1988 (1) TMI 97 - AT - Income Tax

Summary

Issues:
1. Change in accounting period and its impact on assessment for different assessment years.
2. Application of mind by the assessing officer regarding change in previous year.
3. Validity of the order passed by the assessing officer for the assessment year 1981-82.
4. Jurisdiction of the Commissioner of Income Tax (CIT) under section 263.
5. Assessment of income for the period 21st Oct., 1979 to 31st Dec., 1979.

Detailed Analysis:
1. The judgment deals with the peculiar situation where a firm changed its accounting period and the impact it had on the assessment for different assessment years. The firm changed its accounting period from Diwali year to a calendar year, resulting in confusion regarding the assessment of income for specific periods and assessment years.

2. The assessing officer's failure to apply his mind to the change in the previous year and obtain consent for the change led to errors in the assessment process. The assessing officer completed the assessment for the year 1981-82 based on a calendar year without considering the implications of the changed previous year due to the firm's reconstitution.

3. The validity of the order passed by the assessing officer for the assessment year 1981-82 was questioned by the CIT under section 263, stating that the order was erroneous and prejudicial to the interest of the Revenue. The CIT set aside the assessment order and directed a fresh assessment to be conducted.

4. The jurisdiction of the Commissioner of Income Tax (CIT) under section 263 was invoked to review and correct the assessing officer's order for the assessment year 1981-82. The CIT found errors in the assessing officer's order and deemed it necessary to intervene to protect the Revenue's interests.

5. The assessment of income for the period 21st Oct., 1979 to 31st Dec., 1979 became a crucial issue as it had completely escaped assessment for the assessment year 1981-82. The CIT directed that this income should be included in the assessment for that year to prevent any loss of revenue and ensure accurate assessment of the firm's income.

In conclusion, the judgment highlights the importance of adherence to proper procedures and application of relevant laws in the assessment process to avoid errors and ensure accurate determination of income for different assessment years. The CIT's intervention under section 263 was justified in this case to rectify the errors in the assessing officer's order and safeguard the Revenue's interests.