1994 (12) TMI 17 - HC - Income Tax

Assessment Year, Change In Previous Year, Financial Year, Income Tax Act, Public Limited Company

Summary

Issues:
- Petitioner's application for changing the accounting year
- Respondent's rejection of the application based on loss of revenue concerns
- Allegations of fraudulent claims and penalty under section 271(1)(c)
- Interpretation of circular issued by Central Board of Direct Taxes
- Assessment of revenue impact due to changing the accounting year
- Legal implications of changing the accounting year on tax liability and penalties

Analysis:
The petitioner, a public limited company, sought to change its accounting year to align with a circular issued by the Central Board of Direct Taxes due to an amendment in the Income-tax Act. The petitioner filed its return for the extended period but was denied the change by the respondent, citing potential loss of revenue. The respondent's decision was challenged on the grounds of arbitrariness and non-application of penalty provisions. The court found the respondent's stance unreasonable, noting that the penalty under section 271(1)(c) was not applicable as there was no concealment of income particulars. The court emphasized that the change in the accounting year would not result in revenue loss, as demonstrated by the comparison of tax liabilities for different periods.

The court highlighted that the circular allowed for liberal approval of changes in the accounting year to avoid transitional issues. It criticized the respondent's reliance on past permissions for changing accounting years and fraudulent claims without concrete evidence. The court emphasized that the change in the accounting year was necessitated by the statutory amendment and should not lead to penal consequences without proper grounds. The court concluded that the petitioner should be allowed to change its accounting year to the extended period as requested, setting aside the respondent's decision. The judgment directed the respondent to permit the change and quashed the initial order rejecting the application, with no costs imposed on the petitioner.