TMI Blog1992 (8) TMI 110X X X X Extracts X X X X X X X X Extracts X X X X ..... d from 31st of March to 30th June. The application was supported by certain reasons ; the application itself ran as under : " With due respect, I beg to request you to kindly allow me to change my previous year (accounting year ending on 31-3-1985 to 30-6-1985 as it is convenient on my part for the following reasons :-- (a) For convenience in transaction with banks and other financial sources. (b) For convenience in transactions with other parties particularly with those whose accounting year (previous year ending in June July). (c) For procurement of orders and despatch the same with other business world. So, I request you to kindly pass necessary orders allowing me to change my previous year (accounting year) from 31-3-1985 to 30-6-1985 and oblige. " The effect of the request was that, if accepted, it would mean that the previous year commencing on 1-4-1984 would close, instead of on 31-31985, on 30-6-1985 i,e., after a period of 15 months. That would result in the assessment year 1985-86 being skipped, and the assessment year after 1984-85 would be the assessment year 1986-87. 3. The Income-tax Officer passed orders on the application on 28-11-1986. There is some d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent of Rs. 11,14,436 because of the skipping of the income-tax assessment for the assessment year 1985-86, since, though the previous year consisted of 15 months from 1-4-1984 to 30-6-1985 for the assessment year 1986-87 and the lottery income was to be assessed in that year, there was a reduction in the rates of tax applicable for the said assessment year ; and (vi) the reasons furnished by the assessee in support of the request for the change were factually incorrect, not supported by evidence and vague. 6. The Commissioner of Income-tax, on the above grounds, cancelled the order passed by the Income-tax, Officer accepting the change of the accounting period from 31-3-1985 to 30-6-1985. 7. In support of the appeal against the order of the Commissioner of Income-tax, the following broad grounds were canvassed : (i) that the impugned order was barred by limitation, (ii) that the CIT has no power under section 263 to revise an order passed under section 3(4) of the Act ; (iii) that there was no oblique motive on the part of the assessee, such as evasion of tax, in seeking the change ; and (iv) that there was no prejudice caused to revenue by the order passed by the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. 10. We are concerned in the present case with a situation where the Assessing Officer has passed an order acceding to the request for a change of the accounting period from 31st March to 30th June. The Income-tax Act, confers upon the Income-tax Officer the power to grant such request. However, he as prospector of the revenue, has to ensure, before accepting the request, that there is no loss of revenue on account of the change. He may impose conditions upon the assessee before accepting the change, subject, of course, to the rider that such conditions must be valid, reasonable and legal. The power conferred on the Income-tax Officer under section 3(4) implies that every application for change in the accounting period should be carefully scrutinised by the Income-tax Officer who is expected delve into subterranean details and apply his mind to the reasons therefor and the consequences thereof before passing an order thereon. The main charge of the Commissioner of Income-tax in the impugned order is that there has been no enquiry of any kind by the Income-tax Officer before accepting the change. Now, the first thing expected of the Income-tax Officer is that he should have exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge in the accounting period. We therefore agree with the Commissioner of Income-tax that no enquiry has been conducted by the Income-tax Officer before passing the order under section 3(4) of the Act on 28-11-1986. The Delhi High Court in Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375, the Karnataka High Court in Thalibai F. Jain v. ITO [1975] 101 ITR 1 and the Gujarat High Court in Addl. CIT v. Mukur Corpn. [19781] 111 ITR 312 have held that if the order has been passed without making any enquiry into the claims made by the assessee, the Commissioner of Income-tax can invoke the jurisdiction under section 263 and revise the order. We therefore uphold the finding of the Commissioner of Income-tax in this regard. 11. This conclusion of ours would have been sufficient to dispose of the appeal. However, as stated earlier, we find that the Commissioner of Income-tax has been at pains to paint out how the reasons advanced by the assessee for the change are factually incorrect. He has also pointed out the prejudice caused to the revenue by the order passed by the Income-tax Officer in terms of loss of revenue. Considerable arguments were also advanced before us on this aspect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue a few facts have to be noticed. The assessee was lucky to win the first prize of Rs. 2.5 crore in the ATWWA Bumper raffle draw held on 14-6-1984. After deductinng agents' commission of Rs. 62,50,000 and TDS of Rs. 63,28,125, the assessee was paid Rs. 1,24,21,875 by cheque dated 30-8-1984. A certificate for the TDS was also issued to him under section 203 of the Act. Now, the income by way of lottery is taxable under the Act, and would have been brought to tax, in the assessee's case, for the previous year ended on 31-3-1985 relevant for the assessment year 1985-86. By reason of the change granted by the Income-tax Officer in the previous year of the assessee from 31-3-1985 to 30-6-1985, the assessment year 1985-86 is skipped. The lottery income would then be considered for taxation only in the previous year ending on 30-6-1985, relevant to the assessment year 1986-87. The shifting or postponement of the year of taxation by means of the change of accounting period will result in loss of revenue, since the rates of income-tax were lowered by the Finance Act, 1986, for the assessment year 1986-87. The loss on this account has been worked out by the Commissioner of Income-tax to am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for income-tax purposes, it cannot be disputed that the assessee would have been prima facie liable for wealth-tax for the assessment year 1985-86, relevant for the valuation date 31-3-1985, in respect of the lottery prize amount. The amount, having been received by cheque, would have either remained in the bank or would have been invested in any other security or other movable or immovable properties. It is not the case of the assessee either before the Commissioner of Income-tax or before us that the money has been frittered away or spent or lost before 31-3-1985 so that it could be said that there would have been no liability to wealth-tax as on 31-3-1985. Nor is it the case of the assessee that his liabilities exceed the amount of his assets, including the monies representing the lottery prize, and therefore there would only be a deficiency or 'negative wealth'. Therefore, having received a substantial amount before 31-3-1985, the assessee would, prima facie at least, appear to be a potential wealth-tax payer as on the valuation date 31-3-1985 and it is for him to show that he is not and thus rebut the prima facie presumption. The assessee has not taken any such stand either be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the words "prejudicial to the interests of revenue" in section 263. The Madras High Court in Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129 has held that the word "revenue" has been used in the section to denote the abstract conception of "Crown" or the "State". If this is the way, as has been authoritatively prescribed, to understand the said word, it matters little whether the prejudice by way of loss of revenue is on account of income-tax or wealth-tax. We cannot ignore the fact that the three laws relating to direct taxes--Income-tax Act, Wealth-tax Act and Gift-tax Act--have been held by the Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597 to form an integrated scheme of taxation. That apart, even if we were to accept the argument of the assessee, still the order of the Commissioner of Income-tax will have to be upheld since we have already upheld the Commissioner of Income-tax's ground that there is loss of revenue even on account of income-tax. The objection is rejected. 15. That leaves us with the objection of the Commissioner of Income-tax that the tax due for the assessment year 1986-87 under section 140A of the Act was delayed by about 18 months. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions do not relate to the issue before us. 17. Our conclusion is that the Commissioner of Income-tax has made out or established that the order passed by the Income-tax Officer is not only erroneous but also prejudicial to the interests of revenue. We therefore uphold the order passed under section 263. 18. We may refer to the observations of His Lordship Justice v. Balasubrahmanyan in Venkatakrishna Rice Co.'s case at pages 137-138 summarising the nature and content of the jurisdiction conferred on the Commissioner of Income-tax under section 263 of the Income-tax Act : " In our judgment, the expression 'prejudicial to the interests of the Revenue' is not to be construed in a petty-fogging manner, but must be given a dignified construction. It may be noted that the use of the expression 'Revenue', in our opinion, is significant. It denotes some kind of abstraction or symbol in the same sense in which the expression 'crown' is used to distinguish it from any person enthroned.The interests of the Revenue is not to be equated to rupees and paise, merely. There is a biblical saying that we do not live by bread alone. Varying this saying, it may be said that the Revenue does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right distortions and prejudices to the Revenue, which, as we have eneavoured to point out earlier, is a unique conception which has got to be understood in the context of and in the interests of revenue administration. The power, as we conceive, it, is intended to maintain the tone of the revenue administration and the morale of the Officers manning it. Such a power cannot in any manner, be equated to, or regarded as approaching in any way the appellate jurisdiction or even the ordinary revisional power conferred on the Commissioner under section 264 of the Act. " The present case, we are satisfied, fully satisfies the tests laid down for the exercise of jurisdiction under section 263 of the Act which, in our opinion, has been rightly invoked by the Commissioner of Income-tax. 19. Before conclulding we may state that we found certain observations in the order of the commissioner of Income-tax casting aspersions on the assessee's representative who appeared before the Income-tax Officer and also the Commissioner. We wish to make it clear that we have not been swayed by those observations in reaching our conclusion, nor should it be taken that we subscribe to them. The only imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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