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Issues Involved:
The judgment involves a common question of law regarding the acceptance of revised returns for assessment under section 143(3) read with section 143(2)(a) based on the mercantile system of accounting. Details of the Judgment: Assessment Year 1975-76 and Revised Returns: The case pertains to the assessment year 1975-76, where the respondents, members of a Hindu undivided family, filed returns of income initially disclosing rental income but later revised the returns to show nil income, claiming they had not received any rent. The Income-tax Officer rejected this plea and made assessments under section 143(1) based on the original returns. Tribunal's Decision and Method of Accounting: The Income-tax Appellate Tribunal noted that the assessees had been assessed on a "due basis" previously and had voluntarily filed returns on the same basis for the preceding year. Despite the assessees' revised returns showing nil income for 1975-76, the Tribunal, considering the method of accounting as "mercantile," directed fresh assessments based on the original returns. Court's Ruling and Conclusion: The High Court held that since the assessees maintained accounts on a "mercantile basis" and voluntarily reported accrued income in previous years, the revised returns filed on a "receipt basis" were not justified. The Court found the Tribunal erred in setting aside the assessments based on the original returns and directed the Income-tax Officer to proceed with the assessments as per the original returns. The question of law was answered in the negative, favoring the Revenue. Conclusion and Direction: The High Court's judgment was against the assessees and in favor of the Revenue, upholding the assessments made under section 143(3) read with section 143(2)(a) based on the original returns. A copy of the judgment will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench for further action.
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