BASIC PRINCIPLES FOR LAND OF LAW

Basic Principles for LAND OF LAW

1.    Principle of Natural Justice

i.              All evidences / materials - copy to Assessee.

ii.             Right of rebuttal.

iii.            Third party evidence.

iv.            Full access to assessment file.

v.             Examination and cross-examination of a witness.

vi.            Issuance of SCN, It is mandatory to fix the liability of the assesse or increase liability.

vii.           Affidavits.

 2.    Even shifting burden of Proof

i.              Generally, the initial burden of proof is on the Assessee. However, once basic evidences/materials are placed on record and primary onus is discharged, the burden shifts to Assessing Officer.

ii.             Assessing officer to examine and scrutinize the evidences to prove them incorrect, unsupported, false or unbelievable. Then the burden again shift to Assessee.

3.    Commercial expediency of Expenditure

i.              It is an assessee who is the best judge to decide as to which expenditure is to be incurred for the purpose of business/profession, in what circumstances and in what quantum. In short propriety of expenditure cannot be challenged by the department.

• 223 ITR 101 (SC)

• 207 ITR 427 (Guj)

• 84 ITR 508 (Guj)

ii.             Commercial expediency is to be judged from the viewpoint of a prudent businessman/professional and not from the viewpoint of AO.

iii.            No expenditure can be considered excessive by merely comparing it with the preceding year’s expenditure or some other assessee.

iv.            Necessacity of expenditure also cannot be questioned or probed.

4.    Evidences and Materials used in Assessment proceedings

i.              In the assessment proceedings both the evidences and materials can be used.

ii.             Section 3 of the India Evidence Act defines Evidence to mean and include all statements oral or in writing and all documents.

iii.            Therefore, all the evidences in the form of statements, affidavits and declarations can be adduced as evidence.

iv.            Material on the other hand includes explanations, submissions, contentions, claims, details, information, statements, affidavits, books of account, documents, record etc.

5.    Protective Assessment

i.              The Income-tax Act, 1961 doesn’t prescribe any specific provision regarding “Protective assessment”. It is an outcome of various judicial pronouncements.

ii.             If “Substantive assessment” is not made, then “Protective assessment” becomes substantive assessment.

iii.            AO cannot make any recovery from an assessee in whose case protective assessment has been framed.

iv.            Such a concept is restricted to assessment proceedings only. Penalty order cannot be passed on protective basis.

6.    Fresh claims

i.              Assessee can make fresh claims before “AO” only by way of furnishing “Revised return”. No fresh claims shall be entertained by AO at the assessment stage [Goetze (India) Ltd. vs. CIT – 284 ITR 323 (SC)].

ii.             Hence, if an assessee fails to make any claim at the time of furnishing original return, he must file a revised return u/s 139(5).

iii.            The aforesaid decision of the Hon’ble Apex Court does not put any restriction on the powers of “Appellate Authorities” to admit such fresh claims.

7.    Certificate for claiming deduction/exemption

Certain deductions/exemptions require prescribed certificate to be filed along with return of income. However, such a requirement is merely a technical one. Even if such certificate is furnished during the assessment proceedings, then deduction/exemptions cannot be denied in the count that such certificate was not filed along with return.