Section 153(3)

Section 153(3) — the law in short

What the courts have decided on section 153(3), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Sahara India (Firm) v CIT Supreme CourtCuts both ways
  The AO ordered a special audit of my books without hearing me first. Is that direction valid?
  No. A direction under s.142(2A) carries serious civil consequences, so the assessee must be given a reasonable opportunity of being heard before it is issued, even though the section as it then stood said nothing about a hearing. The post-audit hearing under s.142(3) is no substitute, because it reaches only the audit material and not the validity of the direction.
• Rajinder Nath v CIT Supreme CourtHelps taxpayer
  An appellate order in my firm's case said the officer is free to assess the amount in the partners' hands. Does that lift the limitation bar for assessing me?
  No. The Supreme Court held that the words finding and direction are limited in meaning. A finding must be one necessary for the disposal of the particular case, of the particular assessee and for the particular year, and directly involved in that disposal; an incidental finding will not do. A direction must be express, necessary for the disposal, and within the power of the authority making it. Saying the officer is free to take action leaves the matter to his discretion and is not a direction at all. Section 153(3)(ii) does not enlarge jurisdiction; it only raises the bar of limitation.
• ITO v Murlidhar Bhagwan Das — a finding is only what the year under appeal actually required Supreme CourtHelps taxpayer
  The Commissioner (Appeals) allowed my appeal for one year and said in passing that the amount really belongs to an earlier year. The officer has now reopened that earlier year and calls the remark a finding. Is it one?
  Probably not. A Constitution Bench of five judges construed the second proviso to s.34(3) of the 1922 Act — the ancestor of s.150 — and held by three to two that it lifts the time limit only for the year that was actually before the appellate, revisional or reference authority. The majority adopted the Allahabad High Court's definition of “finding” in Pt. Hazari Lal and added that a finding can only be what was necessary for the disposal of an appeal in respect of the assessment of a particular year. A “direction” means one the authority is empowered to give under the sections named in the proviso, and s.31 gave the Appellate Assistant Commissioner no power to order an assessment for a year that was not before him. The words “any person” in the proviso were confined to a person intimately connected with the assessment of the year under appeal. The Revenue's appeal was dismissed with costs. Raghubar Dayal and Mudholkar JJ dissented.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.