Assessee's statutory option for previous year under section 3(1)(b) could not be displaced by revenue authorities.

Where the assessee's accounts are made up to a date within the financial year, section 3(1)(b) permits the assessee to adopt that twelve-month period as the previous year, and the revenue cannot override that statutory choice. On the facts, the assessee had maintained a notebook of transactions and validly exercised the option to adopt the period ending on 23 December 1975, so the entire capital gain could not be brought into assessment year 1976-77 on the Revenue's preferred basis. The reference was therefore not entertained.

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Issues: Whether the assessee could, under section 3(1)(b) of the Income-tax Act, 1961, opt for the previous year ending on 23 December 1975 instead of the financial year ending on 31 March 1976, so that the entire capital gain was not taxable in assessment year 1976-77.

Analysis: Section 3(1)(b) permits the assessee, where accounts have been made up to a date within the financial year, to choose as the previous year the twelve months ending on that date. On the facts, the assessee had a notebook recording the transactions and had exercised the statutory option to adopt the accounting period ending on 23 December 1975. That option could not be displaced by the Income-tax Officer. The finding was treated as one of fact, or at least as a question whose answer was self-evident on the statutory language.

Conclusion: The assessee was entitled to adopt the period ending on 23 December 1975 as the previous year, and the question sought to be referred did not warrant interference.

Final Conclusion: The application for reference was rejected and the parties were left to bear their own costs.

Ratio Decidendi: Where the assessee's accounts are made up to a date within the financial year, section 3(1)(b) confers an option on the assessee to choose that accounting period as the previous year, and that statutory choice cannot be overridden by the revenue authorities.

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