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TMI Blog1991 (8) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... venue. The Income-tax Officer's denial was not based on any reason that the interests of revenue were prejudiced. The Income-tax Officer could have well imposed reasonable conditions to protect the taxation for the assessment year 1982-83 of the limited company or the taxation of the major shareholders for purposes of Income-tax and Wealth-tax for thea ssessment year relevant to the previous year ending on 30-6-1981. There were three major shareholders, Sri George Varghese, Master Paulose Varghese and Master R.F. Varghese (the two being minors). 6. Reliance was placed on a decision of the Bombay High Court in the case of Bennet Coleman (P.) Ltd. 7. The assessee's petition has much force in it. The Income-tax Officer has not applied his mind to section 3(4) of the Income-tax Act. Whether the assessee avoided the payment of advance tax for the assessment year 1979-80 is irrelevant. It could have been a factor to be taken into account while allowing a change in the previous year on the first occasion. The assessee cannot file a return of income for the year ending on 30-6-1981 unless the Income-tax Officer insists on the same. During the assessment proceedings under section 143, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r erred in holding that there will be substantial loss of revenue. The CIT (Appeals) did not also see any merit about the reduction of surtax liability if such a change was allowed as contended by the Income-tax Officer. According to the CIT (Appeals) if surtax was paid by the assessee in case the status quo of the previous year was kept intact, the assessee would certainly avoid payment of surtax in the succeeding previous year on account of heavy investment allowance and depreciation charges and thus there was no merit in the Income-tax Officer's contention. Further he held that as a result of the refusal to accord change of the previous year, the apportionment of income has resulted in an unscientific division as between the two periods. Therefore, the CIT (Appeals) set aside the order of the Income-tax Officer with a direction to grant the assessee's request for a change in the previous year and complete the assessment on the basis of 15 months period. The revenue is on appeal. 3. Sri C. Abraham, the learned senior departmental representative submitted that the assessee had not taken the previous consent of the Income-tax Officer before it closed the accounts on 30-9-1981. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to grant the change of previous year is not an order appealable and the CIT (Appeals) erred in having entertained the appeal. 5. Sri K.I. John, the learned Chartered Accountant submitted that the Commissioner of Income-tax in his order under section 264 has authorised the assessee to file the return of income for any previous year "as it likes". This direction was given in the assessee's petition against the order of the Income-tax Officer refusing to grant the the change of previous year from 30th June to September 1981. In the light of the direction it has to be held that the Commissioner of Income-tax had allowed the change of previous year. Whatever might have been the reasoning of the Commissioner of Income-tax in the earlier part of his order, the conclusions are certainly in favour of the assessee. Thus, he had not merely set aside the order of the Income-tax Officer which was against the interest of the assessee, but had also given a positive direction. Therefore, the impugned order of the Income-tax Officer passed along with the assessment of the assessee for the assessment year 1982-83 holding that the previous year of the assessee would remain closed on 30th June, 1981 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... changed previous year and the dispute was only in relation to the assessment year 1982-83. If the appeal of the department is allowed it will lead to recomputation of the income for several years and there will not be any advantage to the revenue in terms of tax collections, but there will be maximum inconvenience both to the revenue and the assessee. He also relied on the following decisions :--- (1) CIT v. Sri Hari Prosad Lohia [1983] 143 ITR 276 (Cal.), (2) J.K. Synthetics Ltd. v. O.S. Bajpai, ITO [1976] 105 ITR 864 (All.), (3) Esthuri Aswathaiah v. CIT [1966] 60 ITR 411 (SC), (4) Assam Frontier Tea Ltd. v. IAC [1987] 164 ITR 253 (Gauhati), (5) Bennett Coleman & Co. Ltd. v. Allahiri, ITO [1983] 141 ITR 239 (Bom.), (6) VXL India Ltd. v. ITO [1987] 168 ITR 805 (Guj.). 8. We have thus heard the real submissions and perused records. The first point to be resolved is whether an order under section 3(4) of the Income-tax Act is an appealable order or not. In Hari Prosad Lohia's case it was held that in order to compute the amount of income for any assessment year and also the amount of tax payable by an assessee, it was necessary to determine what was the accounting period and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax was apparently aware of the right of the assessee to furnish the return of income for any previous year as it likes. This awareness is with the Commissioner of Income-tax in view of the provisions of section 3(4) of the I.T. Act, which read as follows : " 4. Where in respect of a particular source of income or in respect of a business or profession newly set up, an assessee has once exercised the option under clause (b) or sub-clause (ii) of clause (d) or sub-clause (i) of clause (e) of sub-section (1) or has once been assessed, then, he shall not, in respect of that source, or, as the case may be, business or profession, be entitled to vary the meaning of the expression "previous year" as then applicable to him, except with the consent of the Assessing Officer and upon such conditions as the Assessing Officer may think fit to impose. " A close reading of the section would reveal that nowhere it has been stated that the assessee can change the previous year only with the previous consent of the ITO. Such a change can be implied even on the submission of the return of income with an altered pervious year. In fact, it is settled law that if the assessment is complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,340 17,50,840 After appeal by 6,42,540 11,08,800 17,01,020 CIT(A) (15 months) New investment 65 lakhs 15.60 lakhs 6.3 lakhs II. Surtax liability : 1982-83 : As per assessee (15 months) Nil. (a) On the basis of ITO's figures: Rs. Rs. Total income 40,91,060 Less: Taxes 25,16,000 -------------------------- Chargeable profits 15,75,060 Less: Stat. Deduction 5,85,680 -------------------------- Net chargeable profits 9,89,380 -------------------------- Surtax due 3,66,470 3,66,470 (b) If figures are corrected: Income as per a/cs. 50,15,836 Proportionate for 12 months 40,12,668 Less: Depreciation 7,86,571 -------------------------- Total income: 32,26,097 -------------------------- Less: Taxes 19,84,060 -------------------------- Chargeable profits 12,42,037 Less: Stat. Deduction 5,85,680 -------------------------- Net chargeable profits 6,56,357 Surtax due 2,32,160 2,32,160 ------------------------- ---------------- (c) No surtax liability after CIT(A)'s order. Nil. 1983-84 and 1984-85 : No surtax liability at all, on the basis of returned or assessed income. 11. We have carefully considered the rival submissions and also the figures in the working sheet. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in a period of 12 months comprised in the previous year. In this case, prima facie it has resulted in excess assessment for the assessment year 1982-83 [compare the figures (a) and (b) of the working sheet furnished before us by the learned departmental representative]. Therefore, in the interests of justice, equity and fair play, we direct the Income-tax Officer to have a second look at the determination of income for the assessment year 1982-83 on the basis of 12 months period and pass such orders as he may deem fit in accordance with law. 12. We have indicated that there is loss to the exchequer, by way of reduction in surtax liability. Though it may be that because of the stable rates of taxes in the case of companies, there may not be much loss to the revenue by way of income-tax etc. the same cannot be said in respect of surtax liability. Therefore, the Income-tax Officer was justified in refusing to grant permission to change the previous year. 13. Sri John, vehemently contended that in the assessments for the assessment years 1986-87 and 1987-88, the Income-tax Officer has accepted the previous year of the assessee as that of one ending on 30th September, instead of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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