TMI Blog1988 (1) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... ery next day, change in the constitution of the firm took place inasmuch as a new partner was taken in; and accordingly, a new partnership deed was drawn up. It was also decided by the firm to change its accounting period from Diwali year to calendar year. Accordingly, the newly constituted firm closed its accounts on 31st Dec., 1979. Thereafter accounts were maintained calendar-year-wise and on 31st Dec., 1980, the accounts were closed for the period 1st Jan., 1980 to 31st Dec., 1980. On the basis of the accounts thus closed, for the period 1st Jan., 1980 to 31st Dec., 1980, the assessee firm filed its return of income for asst. yr. 1981-82 on 29th June, 1981. The ITO completed assessment for the asst. yr. 1981-82 on 31st March, 1983 on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment for asst. yr. 1981-82. 6. The learned CIT(A) came to know of the above factual situation when he called for the records of the assessee and examined them. Accordingly, he issued to the assessee a show cause notice under s. 263 as in his opinion, the order passed by the ITO for asst. yr. 1981-82 was not only erroneous but prejudicial to the interest of the Revenue. The subject matter of the show cause notice has been reproduced by the learned CIT(A) in paragraph 2 of his order and, therefore, it is not necessary to reproduce it again at this stage. The main point made out by the learned CIT in the said notice was that "failure on the part of the ITO be consider the income earned by the assessee firm for the period 21st Oct., 1979 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asst. yr. 1981-82 as above." 9. It is the above findings of the learned CIT which are being assailed before us as erroneous. The submissions of the learned counsel for the assessee were, inter alia, as below : (1) That the order of the ITO for asst. yr. 1981-82 was neither erroneous nor prejudicial to the interest of the Revenue. Inasmuch as he has completed assessment for full period of 12 months, taking the calendar year, 1980 as the previous year. (2) That the ITO had impliedly granted change of the previous year to the assessee and that is how he had completed the assessment for asst. yr. 1981-82 on the basis of calendar year, 1980 in respect of asst. yr. 1981-82; and it was wrong on the part of the learned CIT to say that the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the consent of the ITO and upon such conditions as the ITO may think fit to impose." In view of the above position of law as brought out in sub-s. (4) of s. 3, it was incumbent on the assessee to have asked for change in the accounting period before adopting the new previous year. So far as asst. yr. 1980-81 was concerned, the assessee had filed its return of income on the basis of the previous year, which was being adopted by it earlier, namely Diwali year 1979. The assessment for that year has, accordingly, been completed. No change in the accounting period was sought by the assessee for the aforesaid previous year. The change in the accounting period was sought by the assessee for the previous year which would commence after Diwali, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not the case of a new firm having been brought into existence and the said firm adopting a new previous year which it could do in terms of s. 3 of the IT Act, 1961. The present being a case of reconstituted firm and the assessment being on the reconstituted firm in terms of s. 187(2) of the IT Act, 1961, it was incumbent on the ITO to have applied his mind to the question of the return having been filed by the assessee on a changed previous year which in law, it could not have done without first obtaining his consent. Such consent having not been obtained, the completion of the assessment for the period 1st Jan., 1980 to 31st Dec., 1980 could not have been done. The only assessment possible without an application from the assessee for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, it is no solace that the assessee had paid the tax with regard to the income returned for that period. 14. The finding of the learned CIT that "the tax effect would be more if the income for the period 21st Oct., 1979 to 31st Dec., 1979 was included for assessment for the asst. yr. 1981-82" has not been disputed by the assessee before us. The direction of the learned CIT(A), therefore, that for asst. yr. 1981-82 a consolidated assessment should be made on the basis of the changed previous year, but including therein the income which has been earned by the assessee from the end of the immediately preceding previous year till 31st Dec., 1979, is correct. The income for this period cannot be allowed to escape assessment. Under sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
