To decide whether the institution exists solely for education and not to earn profit the test of predominant object of the activity has to be seen to decide. The purpose does not lose its character merely because some profit arises from the activity. It is not possible to carry on educational activity in such a way that the expenditure exactly balances the income and there is no resultant profit, for, to achieve this, would not only be difficult of practical realization but would reflect unsound principles of management. In order to ascertain whether the institute is carried on with the object of making profit or not it is duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is established (Aditanars Educational Institution 224 ITR 310 (SC) & American Hotel and Lodging Association 301 ITR 86 (SC) followed)

The DRP, being an authority created under a statute and conferred with the powers, has the obligation to act as a body living to the expectations which the law mandates. The DRP has to afford adequate opportunity for personal hearing and deal with the issues urged by a speaking order which would reflect cogent reasons. This is apt to say so that no assessee can have any kind of apprehension that the approach to the DRP is perfunctory

The authorities can determine the true legal relation resulting from a transaction and if some device has been used by the assessee to conceal true nature of the transaction, it is the duty of the authority to unravel the device and determine its true character. However, the legal effect of the transaction cannot be displaced by probing into the “substance of the transaction”. The taxing authority must not look at the matter from its own view point but that of a prudent businessman. Each case will depend on its own facts. The exercise of jurisdiction cannot be stretched to hold a roving enquiry or deep probe

As the department had examined the fundamental nature of the transaction in the earlier years and its nature remained unchanged, the department could not have changed its view as regards the nature of the transaction by dubbing it as erroneous. Though the principle of res judicata does not apply to income-tax proceedings, Courts have held that where a fundamental aspect of a transaction is found as having permeated through different assessment years, the revenue is not permitted to change its view unless there is a change in circumstances. The department is not entitled to re-open an assessment based on a fresh inference of transactions accepted by the revenue for several preceding years on the pretext of dubbing them as erroneous. Associated Food Products 280 ITR 377 (MP), Sirpur Paper Mills Ltd 114 ITR 404 (AP) & CIT vs Gopal Purohit 228 CTR 582(Bom) followed

In the context of regular assessment proceedings, it has been held in Lalji Haridas vs. ITO 43 ITR 387 (SC) that even when there is no specific provision in the Act for protective assessment, the AO has power to make such a protective assessment under certain circumstances. This principle of law will apply to block assessment proceedings u/s 158BC & 158BD as well and the AO has the power to make a block assessment order on a protective basis