Making up of accounts requires a balance-sheet and profit ascertainment; absence defeats the option under section 2(11)(c), assessment sustained.

Whether the assessee could treat an earlier Samvat year as the previous year under the option in section 2(11)(c) turned on whether accounts were 'made up' at the end of that Samvat year; the court applied the commercial meaning of making up accounts-ascertaining and balancing as of a date, ordinarily by drawing a balance-sheet and determining profit or loss-and accepted factual findings that no balance-sheet was drawn and profits were ascertained only later; accordingly the option was unavailable and the assessment stood on the ordinary previous year.

---

---

Issues: (i) Whether, on the facts and in the circumstances of the case, the assessee was rightly assessed for assessment year 1959-60 on its income for the financial year 1958-59 (i.e., whether the assessee could, under section 2(11)(c), treat an earlier Samvat year as the previous year by virtue of having "made up" accounts at the end of that Samvat year).

Analysis: The Court analysed section 2(11)(c) which permits an option where the accounts are made up in respect of a period not exceeding twelve months from the date of setting up a newly established business. The Court explained the commercial meaning of "making up of accounts" requires ascertaining and balancing the accounts as of a particular date, ordinarily by drawing up a balance-sheet and determining the profit or loss as at that date. The Tribunal's factual findings - that no balance-sheet was drawn up at the end of Samvat year 2014, that only ledger balances were carried forward, that no attempt was made to ascertain profits separately for the two Samvat years, and that the entire profit was only ascertained and credited at the end of Samvat year 2015 - meant the assessee had not made up its accounts as at the end of Samvat year 2014. The Court rejected reliance on the earlier Patna decision as not addressing the specific "previous year" issue. Applying the statutory test, the Court held the option under section 2(11)(c) was not available.

Conclusion: The option under section 2(11)(c) was not available to the assessee because the accounts had not been made up (i.e., no balance-sheet or ascertainment of profit) at the end of Samvat year 2014; accordingly the previous year for assessment year 1959-60 is the financial year 1958-59 and the assessment was rightly made on that basis in favour of the Revenue.

---