is estimated, no separate adjustments or disallowances under specific provisions like Section 40A(3) should be made, as such disallowances are implicitly covered by the estimated income.