1981 (12) TMI 8 - HC - Income Tax

Summary

Issues: Interpretation of Section 3(1)(c) read with Section 3(4) of the Income Tax Act, 1961 regarding the legality of the assessment based on the previous year from 24th October, 1965, to 31st March, 1967, for the assessment year 1967-68.

In this judgment, the High Court was tasked with determining whether the assessment made by the Income Tax Appellate Tribunal for the assessment year 1967-68, based on the previous year from 24th October, 1965, to 31st March, 1967, was legal under Section 3(1)(c) read with Section 3(4) of the Income Tax Act, 1961. The assessee's first assessment in 1965-66 had a different previous year, and the previous year for 1966-67 was not clear. Before the assessment for 1967-68, the assessee sought settlement and filed a return with a changed previous year. The Income Tax Officer (ITO) treated the assessee as a registered firm and passed an assessment order. The assessee contended that changing the previous year was not permissible due to the previous assessment year's period. The Tribunal, citing a Punjab High Court decision, held that the ITO's action on the changed return implied consent. The assessee argued that explicit consent was required under Section 3(4) and no formal application was made. The Court noted that consent could be implied from the circumstances, such as voluntary change and ITO's action, as seen in the present case. The Court referred to a local case emphasizing voluntary change by the assessee and concluded that the ITO had indeed consented to the change of the previous year.

Therefore, the High Court answered the question in the affirmative, favoring the Department and ruling against the assessee. The Court awarded costs to the Department. The judgment highlights the significance of implied consent in changing the previous year for assessment, emphasizing voluntary actions by the assessee and the ITO's subsequent actions as indicators of consent, even in the absence of an express order or formal application.