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ASSESSMENT PROCEDURE
The mere fact that the material placed by the assessee before the assessing officer is unreliable
does not empower the officer to make an arbitrary order. The power to make a best judgment
assessment is not an arbitrary power - State of Orissa v. Maharaja Shri B.P. Singh Deo 76 ITR 690.
The authority making a best judgment assessment must make an honest and fair estimate of
the income of the assessee and though arbitrariness cannot be avoided in such an estimate, the
same must not be capricious but should have a reasonable nexus to the available material and
the circumstances of the case - Brij Bhushan Lal Parduman Kumar v. CIT 115 ITR 524 .
Power of Joint Commissioner to issue directions in certain cases [Sec. 144A]
A Joint Commissioner may, on his own motion or on a reference being made to him by the
Assessing Officer or on the application of an assessee, call for and examine the record of any
proceeding in which an assessment is pending and, if he considers that, having regard to the
nature of the case or the amount involved or for any other reason, it is necessary or expedient
so to do, he may issue such directions as he thinks fit for the guidance of the Assessing Officer
to enable him to complete the assessment and such directions shall be binding on the Assess-
ing Officer:
Provided that no directions which are prejudicial to the assessee shall be issued before an
opportunity is given to the assessee to be heard.
Income escaping assessment [Sec. 147]
If the Assessing Officer has reason to believe that any income chargeable to tax has escaped
assessment for any assessment year, he may, following the prescribed process, assess or reas-
sess such income and also any other income chargeable to tax which has escaped assessment
and which comes to his notice subsequently in the course of the proceedings under this sec-
tion, or recompute the loss or the depreciation allowance or any other allowance, as the case
may be, for the assessment year concerned.
Where an assessment under section 143(3) or section 147 has been made for the relevant assess-
ment year, no action shall be taken under this section after the expiry of four years from the end
of the relevant assessment year, unless any income chargeable to tax has escaped assessment
for such assessment year by reason of the failure on the part of the assessee to make a return
under section 139 or section 142 or section 148 or to disclose fully and truly all material facts
necessary for his assessment, for that assessment year.
Case Law:
A writ petition challenging reassessment, cannot be thrown out at the threshold on the ground
that it is not maintainable - Techspan India (P.) Ltd. v. ITO 283 ITR 212 .
If the direction by the Commissioner is to reopen the assessment under section 147 bypass-
ing the statutory formalities, that would probably amount to dictating his subordinate to act in
a particular way thereby taking away the discretion vested in the subordinate - CIT v. Abdul
Khader Ahamed 156 Taxman 206.
Disclosure in wealth-tax proceedings will not suffice - Arun Kumar Maheshwari v. ITO 144
Taxman 651.
Notice cannot be issued unless the return which has already been filed has been disposed of -
CIT v. M.K.K.R. Muthukaruppan Chettiar 78 ITR 69 ; Bhagwan Das Sita Ram (HUF) v. CIT 146 ITR
563.
Sec. 149 : Time limit for notice.
(1)No notice under section 148 shall be issued for the relevant assessment year —
(a) if four years have elapsed from the end of the relevant assessment year, unless
the case falls under clause (b);
(b) if four years, but not more than six years, have elapsed from the end of the
relevant assessment year unless the income chargeable to tax which has es
caped assessment amounts to or is likely to amount to one lakh rupees or more
for that year.
• Time-limit applies for ‘Issue’ and not for service - R.K. Upadhyaya v. Shanabhai P
Patel [1987] 166 ITR 163 (SC).
• Amended law will apply only if limitation has not already expired - Chandiram v.
ITO [1996] 87 Taxman 418 (Raj.).
The word ‘issued’ in section 149 should be given its natural meaning and not the strained
wider meaning of ‘served’. Consequently, where the notice was issued within time but was
served on the assessee after the expiry of the time-limit, it could not be held to be invalid - R.K.
Upadhyaya v. Shanabhai P. Patel 166 ITR 163 (SC); CIT v. Sheo Kumari Debi 157 ITR 13 and Jai
Hanuman Trading Co. (P.) Ltd. v. CIT 110 ITR 36
Provision for cases where assessment is in pursuance of an order on appeal, etc. [Sec. 150]
(1) Notwithstanding anything contained in section 149, the notice under section 148 may
be issued at any time for the purpose of making an assessment or reassessment or
recomputation in consequence of or to give an effect to any finding or direction con-
tained in an order passed by any authority in any proceeding under this Act by way
of appeal, reference or revision or by a Court in any proceeding under any other law.
(2) The provisions of sub-section (1) shall not apply in any case where any such assess-
ment, reassessment or recomputation as is referred to in that sub-section relates to an
assessment year in respect of which an assessment, reassessment or recomputation
could not have been made at the time the order which was the subject-matter of the
appeal, reference or revision, as the case may be, was made by reason of any other
provision limiting the time within which any action for assessment, reassessment or
recomputation may be taken.
• This section prescribes the time limit for issuance of notice u/s 148 in a special case.
This section overrides the provisions of section 149. Section 149 vide sub-section (2)
provides that issue of notice u/s 148 is subject to the provisions of section 151. Thus,
approval u/s 151 for issue of notice u/s 148(1) is not required in a case covered by
section 150 {Sukhdayal Pahwa v. CIT [1983] 140 ITR 206 (MP)}.
Case Law:
There is no requirement in any of the provisions of the Act or any section laying down as a
condition for the initiation of the proceedings that the reasons which induced the Commis-
sioner to accord sanction to proceed under section 147 must also be communicated to the asses-
see S. Narayanappa v. CIT 63 ITR 219 .