Section 132A of the Income Tax Act
The decision most relied on for Section 132A is CIT v. Kabul Chawla (380 ITR 573), cited in 3,235 of the 633 judgments on BharatTax that turn on this section.
Leading authorities on Section 132A
In a search assessment under Section 153A, additions can only be made for completed or non-abated assessment years if incriminating material relevant to those years is found during the search, although notice under Section 153A(1) is mandatorily issued for six assessment years preceding the search.
Under Section 153A, no addition can be made to a completed assessment for assessment years where original assessments have concluded, unless incriminating material relevant to the undisclosed income is found during the search and seizure operation.
If no incriminating material is found during a search operation regarding a particular issue, then no addition can be made concerning that issue in an assessment under section 153A of the Income-tax Act.
A statement made by an assessee under Section 131 during search proceedings, without any corroborating incriminating material found during the search, cannot solely constitute incriminating evidence for making additions in assessments under Section 153A or 153C.
The Supreme Court holds that circulars issued by the Central Board of Direct Taxes (CBDT) are binding on all officers and persons employed in the execution of the Income-tax Act. These circulars are binding even if they deviate from the provisions of the Act, particularly when issued to relieve hardships.
Recording satisfaction under Section 153C for initiating proceedings against a third person is not a mechanical exercise; it requires a finding that seized material has a direct bearing on the third person's income, and improper satisfaction vitiates the assessment. Abatement under the second proviso to Section 153A is an inevitable consequence of a search, irrespective of the Assessing Officer's opinion on the material's impact.
When an assessee has sufficient interest-free own funds available to make interest-free advances or investments, it is presumed that such advances or investments are made from these interest-free funds, thereby preventing the disallowance of interest expenditure under Section 36(1)(iii).
Judgments on Section 132A
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