Landmark Cases on Assessment Procedure

Books of account cannot be rejected solely for the absence of a stock register or failure to maintain item-wise stocks unless there is a finding that the accounts are incorrect, incomplete, or the method of accounting does not allow for the deduction of income.

Where circumstances in a case provoke an enquiry, the Assessing Officer (AO) cannot remain passive. If the Tribunal substitutes its own reasons for those required by the AO, it should remand the matter back to the AO.

Exemption under section 54 is allowable where the assessee purchased a new property before the extended due date of filing the return as per section 139(4). Section 139(4) is a proviso to section 139(1) providing an extension for filing returns.

The court's decision in Video Electronics Ltd. v. Joint CIT (2013) 353 ITR 158 is cited as authority in various subsequent judgments, indicating its relevance in income tax law discussions.

A High Court decision remains valid even if a later Supreme Court decision addresses a similar, but not identical, legal issue. A subsequent decision by a higher court does not automatically nullify a prior decision from a lower court unless the ratio decidendi is directly in conflict.

The sanction granted under section 151(2) is not invalid merely because the Additional Commissioner did not explicitly record their satisfaction, provided the reasons for the sanction are unassailable.

Failure by the Assessing Officer to pass a draft assessment order under section 144C(1) before passing the final assessment order vitiates the entire proceeding, making the final order without jurisdiction, null, void, and unenforceable. This procedural lapse is not a mere irregularity but an illegality.

The law prior to the amendment of Section 113 of the Income Tax Act, adding a proviso, was ambiguous regarding the levy of surcharge on block assessments. Some officers believed no surcharge was leviable, while others were unsure of the applicable Finance Act for calculating the surcharge.

The Assessing Officer has a duty to grant benefits and reliefs during assessment, even if they are not claimed by the assessee in their return of income.

An assessment order is not erroneous if the Assessing Officer has applied his mind to the issue and conducted a proper inquiry, even if only a questionnaire was issued and a reply was filed by the assessee.

The Assessing Officer (AO) must record proper satisfaction before invoking Section 14A, as held in Eicher Motors Ltd. v. CIT, citing reliance on Godrej & Boyce Mfg. Co. Ltd.

The rule of consistency in tax proceedings, an exception to the principle that each assessment year is a separate unit, is well-recognized and should not be ignored.

Returns filed pursuant to a notice under section 153A are to be treated as returns filed under section 139(1) by virtue of section 153A(1)(a).

Income can only be taxed under a head specified in Section 14 of the Income-tax Act. The Act does not permit taxing income under any other head.

Disallowance under Section 14A cannot exceed the amount of exempt income earned by the assessee. The Assessing Officer is directed to verify and restrict the disallowance to the exempt income.

If there is a change in the assessing officer, a new notice under section 143(2) should be issued, especially after a settlement application is filed or jurisdiction is transferred.

An order transferring a case is invalid if it is not communicated to the assessee. Non-communication of the transfer order is a serious infirmity.

An Assessing Officer must accept the fair market value of shares determined by the assessee using a prescribed method like DCF or NAV, and cannot substitute their own valuation, as Section 56(2)(viib) is a deeming provision not open to broad interpretation.

Anything that can properly be described as income is taxable unless expressly exempted. The word 'income' has a broad connotation and is not limited to 'profits' and 'gains'.

If a law mandates a specific procedure, it must be followed precisely. Failure to adhere to the prescribed manner invalidates the action.

Partition of Hindu Undivided Family (HUF) property does not require physical division by metes and bounds; disruption of status can be achieved through any legal mode, allowing parties to enjoy their shares as they desire.

The case of SMW Ispat (P.) Ltd. v. ACIT is cited as authority for certain legal propositions in subsequent judgments, although the specific nature of those propositions is not detailed in the provided passages.

A Special Bench decision of the Tribunal rendered prior to a Supreme Court decision is subordinate to the Supreme Court ruling.

An appellant before the Tribunal can raise any new or additional point for the first time in appeal.

A return filed within the time prescribed under section 139(4) of the Income-tax Act is to be considered as having been filed within the time prescribed under section 139(1) or 139(2). This interpretation ensures that the benefits of section 11(1) are available if the required option is exercised in writing with such a return.

The assessment process is an integrated one, commencing with the filing of a return or issuance of a notice and concluding with the demand notice.

Assessments under Chapter XIV B of the Income-tax Act involve an element of guesswork, similar to best judgment assessments, but this guesswork must not be arbitrary.

Where the Assessing Officer (AO) did not consider a new issue, such as the cost of construction, the jurisdiction to deal with it lies solely under sections 147/148/263, not through other assessment proceedings.

In unabated assessment proceedings under Section 153A, the Assessing Officer's additions are limited to incriminating material found during search, otherwise, the assessment can only be reiterated.

Under Section 143(1), an Assessing Officer cannot decide a debatable issue by making adjustments, as the scope of this section is limited to prima facie mistakes and omissions apparent from the record. The Assessing Officer cannot initiate investigations or presume facts not present in the case records.

The Central Processing Centre cannot make adjustments under section 143(1)(a)(iv) that go against a jurisdictional High Court ruling in favour of the assessee, even if the ruling was made after the adjustment.

An assessment recorded in the order sheet, even if not communicated to the assessee, amounts to an order under Section 144 and does not invalidate reassessment proceedings under Section 147, especially when validly reopened under Explanation 2(c) to Section 147.

Prima facie adjustments under section 143(1)(a) are permissible only for incorrect claims that are apparent from information in the return. Debatable claims cannot be adjusted without giving prior intimation to the assessee.

When a valid revised return is filed under Section 139(5), the assessment must be completed solely based on that revised return. Failure to do so, such as not issuing a notice under Section 143(2) for the revised return, renders the assessment order liable to be annulled.

The principle of consistency requires that the Assessing Officer or First Appellate Authority must follow decisions made in earlier years, unless there are good and sufficient reasons to deviate. An assessee's status should not be altered arbitrarily without assigning reasons or distinguishing facts.

When an Assessing Officer raises a query on a particular issue during regular assessment proceedings, it signifies that the officer has applied their mind and formed a view on the matter, which should be reflected in the assessment order. The manner of drafting the assessment order is not within the assessee's control.

An assessee can make a claim of deduction for the first time before the appellate authorities.

Disallowance under Section 14A and Rule 8D requires the Assessing Officer to record specific satisfaction regarding the nexus between expenditure and exempt income, and cannot be mechanically applied without such satisfaction.

An Assessing Officer (AO) must specifically record dissatisfaction with the assessee's claim for disallowance under Section 14A before applying Rule 8D for computation. The dissatisfaction of the CIT(A) or ITAT does not automatically make Rule 8D applicable.

A Hindu Undivided Family (HUF) continues to exist even if it has only one coparcener remaining, as long as the Karta acknowledges its existence by filing returns. The existence of a HUF is not automatically dissolved upon the death of a member if other conditions for its existence remain.

A notice under Section 34 of the Income-Tax Act, 1961, issued to an assessee in the status of an 'individual' when their correct status is 'Hindu undivided family' is illegal, ultra vires, and without jurisdiction, rendering subsequent proceedings void.

Statutory provisions, particularly in taxing statutes, must be strictly construed. No words should be added to a statute, nor should new stipulations be read into it, beyond what is expressly prescribed.

The Department cannot be blamed for delay in completing an assessment if the Assessing Officer could not perform their duties due to the assessee not furnishing evidence.

The Assessing Officer must state in the reasons recorded for reopening an assessment that the appellant failed to disclose all material facts, that the AO had reasons to believe income had escaped assessment, and that there was fresh tangible material justifying the belief.

An assessment order is null and void and without jurisdiction if the Assessing Officer fails to follow the statutorily mandated procedure, such as issuing a draft order under section 144C(1) before issuing a notice of demand and initiating penalty proceedings.

Judicial decisions restate existing law rather than creating new law, and subsequent clarifying judgments have retrospective effect.

The High Court, when exercising powers under Section 260A of the Income Tax Act, cannot interfere with a finding of fact unless it is demonstrated to be perverse. This principle is crucial in appeals before the High Court where the existence of a substantial question of law is a prerequisite.

The Commissioner (Appeals) may pass an order on the basis of material available on hand if the assessee fails to comply with notices despite sufficient opportunity. However, the Tribunal may restore appeals to the AO if similar cases on similar facts were restored.

A prior decision of the Bombay High Court, confirmed by the Supreme Court in P.K. Badiani v. CIT (105 ITR 642), is applicable to the facts of a subsequent case, even if it involves different assessment procedures. This establishes the precedent value of a Supreme Court judgment.

Volition on the part of members is an essential ingredient for forming an 'association of persons'. Simply receiving income jointly, without such volition, is insufficient to constitute an association of persons.