COMMISSIONER OF INCOME TAX Vs. HARI PROSAD LOHIA

JUDGEMENT

(1.) At the instance of the Revenue the two following questions of law have been referred to us by the Tribunal under Section 256(1) of the I.T. Act, 1961:

(2.) Whether the Tribunal was right in holding that once the Income-tax Officer gave permission to change the previous year, the same permission cannot be revoked by the subsequent Income-tax Officer, having regard to the provisions of Section 3(4) of the Income-tax Act, 1961, and that the revenue authorities were wrong in withdrawing the grant of change in previous years relating to the assessment years 1973-74 and 1974-75?" 2. This case relates to the assessment years 1973-74 and 1974-75. The assessee, Had Prosad Lohia, wrote a letter dated March 14, 1973, to the ITO stating that he had been following Diwali year up to and including the assessment year 1972-73 as his accounting year and that his sources of income were from his shares of East India Electricals and proprietorship of a firm styled, Prabhat Textiles, remuneration and interest and dividend. The firm in which he was a partner followed the financial year as its accounting year and that the accounts of the proprietorship business, Prabhat Textiles, were closed on the 31st March, every year. In other words, it was following the financial year as its accounting year. The assessee submitted before the ITO that since his accounting year was Diwali year he felt very much inconvenienced in making adjustments in respect of various incomes and, therefore, he requested the ITO to note that he proposed to change his accounting year from Diwali to the financial year and that he would change the accounting year relevant to the assessment year 1973-74 to the financial year resulting in the position that he would be assessed for a period of 17 months. He further submitted that as a result of the change in the accounting year, there would be no loss of revenue to the exchequer. The ITO, by letter dated March 27, 1973, passed an order under Section 3(4) of the Act laying down the following two conditions:

(3.) However, the successor ITO wrote a letter to the assessee on January 15, 1976, by which he intimated that for the reasons stated therein he was not in a position to allow the assessee to alter the previous year relevant to the assessment year 1973-74. The ITO computed the income of the assessee at Rs. 80,880 for the assessment year 1973-74, by including capital gain on sale of shares of East India Commercial Co. Pvt. Ltd. and Cutler Hammer India Ltd., being taken on protective measure, as these transactions were done after the close of Diwali 2029. For the assessment year 1974-75, the ITO computed the income of the assessee at Rs. 4,64,620 by including capital gain from sale of shares of Cutler Hammer India Ltd. and East India Commercial Co. Pvt. Ltd.