Judgment:
1. On an application filed under Section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following question for the opinion of this court:
'Whether, on the facts and in the circumstances of the case, the Tribunal was correct in cancelling the orders under Section 263 of the Income-tax Act for the assessment years 1977-78, 1979-80 to 1981-82 ?'
2. The assessee derives income from the business of contract and construction of roads and bridges. The assessment years involved are 1976-77 to 1981-82. The assessments were completed under Section 143(3) read with Section 148. Thereafter a notice under Section 263 of the Act was issued by the Commissioner of Income-tax on December 24, 1982, to revise the assessment orders made by the Assessing Officer. For revising the assessment order, the Commissioner of Income-tax was of the view that:
(a) the assessment for the assessment year 1976-77 should be made by the Income-tax Officer, Special Survey Circle, and not by the Income-tax Officer, B-Ward, and
(b) the assessment orders were made in haste and stereotype fashion.
3. In reply, the assessee submitted that when the Income-tax Officer, B-Ward, has issued a notice for registration of the proceedings to assess the income of the assessee in the above said years and since the assessee has not objected to the jurisdiction, therefore, it was not the fault of the assessee as the assessee is not supposed to know who has the jurisdiction, whether it is the Income-tax Officer, Special Survey Circle, or the Income-tax Officer, B-Ward. It has been further noticed that the assessment has not been made in haste and that after making the necessary enquiries for assessing the income of the assessee, some additions were made, therefore, it cannot be said that the order of the Assessing Officer was erroneous and prejudicial to the interests of the Revenue.
4. The Tribunal has considered the submissions and has taken the view that merely the low profit shown by the assessee in itself does not render the order erroneous. The Tribunal further observed that the Income-tax Officer had duly considered the explanation furnished during the course of assessment proceedings and also considered the heavy losses in contract work due to competition in the line of business and held that if low G. P. or N. P. has been shown in the business, that does not mean, the order of the Assessing Officer is erroneous.
5. None appeared for the assessee. Heard learned counsel for the Revenue, Mr. Singhi. Whether the Assessing Officer has committed an error in making the assessment for the assessment year 1976-77 in this case, on this aspect, the Tribunal has concluded its findings in para. 5 of the order, which reads as under :
'We have heard the rival submissions and considered the various materials that have been placed on record. The Income-tax Officer, B-Ward, started with the assessment for 1979-80 onwards and later on did not assessments 1976-77 onwards as the returns contained the GIR number and, therefore, he was justified in assuming that the assessee was an existing assessee in his ward. The Income-tax Officer, B-Ward, had the jurisdiction to assess contractors cases whose names begin with alphabet 'G'. He could have possibly sent the first year, i.e, 1976-77, to the Special Survey Circle had the GIR numbers were not mentioned on the returns. Having assumed the jurisdiction, he proceeded to make the assessments. He conducted such enquiries as he felt necessary considering the fact of the case. From the manner in which he has passed the assessment order, it gives an indication that he had applied his mind to the facts of the case and found the various submissions for low g. p. plausible. The only mistake which the Income-tax Officer committed for 1976-77 was that he did not seek the sanction of the Commissioner of Income-tax prior to issue of notice under Section 147. The Supreme Court in the case of CIT v. Kurban Hussain Ibrahimji Mithiborwala : [1971]82ITR821(SC) , observed that the requirement of assumption of jurisdiction by the Commissioner pertain to reason of natural justice. Breach of principles of natural justice affect the legality of the order made but does not affect the jurisdiction of the Commissioner. The Federal Court in the case of Chatturam v. CIT [1947] 15 ITR 302, has observed that the assessment on a person who submits his return would be valid notwithstanding that no valid notice or no notice at all might have been issued. They have further observed that (page 307) : the income-taxassessment proceedings commence with the issue of a notice. The issue or receipt of a notice is not, however, the foundation of the jurisdiction of the Income-tax Officer to make the assessment or of the liability of the assessee to pay the tax. It may be urged that the issue and service of a notice under Section 22(1) or (2) of the Act of 1922 may affect the liability under the penal clauses which provide for failure to act as required by the notice. The jurisdiction to assess and the liability to pay the tax, however, are not conditional on the validity of the notice.' In the case of Seth Kanhaiyalal v. CIT : [1937]5ITR739(All) , the Income-tax Officer designated himself wrongly and in the following cases the notices contained a small error and it was held that such small error would not invalid the notice or the assessment.
'Tarak Nath Bagchi v. CIT : [1946]14ITR319(Cal) and Dr. R.N. Singha v. Secretary of State for India [1927] 2 ITR 462 139(2)); Lachhman Das Babu Ram v. CIT [1929] 4 ITD 61 (All) 142(1)); Rajmani Devi v. CIT : [1937]5ITR631(All) (Section 143(2)); Mangal Sen v. ITO : [1964]52ITR621(All) and Sewlal Daga v. CIT : [1965]55ITR406(Cal) (Section 148); CIT v. K.M.N.N. Swaminathan Chettiar : [1947]15ITR430(Mad) 148).'
Section 292B has come into the statute book with effect from October 1, 1976, provides that if there are certain mistakes, defects or omissions in the notice, etc. But otherwise the notice, summons or other proceedings are in substance and effect in conformity with or according to the intent and purpose of this Act, such mistakes are capable of correction and would not lead to the conclusion that they are invalid. If we read Section 148 along with Section 292B, we are of the view that the requirement of the section which was not complied with by the Income-tax Officer is only a mistake capable of correction. The sanction though not obtained prior to the issue of the notice would not lead to the conclusion that the notice was invalid in view of the provisions contained in Section 292B especially when the assessee is an existing person and carrying on the business of construction. Since the sanction of the Commissioner of Income-tax under Section 151(2) is a mandatory requirement, not following of such mandatory requirement by the Income-tax Officer is bad in law. It has been repeatedly held that a procedure provided under the Act if not adhered to by the authorities, it would only be justified to remit the matter back to that authority to comply with the procedure for the assessment year 1976-77, the Income-tax Officer had not complied with the requirement under Section 151(2) prior to the issue of the notice and, therefore, it was proper for the Commissioner of Income-tax to set aside the order of that year to be redone. We, therefore, uphold the order of the Commissioner of Income-tax for the sole reason that mandatory requirement of obtaining sanction of the Commissioner of Income-tax prior to issue of notice by placing reliance on the Supreme Court decisions in the case of Johri lal (HUF) v. CIT : [1973]88ITR439(SC) , where it had been held that if the Income-tax Officer fails to obtain the sanction of the Commissioner of Income-tax, the assessment would be vitiated.'
6. The profit rate shown by the assessee and further had been accepted by the Income-tax Officer, whether that renders the order of the Assessing Officer and is prejudicial to the interests of the Revenue on this aspect, the Tribunal has concluded its decision in para. 6, which reads as under:
'As far as the other ground that proper enquiry was not done by the Income-tax Officer is only a surmise based on the acceptance of a low profit of four per cent. as against the generally accepted results of about 10 per cent. to 121/2 per cent. The Income-tax Officer's order which has been reproduced earlier goes to establish that he had in fact carried out such enquiries as he felt necessary and the reading of the order also indicates that he had carried out the examination of the evidence for low tendering in which are at pages 70 to 83 as also extension for carrying out the work granted by the contractors which has resulted in additional expenditure thus leading to low profits. Each assessee's case is distinct and separate from another assessee and merely for the reason that contractors not maintaining the accounts, the profit is assessed at 10 to 121/2 per cent. of the receipts, is no ground for invoking Section 263 as we are sure that the Commissioner of Income-tax is not unaware of cases where even losses have also been assessed and accepted by the Department. Thus, we find ourselves unable to sustain the order of the Commissioner of Income-tax, on this ground. Although we do not endorse any of his other remarks at all, we uphold his order for the assessment year 1976-77 for non-compliance of the requirement of Section 151(2) only and for the other years, we quash his order as in our opinion the Commissioner of Income-tax had not pointed out any error in the order of the Income-tax Officer which could be said to be prejudicial to the Revenue.'
7. When the Assessing Officer after going through the material on record and after considering the explanation of the assessee, made some additions and rejected the books of account, it cannot be said that he has not applied his mind. In our view, it is not always necessary that every assessee in the line of business should have the same rate of profit.
8. When the Assessing Officer has considered all relevant material on record, it is basically a question of fact and it cannot be interfered with unless the finding of the Tribunal is found perverse. Considering the material on record, it cannot be said that the finding of the Tribunal is perverse.
9. In the result, we answer the question in affirmative, i.e., in favour of the assessee and against the Revenue.
10. Reference so made stands disposed of accordingly.