Previous year choice for dividend income cannot be altered unilaterally where the assessee consistently follows a separate accounting year.

An assessee may maintain different previous years for different sources of income, and the choice of previous year for a particular source lies with the assessee. Where dividend income has consistently been accounted for on the basis of a year ending 30 June, and no reason is shown to disturb that regular method, the tax authority cannot unilaterally substitute the financial year as the previous year for dividend income alone. The assessee was therefore entitled to assessment on the previous year it had consistently maintained for that source.

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Issues: Whether the assessee could adopt its own previous year for dividend income and whether the Income-tax Officer was justified in substituting the financial year as the previous year for that source alone.

Analysis: The assessee maintained accounts for dividend income and had consistently followed the year ending 30 June as its previous year. Section 3(3) permits different previous years in respect of different sources of income, and the choice of previous year lies with the assessee. In the absence of any basis to disturb the method regularly followed for dividend income, the Income-tax Officer could not unilaterally adopt a different previous year for that source alone.

Conclusion: The substitution of the financial year for dividend income was unjustified and the assessee was entitled to assessment on the basis of the previous year maintained by it.

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