2002 (2) TMI 35 - HC - Income Tax

Whether, 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? - 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. - 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. - 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. - we answer the question in affirmative, i.e., in favour of the assessee and against the Revenue.

Issues:
1. Correctness of canceling orders under section 263 of the Income-tax Act for assessment years 1977-78, 1979-80 to 1981-82.

Analysis:
The case involved an application under section 256(1) of the Income-tax Act, 1961, where the Tribunal referred the question of canceling orders under section 263 for specific assessment years. The assessee earned income from construction business for the years 1976-77 to 1981-82. The Commissioner of Income-tax issued a notice under section 263 to revise the assessment orders, citing jurisdictional issues and haste in making the orders. The assessee contended that the jurisdictional error was not their fault as they complied with the notice issued. The Tribunal noted that low profit alone does not make an order erroneous and that the Assessing Officer had considered explanations and circumstances, including heavy losses due to competition. The Tribunal upheld the order for 1976-77 due to a procedural error but quashed the orders for subsequent years, finding no error prejudicial to revenue.

The Tribunal's decision was based on the Income-tax Officer's jurisdiction, application of mind, and compliance with procedural requirements. The Tribunal emphasized that jurisdictional errors could be corrected and did not necessarily invalidate the assessment. The Tribunal referred to legal precedents to support its findings regarding the validity of notices and assessments despite minor errors. The Tribunal highlighted the mandatory nature of obtaining the Commissioner's sanction before issuing notices, emphasizing that failure to comply necessitates redoing the assessment. The Tribunal considered each assessee's case individually and rejected the Commissioner's order for subsequent years, citing lack of error prejudicial to revenue.

The Tribunal further analyzed the Assessing Officer's actions, emphasizing the importance of considering all relevant material and explanations provided by the assessee. The Tribunal noted that variations in profit rates among businesses are common and that as long as the Assessing Officer applied their mind and considered the evidence, interference is unwarranted. The Tribunal concluded that the findings were not perverse and upheld the decision in favor of the assessee against the Revenue. Ultimately, the Tribunal answered the question in the affirmative, supporting the assessee's position and disposing of the reference accordingly.

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