9911796707
TMI Blog1982 (10) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment order is the year ended April 12, 1969. As regards the residence, the ITO observed " The assessee who left India on April 8, 1968, has not so far returned to India. As he was also completely absent from India during the accounting year, the residential status declared in the return, i.e., 'non-resident', will be accepted ". Thus, for the assessment year 1969-70, the assessee was assessed as a non-resident and, consequently, the foreign income was left out of consideration. Subsequent to the completion of the assessment for the assessment year 1969-70, the internal audit party who scrutinised the assessment files had pointed out on January 9, 1972, that the assessee had left for Singapore on April 8, 1968, and returned only on April 15, 1970, and that the assessee had derived income from various sources and the relevant accounting period ended with reference to the year 1972-73, were as under : -------------------------------------------------------------------------------------------------------------------------------------------------- Serial No. Source Last date of the Income accounting year ---------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validity of the reopening of the assessment treating the assessee as a resident and ordinarily resident on the ground that it was a mere change of opinion on the part of the ITO. The AAC agreed with the ITO that the assessee would have to be treated as resident for all sources of income in view of the provisions of s. 6(5) of the Act and that the reopening of the assessment under s. 147(b) was legal. The assessee appealed to the Income-tax Appellate Tribunal contesting the decision of the AAC upholding the validity of the reopening of the original assessment and also the reassessment on merits. The Tribunal upheld the validity of the reopening of the assessment but cancelled the reassessment holding that the assessee was to be treated as non-resident for the assessment year in question as has been done in the original assessment. Aggrieved by the said decision, the Revenue has sought and obtained a reference to this court on the following question of law: " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the reassessment made under the Income-tax Act, 1961, on the assessee for the assessment year 1969-70 ? " Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of s. 6(5). The learned counsel for the Revenue mainly relies on the provisions of s. 3(1)(f) and s. 6(5) in support of his stand that as the assessee is a resident in the previous year with reference to the share income from the firms he should be taken to be a resident in respect of all sources of income. The learned counsel for the assessee, however, contends that notwithstanding the said provisions of the Act, the assessee having opted to adopt the Tamil year as the previous year, that should be taken to be the previous year for all sources of income and it is not open to the Revenue to change that previous year taking note of the previous year of the firms from which the assessee received income. It is in the light of the said rival contentions we have to consider the scope and ambit of the relevant provisions of the Act. " Previous year " has been defined in s. 3. Clause (a) of s. 3(1) provides that normally the financial year immediately preceding the assessment year should be taken to be the previous year. Clause (b), however, proceeds on the basis that where the accounts have been made up to date within the said financial year, then, at the option of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of one source of income, that is the share income from partnership, the assessee should be deemed to be a resident in India in the previous year relating to the assessment year in respect of that source of income. In this case, a combined reading of ss. 3(1)(f) and 6(5) makes it clear that if the assessee whose one of the sources of income is share income in a partnership in whose previous year the assessee was a resident, then he should be deemed to be a resident for all sources of income. However, the learned counsel for the assessee contends that s. 6(5) will not stand attracted as the assessee's previous year was the Tamil New Year and that cannot at all be altered with reference to clause (f) of subs. (1) of s. 3. According to him, clause (f) will apply only to an assessee whose only source of income is share income from a firm and not to a case where the assessee has several sources of income and in respect of those sources the previous year has been fixed under s. 3(1)(c). The learned counsel for the assessee points out that once at the option of the assessee particular previous year has been adopted under s. 3(1)(b) or determined by the Board or by any authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 3(1)(f) are not stated to be operative notwithstanding anything in any of the other provisions relating to 'previous year'. As far as this particular assessee is concerned, since the previous year has been fixed by the Board for the assessee except in respect of sources falling under sections 3(1)(a) and 3(l)(b) regarding which the Board's powers under section 3(1)(c) are excluded. It overrides the provisions of section 3(1)(f) which prescribe a previous year only for a particular source of income. We come to this conclusion in the interpretation that the larger will always include the smaller and the wider the narrower, so also the previous year stipulated under section 3(1)(c) being one for the assessee is wider in its scope and larger in its extent and would cover the narrower concept under section 3(1)(f) which governs only a particular source of income of an assessee. " We are at a loss to understand the reasoning of the Tribunal contained in the above extract. Admittedly, s. 3(1)(f) has not been made subject to s. 3(1)(c). Therefore, s. 3(1)(f) will have its own operation and the operation of s. 3(1)(f) cannot be curtailed with reference to s. 3(l)(c). I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of wealth-tax. The view taken by us as to the interpretation of s. 3(1)(f) gets support from the decision of the Bombay High Court in CIT v. Mckenzies Ltd. [1980] 121 ITR 458. In that case, the assessee derived income from various sources in the previous year relevant to the assessment year 1962-63, which commenced on 1st of August, 1960, and ended on July 31, 1961, and also income as a partner in a firm, the previous year of which was September 1, 1960, to August 31, 1961. Since the previous year of the firm from which the assessee received share income and the previous year in respect of the other income of the assessee were different, the question arose whether the assessee's share income from the firm was assessable in the assessment year 1962-63 or in the assessment year 1963-64. The court took the view that clause (f) of s. 3(1) of the I.T. Act, 1961, lays down that et previous year " in the case of an assessee who is a partner in a firm which has been assessed as such means, in respect of the assessee's share in the income of the firm, the period determined as the previous year for the assessment of the income of the firm, that the effect of that clause is that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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