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TMI Blog1968 (11) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... nine months in the next assessment year. Renewal of registration having been granted on the application therefore, which was dated June 21, 1960, the firm for the first assessment year was treated as a registered one. For the assessment year 1961-62, there being no application for renewal of registration, the Income-tax Officer assessed the firm treating it as an unregistered one. He rejected the assessee's stand that the registration granted for the assessment year 1960-61 ensured for the broken period ended March 31, 1960, as well. The Appellate Assistant Commissioner concurred in that view and pointed out that the assessee having closed its books of accounts on June 30, 1959, and the previous year having ended on June 30, 1959, the correct assessment year for the broken period of nine months would be 1961-62 for which the assessee had not applied for renewal of registration. The Tribunal, however, differed and held that in the assessee's case, both the previous years, that is, the assesse's usual previous year and the period from the end of that previous year to the date of dissolution, fell within the assessment year 1960-61 and hence the registration granted for 1960-61 was eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionary and the Income-tax Officer may well choose in a given case not to exercise the power. In such a case, we do not think that the assessee can, as a matter of right, demand a premature assessment, though before the relative accounting year is out, the Income-tax Officer is expected to exercise the discretion vested in him in a reasonable way. In this case, the assessment for the previous year ended June 30, 1959, was completed by the end of March, 1962, and the assessment for the broken period ended March 31, 1960, was made in May, 1962. That would make it clear that the assessment for the broken period could not in any sense be regarded as an accelerated one. There was no need for the Income-tax Officer to resort to section 25(1) when he was assessing the income for the broken period as late as in May, 1962. By that time the Finance Act, 1962, had come into force. The Income-tax Officer could, therefore, legitimately treat the broken period as of the previous year ended June 30, 1960, and bring the income to tax on that basis. That is what he did. If that be the case, there having been no application for renewal of registration for the assessment year 1961-62, the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the charge is on the income of the previous year which means that the assessment has to be up to the end of the previous year, there is an exception embodied by section 25(1) for the purpose of making the accelerated assessment in the course of the previous year itself. What is the rate to be applied to such a case is a matter in doubt not free from difficulty, but that does not, in our opinion, enable us to interpret section 25(1) as implying an enlarged previous year for the same assessment year, that is to say, the previous year taking in the subsequent broken period at the end of which there is dissolution. We do not think that the words " in addition to the assessment " in section 25(1) would warrant such an implication. Those words have reference only to the factual position, namely, that the accelerated assessment would be in addition to the assessment made on the income of the previous year, and do not have the effect of two previous years clubbed together in one assessment year or two assessment years rolled into one. On the view we have expressed of the scope and effect of section 25(1), it should follow that it does not bring about any difference to the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udge, Satyanarayana Rao, the other learned judge, Viswanatha Sastri, being of opinion that the assessee would be entitled to exemption only in respect of the income from July 1, 1939, to February 29, 1940. The view of Viswanatha Sastri J. was sustained by the Supreme Court and this was done on an interpretation of the scope of the expression "end of the previous year" in sub-sections (3) and (4) of section 25. In the course of dealing with that matter, the Supreme Court touched on section 25(1) and observed : " Before proceeding further it is convenient to make a few observations regarding the proposition stated by Satyanarayana Rao J., that section 25(1) provides for cumulative assessment in cases of discontinuance of business. The words of the section do not justify this conclusion. They do not empower the Income-tax Officer to make a cumulative assessment in respect of profits earned in two different accounting periods or entitle him to merge the profits of two years into one total sum and apply to them the rate of one of the financial years. All that the section authorises the Income-tax Officer to do is that it gives him an option to make a premature assessment on the profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hania Kedia & Co. v. Commissioner of Income-tax this court pointed out that it is a contradiction in terms to speak of six previous years in relation to any specified assessment year. Mr. Srinivasan is not right in submitting that section 25(1) contemplates two previous years. Section 25(1) provides that in case of discontinuance of any business, profession or vocation in any assessment year, the Income-tax Officer may in that year make an accelerated assessment in respect of the income of the period between the end of the previous year and the date of such discontinuance, in addition to the usual assessment in respect of the income of the previous year. Section 25(1) contemplates the usual assessment in respect of the income of the previous year and a special and separate assessment in the same assessment year in respect of the income, of the broken period between the end of the previous year and the end of the discontinuance ; it does not contemplate, as counsel submitted, assessments in the same assessment year in respect of two previous years. " Section 25(1) is thus a special provision and has been designed to meet a particular exigency, namely, in cases of dissolution or sto ..... X X X X Extracts X X X X X X X X Extracts X X X X
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