TaxTMI 
TaxTMI 
TaxTMI 
2004 (2) TMI 39
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.... Samvat year. Consequently as far as the share income of the said firm was concerned, the previous year of the assessees was the Samvat year. The firm came to be dissolved on March 31, 1983. For the assessment year 1983-84, each of the 11 assessees filed two returns of income-in the first return of income, the previous year shown was the Samvat year 2038, i.e., from October 28, 1981, to November 15, 1982, in the second return in the same assessment year, each of the assessees had shown the previous year as the period from November 16, 1982, to March 31, 1983. On the basis of the aforesaid two returns in the case of each assessee, the Income-tax Officer passed two separate assessment orders on January 24, 1986. In the case of the first return, the order was passed under section 143(3); in the case of the second return, the order was passed under section 143(3) read with section 176 of the Act. For the assessment year 1984-85, each of the 11 assessees filed their returns of income showing the previous year as the Samvat year 2039, i.e., from November 16, 1982, to November 4, 1983. On the basis of these returns, the assessment for each of the assessees for the assessment year 1984-8....
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....d a serious error of law in overlooking the provisions of sub-section (4) of section 3, which provide that where an assessee has once been assessed, then, he shall not in respect of that source, or, as the case may be, business or profession, be entitled to vary the meaning of the expression "previous year" as then applicable to him, except with the consent of the Income-tax Officer and upon such conditions as the Income-tax Officer may think fit to impose. Learned counsel for the Revenue have submitted that since the Samvat year was the previous year for the income of the firm and also for the assessees' share in the income of the firm for all the earlier years and, therefore, each assessee could have filed only one return for the assessment year 1983-84 relating to the Samvat year 2038 and only one return for the assessment year 1984-85 relating to the entire Samvat year 2039. However, each of the assessees filed three returns-two returns for the assessment year 1983-84 relating to one for the Samvat year 2038 and another for the period from November 16, 1982, to March 31, 1983, and a separate return for assessment year 1984-85 relating to Samvat year 2039 (November 16, 1982, to ....
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.... the firm". Hence, the Tribunal was right in holding that the original assessment order was not erroneous and, therefore, the Commissioner's orders under section 263 have rightly been set aside. Learned counsel also placed strong reliance on the following decisions: (i) CIT v. McKenzies Ltd. [1980] 121 ITR 458 (Bom); (ii) Biswanath Goenka v. CIT [1991] 189 ITR 687 (Cal); (iii) New Ambadi Estates Pvt. Ltd. v. CIT [1997] 228 ITR 141 (Ker); and (iv) CIT v. Greenham Estates Pvt. Ltd. [2002] 254 ITR 402 (Mad). Before dealing with the rival submissions, we would set out the relevant statutory provisions having a bearing on the controversy raised in this group of references. Section 3 defines "previous year" as under: "3. (1) For the purposes of this Act, 'previous year' means- (a) the financial year immediately preceding the assessment year; or (b) if the accounts of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, the twelve months ending on such date ; or. . . (f) where the assessee is a partner in a firm and the firm has been assessed as such, then, in respect of the assessee's share in the income of the firm, th....
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....far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment." Having heard learned counsel for the parties, we find considerable substance in the submission of Mr. Ketan H. Shah, learned counsel for the respondent-assessees that the provisions of section 3(1)(f) are mandatory-where the assessee is a partner in the firm and the firm has been assessed as such, the period determined as the previous year for the assessment of the income of the firm has also to be treated as the previous year for the assessee in respect of his share in the income of the firm. In the facts of the instant case, the firm-CMC (India) had the Samvat year as its previous year and it was accordingly so assessed all throughout. The said firm came to be dissolved on and with effect from March 31, 1983, i.e., in the assessment year 1983-84. Hence, the said firm filed its return of income for the....
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....tions including the provisions of clauses (b), (d) and (e) of sub-section (1) of section 3. In the facts of the instant case, we are not concerned with any of those provisions. As far as reliance placed on the last portion of sub-section (4) of section 3 is concerned, if the assessees were once assessed and, therefore, they cannot vary the previous year, the said provision, if at all applicable to the partner of a firm, would apply only in so far as that person's income from sources other than income from the firm is concerned. If the firm were to continue to do business and were to change its previous year, sub-section (4) of section 3 would certainly come into play and the permission of the Income-tax Officer would be required as already indicated earlier. In the case of dissolution of a firm, sub-section (1) of section 176, however, confers discretion upon the Income-tax Officer to assess income for a part of a year ending on the date of dissolution in addition to the income of the previous year. The Assessing Officer having exercised the discretion and permitted the firm to file returns for the Samvat year 2038 and also for the subsequent period from November 16, 1982, to March....
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....the notice under section 263, the assessees had filed their reply and at the hearing also contended that in making two assessments, there was no prejudice to the interest of the Revenue and, therefore, the proposed action under section 263 may be dropped. After setting out the aforesaid submissions on behalf of the assessees, the Commissioner gave the following reasons which we set out in entirety. The order is identical in the case of all the assessees: "3.1 have considered the submissions made on behalf of the assessee. It is well settled that when the assessee, in respect of a source of income, has exercised an option or once has been assessed, he cannot vary the previous year except with the consent of the Income-tax Officer (Addl. CIT v. P. K. N. Obulisami Chettiar [1978] 115 ITR 794 (Mad) and Ramji Dass Jain and Co. v. CIT [1967] 66 ITR 260 (Punj)). If an assessee wants to change the previous year, he must obtain the consent of the Income-tax Officer. In the present case, the previous year of the assessee remains the Samvat year. In view of this, the income of the assessee from the partnership firm for the period November 16, 1982, to March 31, 1983, should have been taxed i....