Section 143(3) — Assessment

Section 143(3) of the Income-tax Act, 1961 deals with the detailed assessment of a taxpayer's return of income. This section empowers the Assessing Officer (AO) to scrutinize the return filed by the taxpayer to ensure that the income declared and the deductions claimed are accurate and comply with the law. The AO may require the taxpayer to furnish further information or documents to substantiate the claims made in the return. This section is significant as it serves as a mechanism to verify the correctness of the return and to prevent tax evasion. The burden of proof lies with the taxpayer to provide evidence supporting their claims. The assessment under this section results in an order that determines the final tax liability of the taxpayer, which can be subject to appeal if the taxpayer disagrees with the findings.

Common Litigation Flashpoints

1. Discrepancies in income declaration
2. Disallowance of claimed deductions
3. Valuation of assets and liabilities
4. Non-compliance with notice requirements

Judgments on Section 143(3) — Assessment

• Dy. CIT Central Circle – 1(4), Kolkata vs Femina Stock Management Company Ltd. — ITAT,
  The assessee successfully discharged its burden of proof under Section 68 by providing sufficient evidence of the identity, creditworthiness, and genuineness of the share applicants.
• M/s Dilsa Distributers Combines vs ITO-11(1)(1) — ITAT, 2013
  The statement of a third party cannot be used against the assessee without providing an opportunity for cross-examination.
• Rambagh Palace Hotels Private Limited vs Deputy Commissioner of Income Tax — HC,
  A complaint filed by a director alleging financial irregularities can constitute tangible material for reopening assessments under Section 148.
• NAYAN C SHAH vs INCOME TAX OFFICER — HC, 2016
  A mere technical breach does not warrant the imposition of penalty under section 271(1)(c) of the Income Tax Act.
• J K Investo Trade (India) Limited vs DCIT — ITAT, 2023
  The assessee is eligible to claim deduction under Section 80G irrespective of the fact that the corpus contribution relates to CSR activities.
• M/s. Goldman Sachs Services Pvt. Ltd. vs Joint Commissioner of Income Tax — ITAT, 2020
  Disallowance under section 14A is not applicable if no exempt income is earned during the assessment year.
• DCIT, CC-1(2), Kolkata vs M/s Chaman Metallics Ltd — ITAT,
  Once the assessee has submitted documents relating to identity, genuineness of the transaction, and credit-worthiness, the AO must conduct an inquiry before invoking Section 68.
• Smt Gloria Eugenia Rynjah Banerji vs Income Tax Officer — ITAT,
  The assessee successfully explained the source of cash deposits as proceeds from the sale of inherited land, supported by credible evidence.
• The Deputy Commissioner of Income Tax, LTU, Bangalore vs M/s. Biocon Limited — ITAT,
  The provisions of Section 10B are exemption provisions, and profits of the eligible unit should not be set off against losses of non-eligible units.
• DCIT-7(1)(1) vs Goldman Sachs (India) Securities Pvt. Ltd. — ITAT,
  Discount on issue of employees stock options is allowable as deduction in computing the income under the head profits and gains of business.
• Nuvama Wealth Management Limited vs DCIT — ITAT,
  ESOP discount represents consideration for services rendered by employees and is therefore deductible as business expenditure.
• Action Gold vs Deputy Commissioner of Income Tax — ITAT,
  A liability that is subsequently discharged cannot be treated as having ceased during the year under consideration.
• Deputy Commissioner of Income Tax vs IBM India Private Limited — ITAT,
  ESOP expenditure is allowable as a revenue expenditure if it forms part of employee remuneration and is supported by judicial precedents.
• Income Tax Officer (Exemption) vs Wrestling Federation of India — ITAT,
  The proviso to Section 2(15) does not apply if the receipts are incidental to the fulfillment of the charitable objectives and not used as business receipts.
• GM Modular Private Limited vs Principal Commissioner of Income Tax – 1 and Ors — HC,
  A bona fide claim based on a binding judicial precedent cannot attract penal consequences even if the precedent is later reversed.
• M/s. Alubound Dacs India Private Limited vs. Dy. CIT — ITAT, 2024
  CSR expenses mandated by law can be claimed as a deduction under Section 80G if they meet the stipulated conditions.
• Hyatt International Southwest Asia Ltd. vs Additional Director of Income Tax — SC,
  A Permanent Establishment exists if the enterprise has a fixed place of business at its disposal through which it carries on its business activities.
• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.
• Kavita Jasjit Singh vs Commissioner of Income Tax (Appeals) — ITAT, 2023
  The non-declaration of interest on income tax refund cannot be considered as underreporting of income if the taxpayer had a bona fide reason for not declaring it.
• PR. COMMISSIONER OF INCOME TAX CENTRAL-2 NEW DELHI vs MEETA GUTGUTIA PROP. M/S FERNS 'N' PETALS — HC,
  Completed assessments can be interfered with by the AO under Section 153A only on the basis of some incriminating material unearthed during the course of search.
• Price Waterhouse Coopers Pvt. Ltd. vs Commissioner of Income Tax, Kolkata-I — SC, 2012
  A bona fide and inadvertent error does not amount to furnishing inaccurate particulars or concealment of income.
• ITO, Ward 13 (1) vs M/s. Navodaya Castles Pvt. Ltd. — ITAT,
  The AO must independently apply his mind to the information received before initiating proceedings under Section 147/148.