“Section 144(4)”
The decision most relied on for Section 144(4) is Mantola Co-operative Thrift & Credit Society Ltd. v. CIT (50 Taxmann.com 278), cited in 242 judgments on BharatTax.
Leading authorities on Section 144(4)
A cooperative society is not entitled to deduction under Section 80P(2)(a)(i) for interest income earned from investments and deposits which are not attributable to its primary business. An assessment order erroneously allowing such a deduction is revisable under Section 263 as being erroneous and prejudicial to the revenue, or subject to reassessment under Section 147.
The Supreme Court established principles for best judgment assessments, stating that some guesswork is inevitable but the assessment must be bona fide, rational, and free from bias or capriciousness. An appellate authority cannot substitute its judgment for that of the Assessing Officer unless the AO's assessment is shown to be biased, irrational, vindictive, or capricious, especially when the assessee fails to provide proper accounts or counter-evidence.
When an assessee's income is estimated after rejecting their books of account, further additions or disallowances for specific expenses are generally not permissible, as the estimation already accounts for these.
A consolidated satisfaction note covering multiple assessment years is valid for initiating proceedings under section 153C, provided the seized material and the additions rest on incriminating evidence pertaining to those years.
When the Assessing Officer rejects the books of account and computes income by applying a net profit rate, a separate disallowance under section 40A(3) for cash payments cannot be made.
Sections 4 and 5 of the Income Tax Act, which define total income and chargeability, are subject to Section 90, meaning that Double Taxation Avoidance Agreements (DTAAs) override the Act's provisions in case of a conflict.
An Assessing Officer cannot make ad hoc disallowances or estimate an assessee's income if the books of account have not been rejected under Section 145(3) of the Income-tax Act.
The scope of assessment under Section 153A is not limited solely to seized material but includes any other information provided by the assessee in the return of income filed in response to a Section 153A notice. It also applies principles for estimating undisclosed income, such as from on-money receipts, even if there is material for only some transactions.
