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TMI Blog1997 (10) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the request for change of previous year, is vitiated in law in as much as it was based on facts and circumstances not apparent from the records and on suspicions, conjuctures and surmises and irrelevant evidence? 2. Whether on the facts and in the circumstances of the case, there was any evidence on record to support the following findings : (a) The following point stands out in bold relief on a perusal of the order of the CIT. If the order dt. 12th Nov., 1981, which was based on irrelevant material and which was passed without the ITO applying his mind before withholding permission for the variation of the previous year is allowed to stand, the interest of the assessee could be prejudiced because the ITO sitting in judgment over the assessment for the asst. yr. 1982-83 would be bound by the order of the previous ITO dt. 12th Nov., 1981; (b) Therefore, the CIT concluded that the order dt. 12th Nov., 1981, should not be allowed to remain in force and thus chose to set aside the order; (c) Having thus set aside the order, the CIT apparently was aware of the right of the assessee to furnish the return of income for any previous year as it likes. This awareness was within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fusing to grant the change is vitiated in law in as much as it was based on an unsigned piece of paper purported to be showing the surtax liability which was handed over by the Departmental Representative at the time of hearing and which was not produced nor relied on before the lower authorities and by acting illegally and without jurisdiction in accepting the same? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the ITO was justified in refusing to grant permission to change the previous year after accepting the finding of the CIT(A) by holding in para 12 that there may not be loss of revenue by way of income-tax? 3. Whether, on the facts and in the circumstances of the case the Tribunal was justified in holding that the acceptance of change of previous year by the assessing authority himself as evidenced by order for asst. yrs. 1986-87 and 1987-88 is not relevant for the asst. yr. 1982-83 and there cannot be a change of previous year for 1982-83?" 4. Relevant facts are as follows: The assessee is a company engaged in manufacture and sale of tread rubber. It also undertakes mixing and mastication of rubber. Its previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion as between the two periods. The order of the ITO was set aside with a direction to grant the assessee's request for change in the previous year and complete the assessment on the basis of 15 months period. 6. The Revenue took up the matter in appeal before the Tribunal. A contention was raised by the assessee that the order passed by the CIT under s. 264 of the IT Act, dt. 7th May, 1983, had the effect of permitting the assessee to change its previous year and, therefore, the ITO had no authority to deny such change while finalising the assessment for the year 1982-83. The Tribunal did not accept this contention. It took the view that the CIT had only stated that the ITO should consider the application afresh and in accordance with law at the time of finalising the assessment for the year 1982-83. 7. On the basis of a computation sheet filed by the Departmental Representative before the Tribunal at the time of hearing, the Tribunal took the view that there would not be any surtax liability for the asst. yr. 1982-83, if the assessee's request for change of previous year is allowed and the surtax liability for subsequent years 'may be either nil or very low figure'. It also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permission to change the previous year from 30th June, to September, 1981, in view of the order passed by the CIT under s. 264 of the IT Act was reiterated before this Court also. On examining the order passed by CIT(A) under s. 264, relevant portion of which is quoted in the statement of case, we are not persuaded to accept the contention of the assessee. After discussing the effect of the provisions contained under s. 3(4) of the IT Act, 1961, the CIT(A) held as follows: "7. The assessee's petition has much force in it. The ITO has not applied his mind to s. 3(4) of the IT Act. Whether the assessee avoided the payment of advance-tax for the asst. yr. 1979-80 is irrelevant. It could have been a factor to be taken into account while allowing a change in the previous year on the first occasion. The assessee cannot file a return of income for the year ending on 30th June, 1981, unless the ITO insists on the same. During the assessment proceedings under s. 143, the ITO would not be able to take a fresh decision in view of the ITO's order dt. 12th Nov., 1981, on the subject of the previous year. It, therefore, seems appropriate to me that the ITO's refusal dt. 12th Nov., 1981, shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention raised on behalf of the Revenue. In the statement of objects and reasons attached to the Bill introducing Companies (Profits) Surtax Act, 1964, it is stated as follows: "The object of this Bill to impose a special tax on companies (other than those which have no share capital) on their excess profits, namely, the amount by which the total income of a company as reduced by certain types of income and certain sums and the income-tax and super-tax payable by it exceeds a sum of ten per cent of its capital reserves and certain borrowed moneys or a sum of Rs. 2 lakhs, whichever is higher..." The above would show that it is the income of the assessee-company that is brought under tax under this enactment. Sec. 4 of the Companies (Profits) Surtax Act, 1964, which is a charging section reads as follows: "4. Charge of tax-Subject to the provisions contained in this Act, there shall be charged on every company for every assessment year commencing on and from the first day of April, 1964 (but before the first day of April, 1988), a tax (in this Act referred to as the surtax) in respect of so much of its chargeable profits of the previous year or previous years, as the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or very low figure. It is contended by the learned counsel for the assessee that the procedure adopted by the Tribunal in accepting certain work-sheets produced before the Tribunal by the Departmental Representative at the time of hearing is not according to the rules and, therefore, such action has to be deprecated. No reliance should have been made on the unsigned work-sheets produced at the time of hearing before the Tribunal. The learned counsel for the assessee pointed out that the Tribunal has not followed the procedure prescribed under rr. 29 to 31 of the IT (Appellate Tribunal) Rules, 1963, in accepting the above material. 13. This Court had occasion to consider the power of the Tribunal to admit additional evidence in CIT vs. Travancore Titanium Products (1993) 111 CTR (Ker) 112 : (1993) 203 ITR 685 (Ker) : TC 8PS.80. This Court found that the procedure followed by the Tribunal in relying on the work-sheets without admitting them as additional evidence and without giving reasons as contemplated by r. 29 of the IT (Appellate Tribunal) Rules, 1963, was irregular and the matter was sent back to the Tribunal for fresh consideration. The learned counsel appearing on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if the order permitting change for the previous year 1972-73 is cancelled at that stage, it would involve upsetting of assessments for over ten years and create undue hardship. In the present case no sanction was originally granted for change of the previous year and the appeal that was being considered by the Tribunal was on the correctness of the order passed by the ITO. Therefore, there is no justification in finding the issue in favour of the assessee only for the reason that for the subsequent years 1986-87 and 1987-88 change in previous year was permitted. 16. In the light of the above, we answer question No. 1 in IT Ref. No. 125/92 in the negative in favour of the Revenue and against the assessee. Questions 2(a) to 2(g) are not answered, as unnecessary in view of the answers given to other questions. We refuse to answer question No. 3, as it is another facet of question No. 1. We refuse to answer the question in IT Ref. No. 4/94 in view of the finding in this judgment that the Tribunal has to remand the matter to the ITO for fresh consideration. We answer question No. 1 in IT. Ref. Nos. 166 and 167/ 1995 in the affirmative in favour of the assessee and against the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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