RAJARATHANAM V D Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) These two references arise from the same transactions entered into by the assessee, namely, renovation and repairs to what is known as Rashtrapati Nilayam at Bolarum, and the period of assessment is in respect of the previous year 1959-60. Two questions are before us, the one referred by the Tribunal under section 66(1) of the Income-tax Act, 1922, Viz.,

(2.) The assessee is an individual contractor and has several sources of income, such as interest on securities, income from house property and income from business. In the previous year, relating to the assessment year 1959-60, he had undertaken to complete the building contract work. In fact, this building contract was undertaken by him even earlier to the previous year. But the question that has been referred is only confined to the previous year relation to the assessment year 1956-60. It is, however, stated in the statement of the case that the contract actually started on 1st January, 1957, and was completed on 30th August, 1959. Accounts maintained for this business were, however, closed only once, i.e., when the contracts were completed; so much so, the profit from the contracts was ascertained for the entire period from 1st January, 1957, to 30th August, 1959, when the accounts were so closed and not periodically with reference to any previous year. For the assessment year 1st January, 1957, to 30 August, 1959, the Income-tax Officer had adopted the previous year as the year ending with 30th September, because the assessee was maintaining accounts from October to September in respect of his other businesses, such as film exhibition business, medical stores, etc., and this was also the accounting period which he preferred for the earlier assessment year in respect of the contract business. But when it came to 1959-60, it was found by the next Income-tax Officer that the assessee could not so adopt and, therefore, he apportioned the entire profits as between the two assessment year 1958-59, and 1959-60 for which the previous years are 1958-59 in the proportion of 3 : 1. The basis for doing so as appears from the Income-tax Officers report is the receipts in each of the above assessment years, which according to him justify the fixing of that proportion.

(3.) Mr. Ramachandra Rao contends that once a year of assessment has been adopted by the Income-tax Officer, he cannot give a go-by to that period and adopt another. As a proposition of law it is unexceptionable. But in this case the adoption by the Income-tax Officer of the previous year, October to September, for the assessment year 1958-59, was wrongly adopted, because it does not satisfy the requirements of section 2(11) (i) (a) of the Income-tax Act. It is only in cases where the assessee could adopt a different period to the financial year, 1st April to 31st March, that any other period could be adopted, which would invariably mean a period of twelve months. This is also subject to the requirement of the section. Section 2(11) (i) (a) is as follows :