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Gauri Sahai Ghisa Ram Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Application No. 865 of 1978
Judge
Reported in[1979]120ITR338(All)
ActsIncome Tax Act, 1961 - Sections 3(4)
AppellantGauri Sahai Ghisa Ram
RespondentCommissioner of Income-tax
Appellant AdvocateR.K. Agarwal, Adv.
Respondent AdvocateR.K. Gulati and ;Ashok Gupta, Advs.
Excerpt:
- - moreover, we are not satisfied that there is any substance in this objection......year 1972-73, the accounting period ended on october 18, 1971. the assessee filed a return for the period october 21, 1970, to october 18, 1971, which was returnable for the assessment year 1972-73. 2. on december 20, 1971, one of its partners, ghisa ram, died. the firm came to an end and was succeeded by another firm. the new firm adopted the financial year as its previous year. a return was filed on behalf of the old firm for the period october 19, 1971, to december 20, 1971, and a third return was filed on behalf of the new firm for the period december 21, 1971, to march 31, 1972. before the ito, counsel appearing for the assessee conceded that the income for the period october 21, 1970, to march 31, 1972, may be assessed for the assessment year 1972-73. the ito acted accordingly and.....
Judgment:

Satish Chanpra, C.J.

1. The assessee is a registered partnership firm. Its accounting period was Dussehra to Dussehra. For the assessment year 1972-73, the accounting period ended on October 18, 1971. The assessee filed a return for the period October 21, 1970, to October 18, 1971, which was returnable for the assessment year 1972-73.

2. On December 20, 1971, one of its partners, Ghisa Ram, died. The firm came to an end and was succeeded by another firm. The new firm adopted the financial year as its previous year. A return was filed on behalf of the old firm for the period October 19, 1971, to December 20, 1971, and a third return was filed on behalf of the new firm for the period December 21, 1971, to March 31, 1972. Before the ITO, counsel appearing for the assessee conceded that the income for the period October 21, 1970, to March 31, 1972, may be assessed for the assessment year 1972-73. The ITO acted accordingly and passed a single assessment order for the entire period for which the assessee had, in fact, filed three returns of income.

3. The assessee went up in appeal. Before the AAC, it was urged that a single assessment order for the assessment year 1972-73 could not be passed except for the twelve month period--October 21, 1970, to October 18, 1971. The return filed by the old firm for the period October 19, 1971, to December 20, 1971, was assessable for the year 1973-74, while the income for the period December 21, 1971, to March 31, 1972, was assessable for the assessment year 1973-74, in the hands of the new firm. The AAC accepted these contentions and directed the ITO to frame three assessments and to exclude the income of the second and the third periods from the income of the old firm for the year 1972-73. The assessee's appeal was accordingly allowed.

4. The ITO went up in appeal to the Tribunal. The Tribunal held that the assessee could validly get out of the concession made by the counsel before the ITO because the concession was made on an erroneous understanding of the correct legal position. It then went on to hold that the income of the firm for the period October 21, 1970, to October 18, 1971, was assessable for the assessment year 1972-73 and since the two assessments cannot be made against the same assessee for the same assessment year, it directed that the entire income between October 21, 1970, to December 20, 1971, was assessable for the assessment year 1972-73. It, however, held that the income for the period December 21, 1971, to March 31, 1972, was assessable in the hands of the new firm for the assessment year 1972-73. It, therefore, directed that two and not three assessments be framed,

5. At the instance of the assessee, the Tribunal has referred the following questions of law for our opinion :

' 1. Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the income of the assessee from October 18, 1971, to December 20, 1971, which was relevant for the assessment year 1973-74 for which a separate return was Sled be included in the assessment for the assessment year 1972-73

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified that one assessment be made for the income of more than fourteen months, i.e , one from October 20, 1970, to October 18, 1971, and the other from October 19, 1971, to December 20, 1971

3. Whether, on the facts and in the circumstances of the case, there can be one assessment for more than 12 months when there was no change in the accounting year '

6. Admittedly, the accounting period adopted by the old firm was Dussehra to Dussehra which, for the the assessment year 1972-73, ended on October 18, 1971. The period October 19, 1971, to December 20, 1971, during which the old firm continued the business, could not be treated as part of the accounting period for the assessment year 1972-73 in respect of the old firm. Mr. Gulati appearing for the revenue, however, urged that in view of Section 3(4), the assessee would be deemed to have changed the previous year without obtaining the consent of the ITO because it closed its accounts on December 20, 1971. In other words, since the assessee did not carry on its business and maintain accounts for the entire accounting period which would have normally ended in October 1972, it was a case of change of the previous year. We are, however, unable to agree. If an assessee dies with the consequence that the business carried on by the assessee comes to a close, it is not a case of change of previous year within the meaning of Section 3(4) of the Act. Change of previous year implies a deliberate or voluntary change at the instance of the assessee. When an assessee diesor where an assessee-firm undergoes a civil death, it no longer has any volition in respect of the change of the previous year. The business comes to an automatic end and the books of account have got to be closed ending with the period when the business closes. In this view, the period October 19, 1971, to December 20, 1971, during which the old firm continued to do business, was referable to the assessment year 1973-74 and an assessment order could be passed validly against the old firm only for the year 1973-74. This period could not be clubbed with the assessment year 1972-73. The AAC was hence justified in directing that the assessment for the period be framed against the old firm, but for the period 1973-74.

7. Mr. Gulati, learned counsel for the revenue, submitted that no appeal lay to the AAC against the ITO's assessment order because it was based on the concession made by the assessee's counsel. Hence the assessee could not be an aggrieved person within the meaning of the appellate provision. This plea was not raised in this form even before the Tribunal. No such objection was taken before the AAC. Moreover, we are not satisfied that there is any substance in this objection. The appeal was filed on the basis that the ITO has framed the assessment on the basis of a concession given by the assessee's counsel wrongly on a question of law. This objection was entertained and accepted. This was a case where the assessee was an aggrieved person. Another difficulty in accepting this submission is that no question on the finding of the Tribunal rejecting the preliminary objection of the revenue has been referred to us at the instance of the revenue.

8. We, therefore, answer the questions referred to us as follows :

Questions Nos. 1 and 2.

9. In the negative, in favour of the assessee and against the department.

Question No. 3.

10. In view of our answer to the first two questions, this question has become academic and is returned unanswered.

11. The assessee would be entitled to costs which are assessed at Rs. 200.


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