SHREEPATI DISTRIBUTORS LTD Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) Section 3(4) of the Income-tax Act, 1961, defines "previous year ". Generally, it means an accounting year of 12 months. It may be the financial year or at the option of the assessee, any other period of 12 months. Section 3(4) lays down that if an assessee has once exercised his option of choosing his "previous year", he shall not be entitled to vary his accounting year except with the consent of the Income-tax Officer and upon such conditions as the Income-tax Officer may think fit to impose.

(2.) In the instant case, the assessee is a company which used to follow the year ending on 31st December, as its "previous year". This system continued up to the assessment year 1982-83. For the assessment year 1983-84, the assessee wanted to change its previous year to the financial year. This change was allowed by the Income-tax Officer and the assessment for the assessment year 1983-84 was completed on the basis of the previous year from January 1, 1982, to March 31, 1983. On March 14, 1985, the assessee once again wanted to change its previous year from financial year to the year ending on June 30.

(3.) This prayer was refused by the Income-tax Officer by an order dated May 31, 1985. The ground that was given by the Income-tax Officer was that once there had been a change of previous year, the same cannot be allowed to be changed again. Moreover, if the assessee was allowed to change its previous year from March 31, 1985, to June 30, 1985, the assessment will have to be done for the assessment year 1986-87. In such a situation, there will be no assessment for the assessment year 1985-86 and there will be a substantial loss of revenue inasmuch as the rate of income-tax for companies had been reduced by 5% and the provisions of Section 37(3A) stood omitted with effect from the assessment year 1986-87. The petitioners prayer for change of accounting period was accordingly rejected by the Income-tax Officer.