Govinda Bhat, J.
1. The questions referred for our decision under section 65(2) of the Indian Income-tax Act, 1922, hereinafter referred to as the Act are :
'(1) Whether the Income-tax Tribunal was justified in law in refusing to entertain the additional ground of appeal urged by the assessee regarding the correct rate of tax applicable or to be applied for the nine months income considered in the assessment
(2) Whether the assessee's income for nine months ended on March 31, 1950, could have been rightly assessed at the rate applicable for twelve months' income
(3) Whether there was any material available on record to support the Tribunal's conclusion that the assessee's turnover for the year ended March 31, 1950 was Rs. 15,00,000 ?'
2. The learned counsel on both sides were agreed that question No. 1 need not be answered as the said question is involved in question No. 2 which was directed by this court to be referred as it arises out of the order of the Tribunal. The learned counsel for the assessee, Sri K. Srinivasan, did not press question No. 3 and he submitted that the same may be answered in favour of the revenue.
3. The only question that requires to be answered is question No. 2. In our opinion, the judgment of the Supreme Court in Esthuri Aswathaiah v. Commissioner of Income-tax, furnishes a complete answer and the question has to be answered in favour of the assessee.
4. The relevant facts so far as they are material for the purpose of answering question No. 2 as found in the statement of the case submitted by the Tribunal are as follows :
5. The Mysore Income-tax Act, 1923, was repealed and the Act was extended to the erstwhile Mysore State by section 13 of the Finance Act, 1950, with effect from the first of April, 1950. Under the Act, the 'financial year' commences on the first of April, and the expression 'previous year' is defined in section 2(11). In 1950 it read thus :
'2. (11) 'previous year' means in respect of any separate source of income, profits and gains -
(a) the twelve months ending on the 31st day of March next preceding the year for which the assessment is to be made, or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then at the option of the assessee the year ending on the day to which his accounts have so been made up :
Provided that where an assessee has once been assessed in respect of a particular source of income, profits and gains, he shall not in respect of that source exercise this option so as to vary the meaning of the expression 'previous year' as then applicable to him except with the consent of the Income-tax Officer and upon such condition as the Income-tax Officer may think fit.......'
6. Under the Act, the tax is levied for each financial year commencing on the first April at the rate or rates prescribed in the Finance Act in force for the time being and is actually charged on the total income of the 'previous year'. The year for which the tax is paid is called the 'assessment year' or 'income-tax year'. 'Previous year', on the income of which the tax is levied, is called the 'accounting year'.
7. For the assessment year 1949-50, the assessee was assessed under the Mysore Income-tax Act on his income earned during the accounting year ended on 30th June, 1949. By reason of the repeal of the Mysore Income-tax Act and the extension of the Indian Income-tax Act, the first assessment year under the Act commencing on the first of April, so far as the erstwhile Mysore State was concerned, was the assessment year commencing on the first of April, 1950. The assessee submitted his return for the assessment year 1950-51 commencing on the first of April, 1950, in respect of the income earned during the period of nine months from July 1, 1949, to March 31, 1950. He sought the consent of the Income-tax Officer for allowing him to change the financial year ending on 31st March. That request of the assessee was granted by Income-tax Officer, but with a condition that the income of the period from July 1, 1949, to March 31, 1950, would be assessed at the rates applicable to the income of twelve months.
8. The Income-tax Officer assessee the income that had accrued during the period of nine months at the rates applicable to the income of twelve months. That order was affirmed on appeal by the appellate authorities. Hence the matter has come up before us on a reference sought at the instance of the assessee.
9. It was argued by Sri K. Srinivasan, the learned counsel for the assessee, that the proviso to clause (a) of sub-section (11) of section 2 of the Act does not empower the Income-tax Officer to impose a condition that the assessee shall be assessed at the rates applicable to the income of twelve months where consent is granted for change of the 'previous year' even where as a result of the change the period of the 'previous year' becomes less that twelve months.
10. In Esthuri Aswathiah v. Commissioner of Income-tax, the facts were as follows : The appellant, who had adopted the year ending on June 30, as the 'previous year', was assessed to tax for the year ending June 30, 1950, for the assessment year 1951-52. For the assessment year 1952-53, he filed a return for 21 months commencing on July 1, 1950, and ending on March 31, 1952, and to this change the Income-tax Officer accorded his sanction and he assessed the total income for the period of 21 months at the rate applicable to that total income.
11. One of the main contention urged by the assessee which was rejected by the Supreme Court was that the income for 21 months should be assessed at the rate applicable to the income of the last period of twelve months. In the said case, the Supreme Court laid down the following three propositions :
(1) That the length of a 'previous year' need not necessarily be twelve calendar months.
(2) Where the Income-tax Officer accords his consent to a change of the 'previous year', he has ample power to impose the condition that the full period from the end of the 'previous year' for the preceding year's assessment to the end of the new accounting year should be taken as the 'previous year' for the current assessment year. In a case where the 'previous year' at any given time applicable to the assessee ends on June 30 and he wants to vary it so as to make it end on March 31 next, the Income-tax Officer has power to accord sanction to the change on the condition that the 'previous year' would consist of the entire period of 21 months commencing on June 30 of the year up to which his accounts were last made up to March 31 of the year up to which his accounts are newly made up.
(3) Where the Income-tax Officer accords consent for change of the 'previous year', he has no power to vary the rate at which the income of the 'previous year' is to be assessed.
12. The law as laid down by the Supreme Court is that once the length of the 'previous year' is fixed and the income of the 'previous year' is determined that income must be charged at the rates specified in the Finance Act at no other rate.
13. It was argued by the learned counsel for the revenue that under the proviso to clause (a) of sub-section (11) of section 2, the Income-tax Officer has the power to accord consent for the change upon such conditions as he may think fit and the power comprehends within its ambit the power to impose a condition that where the 'previous year', as a result of the change allowed, falls below twelve months, the assessee shall be liable to pay tax at the rate applicable to the income of twelve months. It is clear from the judgment of the Supreme Court that the discretion vested in the Income-tax Officer under the proviso is limited to the period of 'previous year' only. It was open to the Income-tax Officer in the instant case to impose a condition that the assessee's 'previous year' for the assessment year 1951-52 shall be a period of 21 months commencing from July 1, 1949, to March 31, 1951. That, the Income-tax Officer has not done. He has accorded consent for change of the 'previous year' to cover the period of nine months from July 1, 1949, to March 31, 1950. Having accorded consent, he had no power under the Act to impose a condition to charge tax at a rate higher than the rate charged under the Finance Act. That power is a legislative power and cannot be exercised by any authority exercising power under the Act.
14. We, therefore, answer question No. 2 in favour of the assessee that the assessee's income for the nine months ended on March 31, 1950, can be taxed only at the rates applicable for the income of the said period of nine months and not at the rates applicable for twelve months' income. Question No. 3 is answered in the affirmative in favour of the revenue in view of the concession made by the learned counsel for the assessee. The respondent will pay the costs of the assessee. Advocate's fee Rs. 250.