This article explains Income Tax Assessment and laws related to the jurisdiction, principles of natural justice, deeming provisions, the burden of proof, onus, and shifting of burden.
Income tax assessment can be defined as the process of collecting and reviewing the income tax returns filed by assessees. This assessment is done after filing the income tax returns. In this article, we will discuss case laws about jurisdiction and deeming provisions, among others.
Case Laws of Income Tax Assessments
1. Jurisdiction
(a) The term ‘jurisdiction’ refers to an officer’s legal right to make a decision or to take action in accordance with a statute. With mutual agreement, the parties cannot waive or transfer jurisdiction. The usual principle is that vires of jurisdiction can be addressed at any time.
(b) There is a difference between ‘venue’ and ‘jurisdiction.’
- ‘Jurisdiction’ is the legal term for statutory power.
- The venue, on the other hand, is the location of the assessment in terms of territorial area.
(c) The ‘venue’ component of an Assessing Officer’s jurisdiction is regulated by the following factors:
(i) Regional jurisdiction over the place of business or residence
(ii) Level of returned income or loss
(iii) The class of the individual, such as salaried employees, contract workers, business partners
(iv) Granted jurisdiction under section 127
(v) Even such a jurisdiction is constantly changing. It might be different depending on when the jurisdiction’s return of income was filed, when assessment proceedings were first started, as well as when the assessment order was eventually going to be passed.
(vi) In accordance with the Taxation Laws (Amendment) Act of 2006, a Tax Recovery Officer may be permitted to perform the duties of an Assessing Officer.
(d) When discussing ‘jurisdiction of the assessing officer,’ section 124 only discusses ‘venue’ and not ‘jurisdiction,’ which refers to statutory authority.
(e) An assessee must raise objections to the Assessing Officer’s jurisdiction within the time frame specified by Section 124(3), and the DG, Chief CIT, or CIT must decide whether to uphold the objection.
(f) Section 124(5) enables concurrent jurisdiction. According to the general rule, an individual would be assessed by the Assessing Officer of the district in which they reside or conduct business. It will be up to the designated Assessing Officers with jurisdiction over the branch office to assess where the assessee has branches other than the Head Office. However, there is a fundamental concept that states that the same individual cannot be subjected to two separate evaluations.
(g) Section 127 permits any matter to be transferred from one or more Assessing Officers under them to any other Assessing Officer at any time during the proceedings by the Director General, Principal Director General, Commissioner Chief Commissioner, Principal Chief Commissioner and Principal Commissioner.
Discover the Seamless Power of Online Bookkeeping – Empowering Your Business With Real-Time Insights and Financial Clarity, All at Your Fingertips.
2. Principles of Natural Justice
(a) It is also called ‘hearing opportunity,’ and it is based on the ‘audi alteram partem’ rule. This principle has been known from the beginning of time. A fundamental legal principle states that every judgement that will affect someone’s rights must first provide that individual with a chance to present their side of the matter.
(b) Articles 14 and 21 of the Indian Constitution specifically state the principles of natural justice. Adherence to the Principles of Natural Justice is at the centre of justice administration.
(c) Natural justice is based on fundamental, very basic principles, and it is not to be interpreted as a simple formality or misinterpreted as such.
Make informed financial decisions – our Income Tax Calculator ensures accurate projections.
3. Burden of Proof, Onus and Shifting of Burden
(a) The burden of proof is a significant factor in assessment proceedings. It’s interesting how the burden of proof is constantly changing, just like the ball in a football game. Additionally, there are a few deeming provisions that must be given their proper role to play, such as sections 68, 69, 69A, 69B, and 69C, where the assessee has the initial burden of proof.
(b) The rule of the onus is an important rule of evidence. Similar to how the toss determines who must bat first in a game of cricket, the person whose burden of proof is on them in a court case is required to present evidence in support of that individual.
Imagine a case where the assessee and the department are at a standstill because neither has any supporting evidence. The question of whose side the decision would be made in such a situation arises. And the answer will depend on who has the onus. In the event that the assessee had the burden of proof and he failed to discharge it, the matter will be resolved against them, and vice versa.
(c) The basic rule is that the onus, or primary burden of proof, is always on the person declaring a proposition or fact that is not self-evident. The onus is on the side, asserting that the apparent is not genuine.
If a party asserting a fact that is not obvious must provide evidence but fails to do so, the issue must be ruled against that party.
The onus is on the assessing officer to establish the truth of any allegations made by the department, including any claims that a transaction is fraudulent or false or that the assessee is Benami or some other person.
4. Deeming Provisions
(a) To put it simply, a deeming provision is one that considers a male to be a female and vice versa.
(b) A ‘deeming provision’ is a presumptive claim that allows legal processes to move promptly and without unfavourable pauses.
(c) The term ‘deemed’ might refer to the obvious, the unclear, or even the impossible. It is occasionally used to prove a certain construction that could otherwise be uncertain.
(d) A deeming provision may occasionally be used to broaden the definition of a term to cover situations that would not typically fall within the scope of the provision. Therefore, the events and consequences that arise from legal fiction also need to be considered real.
(e) A legal fiction and a legal presumption are two different things. A legal provision that fabricates a fact out of something that is not one is known as a legal fiction. Legal fictions serve a certain function solely. They must be strictly defined, limited to the function for which they were intended, and should not be used outside of their proper scope. Fiction, on top of fiction, is not possible. In the context of a penalty provision, it assumes significance.
(f) A legal presumption is an inference that can be made based on a specific fact, collection of facts, etc. When a legal presumption is intended to be raised by a specific and unique provision, it cannot be considered to be simply clarifying in nature but must be treated as a substantive provision of law for all intents and purposes.
Conclusion
Now that you are aware of what is the income tax assessment and its case laws, you can take a necessary call as to what to do if need be. In case of any queries, you can always take expert help by contacting the legal experts at Vakilsearch.
Read More:
- How to Submit your ITR Online?
- Why we should file Income Tax Returns?
- Things to know about Income Tax Act
