Landmark Cases on Assessment Procedure

The Assessing Officer's (AO) processing of a return under Section 143(1) of the Income Tax Act, 1961, may be questioned if there was a lack of fresh information before the AO or a lack of application of mind, particularly when a refund was granted based on manual processing.

Issuance of a draft assessment order under section 144C(1) of the Income Tax Act is mandatory, and its non-issuance is not a curable procedural lapse.

The validity of sanction for issuing orders under section 148A(d) and notices under section 148 must be tested with reference to the amended section 151. If sanction is not granted by an authority specified under section 151(ii), such orders and notices are invalid and liable to be quashed.

Addition on an estimate basis is not justified without rejecting the books of account.

Improper service of notice invalidates the entire reassessment proceedings. If no notice is served within the prescribed period, the Income-tax Officer is incompetent to commence reassessment proceedings.

The Assessing Officer must record a specific finding that the method of accounting adopted by the assessee is unacceptable or that the accounts are irregular before rejecting them. Mere high percentage of dead loss in a spinning mill does not automatically lead to an inference of suppressed production or justify an addition by way of estimate if record-keeping of wastage is not feasible.

A tribunal can exercise its discretion to admit an additional ground of appeal, even if raised for the first time, provided it considers the facts and circumstances of the case.

When an Assessing Officer records satisfaction in relation to assessment proceedings, such satisfaction must be recorded for each assessment year individually. This ensures compliance with legal requirements and facilitates proper assessment.

An Assessing Officer cannot allow a claim for deduction that is raised afresh unless a revised return is filed. However, an assessee is not disabled from raising such a claim before appellate authorities if it was disallowed by the Assessing Officer for the technical reason of not filing a revised return.

A court's decision must be interpreted within the context of the specific questions of law raised before it. It is impermissible to isolate a word or sentence from its context to define the complete law declared by the court.

The furnishing of an audit report during assessment proceedings, rather than by the due date of filing the return, is considered a directory and not mandatory compliance for claiming deductions under Section 80-IA.

Courts must give a fair and reasonable construction to revenue statutes, adhering strictly to the statutory language without resorting to equitable interpretation. No tax can be levied without clear statutory intent.

The Supreme Court refers the issue of whether a shareholder must be both registered and beneficial for reconsideration by a larger bench.

If an assessee explains a factual position and the Assessing Officer (AO) does not reject it in the assessment order, the issue is deemed accepted by the department, preventing its relitigation.

The Tribunal follows the decision in ITO v. Aarti Mittal (2013) 37 CCH 227 HydTrib, 149 ITD 728, which was also rendered by the ITAT.

Assessing officers cannot introduce issues for inquiry that were not part of the original limited scrutiny, without adhering to mandatory procedural requirements.

The levy of interest under the Income Tax Act is part of the assessment process and can be challenged in an appeal if the assessee disputes the chargeability of interest itself. However, claims for waiver or reduction of interest cannot be challenged in appeal and must be pursued through revisional jurisdiction.

An order passed under Section 148A(d) and subsequent proceedings are void if the Assessing Officer provides insufficient opportunity for the assessee to file a reply before issuing the notice under Section 148A(b).

The Income-Tax Act, 1961, as amended on April 1, of any financial year, applies to the assessment of that year, and amendments coming into force after April 1 would not apply.

In a best judgment assessment, the element of guesswork is permissible as long as it is based on material on record and the discretion is not exercised arbitrarily or capriciously.

A return of income filed in response to a notice under Section 153A of the Income-tax Act is to be considered as a return filed under Section 139 of the Act for all other provisions, including the purpose of penalty under Section 271(1)(c).

In proceedings challenging the reopening of an assessment, the High Court's role is limited to examining whether the conditions for reopening existed, not to make a final decision on the merits of the disclosure. A mistake in a notice, such as non-indication of the penalty limb, will not invalidate penalty proceedings if no prejudice is caused to the assessee and they are aware of the charges.

Section 2(22)(e) of the Income Tax Act applies if a shareholder has a substantial interest in a company that receives a loan, making the loan amount a deemed dividend.

A statute levies tax by a charging section that creates liability, and then provides machinery for assessment, recovery, and penalties.

In motor accident claim cases, the multiplier method is required to be standardized to achieve uniformity in awarding compensation for future loss, considering income adjustments and life's imponderables.

Approval under section 151 for reopening an assessment is valid if the Assessing Officer records reasons strictly as per law, and the assessee cannot raise this as an additional ground at a belated stage.

An Income Tax Appellate Tribunal (ITAT) decision is binding on lower authorities, including the Assessing Officer, even if the department has appealed it to a higher court. The Assessing Officer cannot refuse a deduction solely because the department has not accepted an ITAT order.

Reopening of assessment is valid when the Assessing Officer (AO) receives specific information from an investigation wing, applies their mind to it, and forms a reason to believe that income has escaped assessment. This is particularly true when the assessee has not filed a return in response to a notice under Section 148.

A notice issued under section 148 is valid if the assessee treats it as valid, responds to it in letter and spirit, and participates in the proceedings, given the application of section 292B.

Approval for reassessment proceedings under Section 151 requires the sanctioning authority to be satisfied with the reasons recorded by the Assessing Officer, but does not necessitate elaborate reasoning. The sanctioning authority exercises a mechanical approval if satisfied.

The case is cited for the proposition that various other decisions, including those concerning software consultants, Anil Corporation, and Sunbeam Auto Ltd., are relevant in a tax matter.

The appellate authority must provide the assessee an opportunity to show cause before enhancing an assessment, as required by Section 251(2) of the Income-tax Act.

For the Assessing Officer to assume jurisdiction under Section 153C of the Income Tax Act, 1961, the formation of satisfaction must establish a prima facie nexus with the seized material in the possession of the department. A mere mention of 'satisfied' in the order or note sheet is insufficient.

The pendency of Special Leave Petitions (SLPs) before the Apex Court concerning the interpretation of Section 153A of the Income Tax Act, 1961, means that finality on the legal issue has not yet been attained.

Approval under Section 153D of the Income Tax Act, similar to approval under Section 274(2), is a procedural requirement that does not affect the Assessing Officer's jurisdiction to levy penalty.

The rule of consistency applies in income tax proceedings, meaning similar views taken in earlier years should ordinarily be followed in subsequent years if facts and circumstances are similar.

Assessment orders are vitiated if the approval under section 153D is granted mechanically without application of mind by the superior authority.

When two authorities have concurrent jurisdiction to exercise a power, either can exercise it, and once initiated, the exercise must be concluded by that authority alone.

The limitation period for passing an assessment order under Section 153 of the Income Tax Act prevails over the specific time restriction for passing a final order under Section 144C(13).

Decisions of the Income Tax Appellate Tribunal (ITAT) are binding on lower authorities, even if the department prefers an appeal. The Assessing Officer cannot deny a deduction solely because an ITAT order is not accepted and an appeal is pending.

The Income Tax Appellate Tribunal (ITAT) can adjudicate a fresh claim raised for the first time before it, provided it is permissible under the law.

A jurisdictional defect cannot be rectified by a corrigendum, and mistakes in assessment orders must be faced by the concerned party.

If an Assessing Officer fails to dispose of objections filed by an assessee regarding reopening of assessment, the subsequent assessment order is invalid.

The assessment order framed under section 153A of the Income Tax Act is justified when a search under section 132(1) has been conducted, as section 153A provides the Assessing Officer with the power to assess or reassess.

Once an addition made based on original reasons recorded for reopening is deleted, other additions not part of those original reasons cannot be sustained.

Additions to the cost of construction under section 153A are not sustainable when no incriminating material is found during the course of a search, even if a reference is made to the DVO under section 142A.

Assessment proceedings are void ab initio if initiated by an Assessing Officer lacking jurisdiction. This jurisdictional defect can be raised at any stage, even in collateral proceedings or during execution.

An assessment completed under an incorrect section of the Income Tax Act is considered to be in favour of the assessee.

The assessee has the choice of accounting method, provided it is followed regularly, and the department must accept this choice unless the AO can demonstrate that the true income cannot be ascertained.

Statutory interpretation requires adhering to the plain meaning of the words used by the legislature to discern legislative intent, especially when the meaning is unambiguous.