Section 254(1) of the Income Tax Act
The decision most relied on for Section 254(1) is S. Ranganathan J in Yadu Hari Dalmia v. Commissioner of Income Tax, Delhi (Central) (126 ITR 48), cited in 77 of the 396 judgments on BharatTax that turn on this section.
Leading authorities on Section 254(1)
Section 68 was introduced to codify and clarify existing judicial principles regarding unexplained cash credits and to plug loopholes, rather than to introduce entirely new law. The Assessing Officer must conduct exhaustive inquiries and gather material before making any additions for unexplained credits.
For a valid reassessment under Section 147, the Assessing Officer must record substantive reasons to believe income has escaped assessment, as a mere boilerplate statement of non-disclosure or non-filing is insufficient. Furthermore, a taxpayer's disclosure is not considered full and true if it requires further inquiry by the AO to ascertain material details, especially under Explanation 1 to Section 147.
An assessee can raise a new claim or ground for the first time before an appellate authority or the Tribunal, even if no revised return was filed, provided the claim was legally available and the necessary facts are on record or can be examined. Such a claim, if available in law, cannot be shut out merely due to inadvertence or an erroneous belief of a complex legal position.
Assessment orders passed by an Assessing Officer are liable to be set aside if they disregard binding instructions or circulars issued by the Central Board of Direct Taxes (CBDT), especially concerning the selection of returns for scrutiny. The CBDT circulars are binding on all officers of the Income-tax department.
Expenditure incurred for making advertisement films is revenue expenditure if it relates to an ongoing business. However, if the expenditure is for a brand to be used in a business yet to commence, it is capital expenditure.
Payment received for refraining from carrying on a competitive business is treated as a capital receipt. High Courts may misinterpret prior Supreme Court judgments like Gillanders Arbuthnot & Co. Ltd. in their decisions.
The Gujarat High Court in Jayvant Singh Vaghela v. ITO (2013) establishes that a reasonable cause for delay in filing an appeal is necessary for condonation. The court relies on principles laid down in landmark Supreme Court decisions to assess whether the grounds presented by the assessee constitute a sufficient 'reasonable cause' for the delay.
Retention money withheld by a contractee is not taxable in the year it is retained, but only in the year the obligations under the contract are fulfilled and the amount becomes due to the assessee.
Judgments on Section 254(1)
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