Landmark Judgements of Supreme Court on Section 143(3) [Assessment]
Where High Court upheld Tribunal’s order holding that Assessing Officer was not justified in making addition to assessee’s income in reassessment proceedings in respect of profit earned on suppressed sales because there was no independent material brought on record by Assessing Officer other than those which, were already collected by Excise Department and which, were yet to be verified by Excise department SLP filed against order of High Court was to be dismissed Estimation of profit (GP rate) - For relevant year, Assessing Officer reopened assessment on basis of show casue notice issued to assessee by Excise Department alleging that assessee had suppressed sale of ceramic tiles and other similar products. In reassessment proceedings, Assessing Officer estimated assessee’s profit margin at rate of 25 per cent of suppressed sales. Accordingly, certain addition was made to assessee’s income. Tribunal, however, deleted said addition by holding that there was no independent material brought on record by Assessing Officer other than those which were already collected by Excise Department and which, were yet to be verified. High Court upheld Tribunal's order. On facts, SLP filed against order of High Court was to be dismissed. [In favour of assessee] (Related Assessment year : 2008-
9) – [PCIT v. Ganga Glazed Tiles (P) Ltd. (2020) 117 taxmann.com 108 (SC)]
Where High Court upheld Tribunal’s order confirming addition made to assessee’s income in respect of unaccounted business receipts having regard to fact that gross profit declared by assessee was much lesser than profit in said line of business and, moreover assessee had failed to provide stock register despite several opportunities, SLP filed against said decision was to be dismissed
Assessee was running a shop selling snacks, namkeen and sweets. A survey operation under section 133A was carried out at business premises of assessee. In course of survey, assessee’s brother, who was an employee of shop, made a statement that there were certain unaccounted receipts from business. On basis of said statement, Assessing Officer made the addition of Rs. 59.40 lakhs as unaccounted
income. Commissioner (Appeals) as well as Tribunal apart from confessional statement of assessee’s brother, noted that gross profit declared by assessee was much lesser than profit in said line of business. Moreover, assessee had failed to provide stock register despite several opportunities. Accordingly, addition made by Assessing Officer was upheld.
In fact, the order of CIT (A) which is elaborate, refers to other materials collected during the course of survey such as gross profit rate in the line of business done by the assessee. It was noticed that the gross profit declared by the assessee was much lesser than the profit in the trade. CIT(A) also noted that during the survey as well as after the survey, assessee failed to submit the stock reconciliation. He had in fact conveyed that no stock was maintained. The assessee had failed to provide stock register despite several opportunities. Inter alia on such grounds, the CIT (A) had confirmed the addition. It is true that the Tribunal has discussed the issue somewhat briefly. Nevertheless, the Tribunal has observed that the information given by Mahesh Biyani cannot be brushed aside nor has the assessee brought on record any material to show that the same was incorrect or unreasonable. More importantly, the Tribunal noted that the material found during the survey proceedings showed that the books of account were not correctly maintained and that therefore, there was no error in rejection of the assessee’s books of account. High
Court taking a view that findings recorded by Tribunal being findings of fact based on appreciation of material on record, confirmed same. All in all, the issue is based purely on appreciation of materials on record being purely factual in nature, in our opinion, no question of law arises. On facts, SLP filed against High Court’s order was to be dismissed. [In favour of revenue] – [Pradeep Kumar Biyani v. ITO (2019) 260 Taxman 298 : 101 taxmann.com 131 (SC)]
Where High Court accepted assessee’s contention that assessment order passed by Assessing Officer without considering material on record was in violation of principles of natural justice, SLP filed against said order was to be dismissed
Assessee filed his return declaring certain taxable income. Assessee’s return was selected for scrutiny and a notice was issued under section 143(2). Assessee’s case was that he brought on record various documents in support of income declared in return. However, Assessing Officer without even taking into consideration those documents, passed assessment order making various additions. Assessee thus filed a writ petition before High Court contending that assessment order was liable to be set aside on ground of violation of principles of natural justice. High Court accepted contention raised by assessee. On facts, SLP filed against order passed by High Court was to be dismissed. [In favour of assessee] – [ACIT v. Balmiki Prasad Singh (2018) 259 Taxman 372 : 99 taxmann.com 204 (SC)]
Order of assessment passed without granting an opportunity to assessee to cross-examine, should not have been set aside by High Court; at most, High Court should have directed Assessing Officer to grant an opportunity to assessee to cross-examine concerned witness
The Apex court held that the High Court ought not to have set a side the order of assessment but at the most, the High Court should have directed the Assessing Officer to grant an opportunity to the assessee to cross-examine the concerned witness. [In favour of revenue] (Related Assessment year : 2004-05). – [ITO v. M. Pirai Choodi (2011) 334 ITR 262 : 245 CTR 233 : 63 DTR 187 (SC)]
KEY NOTE : Decision of Madras High Court in M. Pirai Choodi v. ITO (2008) 302 ITR 40 (Mad.), set aside.
Evidence brought by confession, if successfully retracted, must be corroborated by independent and cogent evidences
The Hon’ble apex Court in Vinod Solanki v. Union of India cautioned in using the retracted statement. The relevant para is as follows:—
It is a trite law that evidences brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidences, which would lend adequate assurance to the court that it may seek to rely thereupon. We are not oblivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also notice that in some of the cases retracted confession has been used as a piece of corroborative evidence and not as the evidence on the basis whereof alone a judgment of conviction and sentence has been recorded. (See Pon Adithan v. Deputy Director, Narcotics Control Bureau, Madras (1999) 6 SCC 1) - [Vinod Solanki v. Union of India (2009) 233 ELT 157 (SC)]
No addition if cross-examination not provided - Evidence which is used against the assessee must be provided to the assessee and also an opportunity to confront the same should be given permitting cross- examination
Though the proceedings under the Income-tax Act are not governed by the strict rules of evidence, the department is bound to afford an opportunity to controvert and cross-examine the evidence on which the department places its reliance. Opportunity of cross-examination must be given. The consequence of breach of natural justice is that either the addition is void or matter may have to be remanded to lower authorities.
- [Kishanchand Chellaram v. CIT (1980) 125 ITR 713 (SC)]
Once affidavit is filed, the contents of the affidavit should be regarded as correct and relied upon as sufficient proof unless the party is called upon and cross-examined and the contents of the affidavit are proved otherwise with sufficient documentary evidence
Section 143 of the Income-tax Act, 1961 [Corresponding to section 23 of the Indian Income-tax Act, 1922] On promulgation of High Denomination Bank Notes (Demonetisations) Ordinance, 1946, Assessee firm encashed 61 high denomination notes of Rs. 1,000 each. When asked to prove, assessee submitted books of account showing relavant entries showing payment being made to them which resulted in said cash in their hand. It also submitted affidavits of payers. Revenue authorities held that it was not possible that all payments after a particular date were being made in multiples of Rs. 1000. They held a part of this amount to be assessee's income from undisclosed sources. It was not enough without further scrutiny to dislodge position taken up by assessee which was supported by entries in cash books and affidavits put in by assessee. Treating a part of case balance as assessee’s income from undisclosed sources was based on pure surmise and based on no evidence and, hence, to be quashed. (Related Assessment year : 1947-48) - [Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC)]