Satish Chandra, J.
1. This reference relates to the assessment year 1967-68.
2. The assessee-firm was constituted under a deed of partnership dated January 15, 1962, under the name of Messrs. Silk Centre, Varanasi. It consisted of two partners, Baqar Husain and Mumtaz Husain, who are brothers. The third minor brother, Jaffar Husain, was admitted to the benefits of that partnership. On July 1, 1966, Jaffar Husain attained majority. On July 3, 1966, the constitution of the firm was changed and a new partnership deed was drawn up. Under it the partnership consisted of five partners including the existing three. The reconstituted firm was in due course registered with the Registrar of Companies. For the assessment year 1967-68, the firm filed a return, showing its accounting period from 1st January to June 30, 1966, and that of the reconstituted firm from 1st July, 1966, to 30th June, 1967. It made an application that with effect from 1st July, 1966, the firm had been reconstituted and the reconstituted firm had decided to adopt the period from 1st July to 30th June as its previous year. The old firm had adopted the calendar year as its previous year. The Income-tax Officer allowed this application and permitted the firm to change its previous year as prayed. The returns filed for the two firms were accepted and separate assessment orders were passed in relation to the old as well as the reconstituted firm. The new firm was granted registration while the registration of the old firm was allowed to continue.
3. On going through the record of this case, the Commissioner of Income-tax found that the order of the Income-tax Officer was erroneous as well asprejudicial to the interest of the revenue. He passed an order under Section 263(1) of the Act cancelling the assessment orders and directed the Income-tax Officer to reassess the firms. The commissioner was of opinion that the previous year of the firm could be changed only with the prior consent of the Income-tax Officer. The consent should have been obtained before the firm decided to adopt a different previous year.
4. Aggrieved, the assessee went up in appeal to the Tribunal. The Tribunal held that the transaction of 3rd July, 1966, was merely a reconstitution of the firm. It was not a case of succession. The Tribunal held that the consent required by Section 3(4) of the Income-tax Act, 1961, cannot be interpreted as a requirement of obtaining prior consent, In this view, the Income-tax Officer had jurisdiction to give his consent even after the commencement of the changed previous year. The Tribunal also held that in view of the fact that after cancellation the assesses had been assessed at a lower income, it was evident that the original assessment order was not prejudicial to the interest of the revenue and hence the Commissioner was not justified in setting it aside. On these findings the order of the Commissioner passed under Section 263(1) of the Act was set aside and the original assessment orders were restored.
5. At the instance of the Commissioner, the Tribunal has referred the following questions of law for the opinion of this court:
'1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the Income-tax Officer was justified in allowing the change in the previous year of the assessee from the calendar year to the year from 1st July to 30th June under Section 3(4) of the Income-tax Act, 1961
2. Whether, on the facts and in the circumstances of the case, the order of the Income-tax Officer was erroneous and prejudicial to the interest of the revenue and the Commissioner was right in setting aside the same under Section 263(1) of the Act and directing the Income-tax Officer to make the fresh assessment on the basis of the previous year being the calendar year ?'
6. Section 3(4) of the Income-tax Act, 1961, provides :
'Where in respect of a particular source of income or in respect of a business or profession newly set up, an assessee has once exercised the option under Clause (b) or Sub-clause (ii) of Clause (d) or Sub-clause (i) of Clause (e) of Sub-section (1) or has once been assessed, then, he shall not, in respect of that source, or, as the case may be, business or profession, be entitled 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 conditions as the Income-tax Officer may think fit to impose.'
7. Under this provision an assessee can change the previous year only with the consent of the Income-tax Officer, and such change is effective subject to such condition as the officer may impose. Of course the conditions have to be reasonable and with a view to safeguarding the -interest of the revenue. But beyond that there is no further condition or limitation in the section as to the point of time when the consent ought to be sought or granted. Learned counsel for the revenue suggested that the consent ought to be obtained prior to the filing of the return. We are unable to agree to this construction. The section is clear and authorises the Income-tax Officer to grant his consent to the change of previous year subject to the conditions that he may like to impose. If the legislature had intended that the consent should be prior to a particular event, either the closing of the books or the filing of the return, then evidently such conditions would have been mentioned in the section. The absence of any condition shows an intention that the consent was not supposed to be granted at any particular stage of the proceedings or before any specific event. We are in agreement with the Tribunal that the consent to be operative need not be a prior consent.
8. This was the only aspect from which the consent granted by the Income-tax Officer was challenged before the Tribunal.
9. In respect of the second question, the controversy whether the original assessment order for the year 1967-68 was prejudicial to the interest of the revenue was merely academic. The original order passed by the Income-tax Officer cannot, in view of our answer to the first question, be said to be erroneous merely because (sic) in the interest of the revenue.
10. In the result the first question is answered in favour of the assessee. The second question is returned unanswered. The assessee is entitled to costs which we assess at Rs. 200.