Oza, Actg. C.J.
1. This is a reference made by the Income-tax Appellate Tribunal for answering the following questions :
'(1) Whether, on the facts and in the circumstances of the case and the material on record, the Tribunal was correct in law in holding that the return under Section 139(5) is not a valid return ?
(2) Whether, on the facts and in the circumstances of the case and the material on record, the Tribunal was correct in law in ignoring the return under Section 139(5) as a return under Section 139(4) as in any case the return under Section 139(5) or Section 139(4) replaces the original return filed under Section 139(1) and has to be disposed of by assessment of the fresh return filed in place of the original return ?'
2. The facts that emerge from the statement of case submitted by the Tribunal are that the assessment pertains to the year 1978-79. The accounting year ends on March 31, 1978. It is stated that on September 18, 1978, the assessee filed a return under Section 139(1) of the Income-tax Act, 1961, showing a net profit of Rs. 57,990. In this return, the assessee showed the status as individual and a statement of account and balance-sheet were filed along with the return.
3. On October 6, 1979, the assessee filed a revised return in which the income shown was Rs. 19,048 and in this return the status was shown to be that of a firm and a statement of accounts was submitted with a note that these accounts have been maintained on cash basis.
4. The Income-tax Officer did not accept the revised return as, according to him, the accounts, which were maintained during the accounting year which appear from the statement of accounts and balance-sheet filed along with the earlier return, show that they were maintained on mercantile basis and, therefore, after a lapse of one and a half years, the assessee cannot be permitted to rewrite the accounts by changing the system from mercantile to cash. Against this order of the Income-tax Officer, an appeal was preferred before the Appellate Assistant Commissioner where also the assessee lost and the order of the Income-tax Officer was maintained. On second appeal, the Income-tax Appellate Tribunal also maintained the order of the Income-tax Officer on the ground that this subsequent return could not be accepted as a return under Section 139(5) as it does not fall within the ambit of that section and it was also held that as the accounts in the accounting year were maintained on mercantile basis, the assessee cannot be permitted to rewrite the accounts after two years and furnish fresh accounts on cash basis. On this decision of the Tribunal, it appears that, at the instance of the assessee, the present reference has been made.
5. The facts are not in dispute. It is not disputed that originally when the return was filed by the assessee, a statement of accounts and a balance-sheet were submitted which showed that the assessee was following mercantile basis of accounts and the accounts were maintained in accordance with that system. Subsequently, a revised return was filed and with this revised return, a statement of accounts was filed with a note that these accounts were maintained on cash basis. The explanation of the assessee was that although he had maintained accounts on the mercantile basis, in fact, the sale proceeds had not been recovered and still he had to pay tax treating them to be his income and it becomes difficult for him to pay until the amounts are recovered and, therefore, he chose to switch over to cash basis so that he may have to pay income-tax only on the amounts which were received. The Tribunal took the view that although it is open to the assessee to follow a particular system of accounts, if during the accounting year for which the assessment was to be made, accounts were made on a particular basis, the assessee cannot be permitted to rewrite the account books on any other different basis and on this ground the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal did not accept the revised return under Section 139(5).
6. Section 139(5) reads:
'If any person having furnished a return under Sub-section (1) or Sub-section (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made.'
7. This provision clearly enacts that where a person who has filed a return under Sub-section (1) or Sub-section (2) discovers any omission or wrong statement made in the return filed, it is only in those circumstances that he is permitted to file a revised return. Apparently, it is not the case of the assessee that he has omitted to mention something or that he has made any wrong statement. Therefore, as held by the Tribunal, the assessee could not be permitted to rewrite the account books when in fact during the accounting year they were maintained on a particular system of accounts. In this view of the matter, it is apparent that the Tribunal was right in holding that the return filed under Section 139(5) was not a valid return. In this view, therefore, our answer to the questions referred to us are:
(1) The Tribunal was correct in law in holding that the return under Section 139(5) was not a valid return.
(2) In view of our answer to question No. 1, it is not necessary to answer this question as it is a direct consequence thereof.
8. The reference is answered accordingly. In the circumstances of the case, parties are directed to bear their own costs.