Procedure in cases of hijri year taken as previous year and where financial year adopted in place of hijri as previous year. - Income Tax - 1756/CBDT

INSTRUCTION NO. 1756/CBDT Dated: April 28, 1987 Attention is invited to the Board's instruction F.No.33/8/62-ITA.II dated 16.4.1966 on the above subject (copy enclosed for ready reference).* 2. It would be observed that while delineating the procedure to be followed in switching over to the financial year as previous year from the Hijri year, it was directed that in the first assessment to be made after the change, the income of the period prior to the financial year not assessed in the earlier assessment plus the income of the relevant financial year should be taken as total income and be assessed at the rate applicable to the income of the twelve months of the financial year. 3. It has been pointed out to the Board that the above instructions have been interpreted by the Income-tax Officers so as to split up the income of the previous year extending beyond the period of 12 months into two parts, i.e., the income of the period of 12 months ending 31st March and the income of the earlier period and to levy income-tax at the rate applicable to the income of the financial year. The Board wish to clarify that as per charging Section 4 of the Income Tax Act, the tax has to be charged for any assessment year in respect of the total income of the relevant previous year at the rates enacted by the Central Government, and therefore, the rates enacted by the Finance Act are not with reference to the financial year but with reference to the assessment year. The income of the entire previous year relevant to the assessment year concerned has, therefore, to be charged as one unit at the rates prescribed in the Finance Act. 4. These instructions may please be brought to the notice of all the officers working in your charge. *XII/II/59: Previous year-loss of revenue due to adoption of lunar year-regarding:- Reference is invited to Board's letter of even number dated, the 5th March, 1963 on the above subject. The following procedure may be adopted in the cases where Hijri year has been followed as previous year:- (i) In all pending assessments where the assessees have been following lunar year as the previous year, the Income-tax Officers will switch over to the financial year as the previous year and follow it in subsequent assessments: (ii) If, in the first assessment to be made under the new procedure, there is a period prior to the financial year to be taken as the previous year, the income of which has not been assessed in the earlier assessment, the income of such period plus the income of the relevant financial year should be taken as the total income which should be assessed at the rate applicable to the income of the 12 months of the financial year. (iii) Similarly, if in the first assessment to be made under the new procedure, the income of any particular period which has already been assessed for the preceding assessment year has to be considered, it will be taken only for rate purposes; (iv) The procedure to be followed proposed at (ii) and (iii) above, will be subject to the assessee concerned agreeing to the same. If any particular assessees do not agree, the case may be referred to the Board for instructions.