TMI Blog1995 (7) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of the previous year. The plea was not accepted and consequently the loss was rejected. The Assessing Officer took the view that in the earlier three assessment years, the assessee had adopted the calendar year as the accounting period. Since there was a change in the accounting period, necessary permission should have been obtained. The assessee had taken a plea that it was a new source of income and assessee had a right to adopt a different period as the accounting period. The Assessing Officer further noticed that no return had been filed for the period 1-1-1983 to 31-12-1983 and, instead, return had been filed, adopting the closing period as June 30. The Assessing Officer, while passing the assessment order, adopted the accounting period as December 31. Since no return had been filed for the calendar year 1983, loss arrived at in that year was held to be not determined. Thereafter, the Assessing Officer declined to determine the loss for the calendar year 1984 also, on the ground that the assessee had failed to obtain permission from the department while making a change in the accounting period. The assessee went in appeal but failed. 3. The Ld counsel has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had commenced the business w.e.f. 1-12-1983 and opted to close the accounts on June 30. 4. Here, we may refer to the decision of the Supreme Court in the case of CIT v. Ramaraju Surgical Cotton Mills Ltd. [1967] 63 ITR 478. In order to ascertain as to what is the meaning of the words 'setting up'. It was held that a unit cannot be said to have been set up unless it is ready to discharge the function for which it is being set up. It is only when the unit has been put into such a shape that it can start functioning as a business or a manufacturing organisation that it can be said that the unit has been set up. In the light of said decision, we are of the view that the assessee's plea has to be accepted in respect of setting up of the business. It was not a case where the assessee was earning any income in any of the earlier three assessment years and there can be no assumption that any business had already been set up or commenced by the assessee. Even if the assessee had shown the calendar year as the previous year in respect of the earlier assessment years, that could not debar it from taking the plea that the case was covered under section 3(1)(e). In the case of CIT v. Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in earlier three years, that will not go to establish that the business had already been commenced. We may also refer to a decision of the Allahabad High Court in the case of Rattan Lal Ved Prakash v. CIT [1983] 144 ITR 135. That was a case where no application had been filed by the assessee and the return filed for the changed period of previous year had been acted upon by the Assessing Officer. It was held that the consent of the ITO was implied and there was no requirement to sign any application in a particular form. In the light of this observation also, we reach the conclusion that the assessee, in case of a change, could only file a return of income showing such a change and, even an application was not required to be made. If such a return is accepted, that is to be treated as sufficient compliance of law. 5. The Ld D.R. has, in reply, contended that the assessee has already exercised the option while filing returns for earlier years and it was necessary to seek permission while making a change in the accounting period. Our attention has been drawn to the assessee's explanation, whereunder it was stated that the change has been effected on account of new source of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not damage the assessee's case, on the basis of actual facts. This was also pointed out by the Ld counsel that even if the previous year adopted by the assessee was not acceptable and the accounting period was treated as having ended on 31-12-1983 or 31-12-1984 loss could have been determined and allowed to be carried forward accordingly. By way of alternative plea, the Ld counsel has contended that the loss up to the period 31-12-1984, should have been allowed. It is also explained that the loss from 1-1-1983 to 31-12-1983 had been shown in the books of account at Rs. 1,63,080. Loss from 1-1-1983 to 30-6-1984 had been shown at Rs. 8,66,671. Loss from 1-1-1984 to 31-12-1984 had been shown at Rs. 18,02,848. The plea of the Ld counsel is that the loss up to 30-6-1984 was not allowed after rejecting the assessee's plea. In regard to the adoption of previous year, the loss should have been allowed, treating the accounting year having been closed on 30-12-1984. But that has also not been allowed. In assessment year 1986-87, the year ending has been shown by the assessee as 30-6-1985, and that has been accepted. In view of this also, the Ld counsel has claimed that the revenue, by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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