Court directs IT Officer to approve company's change of accounting year, subject to revenue loss coverage. Petitioner must file revised returns.

The court set aside the rejection of the company's application to change its accounting year and directed the Income-tax Officer to grant consent for the change, provided the company undertakes to cover any revenue loss resulting from the alteration. The petitioner was instructed to file revised returns within twelve weeks, with a warning of dismissal for non-compliance. No costs were awarded in the case.

---

---

Issues:
Challenge to rejection of application for changing previous year for accounting purposes.

Analysis:
The petitioner, a company engaged in tea production, sought to change its accounting year from March 31 to June 30 due to unsold tea stock valuation issues. The company applied for consent under section 3(4) of the Income-tax Act, 1961, to change the previous year, but the application was rejected by the Income-tax Officer and the Commissioner of Income tax. The petitioner contended that consent should be granted if willing to make good any revenue loss. The authorities refused consent citing potential revenue loss due to the change.

The court analyzed the discretionary nature of granting consent under section 3(4) of the Act. The judge noted that consent should not be unreasonably withheld, and the assessee's right to change the accounting year should not be restricted if no revenue loss is anticipated. The court found that the Revising Officer mechanically accepted the Income-tax Officer's decision without considering the petitioner's undertaking to cover any potential loss. The court referred to a Division Bench judgment of the Guwahati High Court that consent should not be denied if the assessee agrees to compensate for any loss resulting from the change.

The court concluded that both the Income-tax Officer and the Revising Officer unreasonably withheld consent. The court set aside the orders and directed the Income-tax Officer to grant consent for changing the previous year if the petitioner undertakes to cover any revenue loss resulting from the change. The petitioner was instructed to file revised returns within twelve weeks, failing which the application would be dismissed. No costs were awarded in the matter.

---