COMMISSIONER OF INCOME TAX Vs. NUTHERN PVT LTD

JUDGEMENT

(1.) The Income Tax Appellate Tribunal, Ahmedabad Bench B has referred the following question under Section 256(1) of the Income Tax Act, 1961 (the Act) at the instance of the Commissioner of Income Tax.

(2.) The assessment year is 1985-86. The assessee's accounting period is 1-7-1983 to 30-6-1984 and the assessee was assessed under Section 143(3) of the Act by order dated 4-1-1988. On 31-12-1984, the assessee company amalgamated with M/s Nestler Boilers Pvt. Ltd. Therefore, the accounts of the assessee company were made up for a period of six months from 1-7-1984 to 31-12-1984 showing net profit of Rs.2,86,074/-. The assessee company accordingly filed the return of income for assessment year 1986-87. Assessment came to be framed for assessment year 1986-87 on total income of Rs.3,83,170/- for the six months' period.

(3.) The Commissioner of Income Tax, Baroda (the CIT) initiated action under section 263 of the Act for assessment year 1985-86, as according to him, the income of Rs.3,83,170/- for the accounting period of six months from 1st July 1984 to 31st December 1984 had to be assessed as income for assessment year 1985-86 and not assessment year 1986-87. According to the CIT, since the six months' period ending on 31st December 1984 fell during financial year 1984-85, the income was assessable for assessment year 1985-86 and therefore, the assessment order dated 4-1-1988 for assessment year 1985-86 was erroneous and prejudicial to the interest of revenue. He, therefore, set aside the assessment for assessment year 1985-86 with a direction to pass a fresh assessment order so as to assess the income of a period of eighteen months from 1st July 1983 to 31st December 1984.