1. This appeal has been filed by the department against the order dated 16-10-1980 of the Commissioner (Appeals).
2. The assessee is an individual deriving income from salaries. The assessment year involved in this appeal is 1978-79. The assessee was deriving salary income from his employer, West Coast Paper Mills Ltd. The previous year adopted by the assessee in respect of that salary income was the financial year up to and including the assessment year 1977-78. On 31-8-1977, the assessee left his former employer and joined the services of Tungabhadra Industries with effect from 1-9-1977. The case of the assessee was that he had the option to choose a separate previous year for each source of his income and that the salary from the West Coast Papers Mills Ltd. represented a different source from the salary derived by him from the Tungabhadra Industries. He returned the income from his former employer received for the period from 1-4-1977 to 31-8-1977 as the income earned during the previous year ended 31-3-1978, relevant for the assessment year 1978-79. Regarding the salary earned by him from his new employer from 1-9-1977 to 31-3-1978, the case of the assessee was that he opted the previous year ending 4-8-1978 for this new source of income which would be assessable only in the assessment year 1979-80. In this view of the matter, he did not include the salary income from his new employer in the return of income filed for the previous year ended 31-3-1978. The ITO did not agree with the contentions of the assessee. He found that the assessee was assessed on salary income on the basis of the previous year ending 31st March. According to him, the assessee could not have two separate previous years for the same salary income. Hence, he included the salary earned by the assessee from his new employer up to 31-3-1978 in the income assessable for the year ended 31-3-1978. In other words, the ITO held that the assessee was not entitled to change the previous year in respect of the income derived from his new employer.
3. The assessee appealed to the Commissioner (Appeals) and contended that the action of the ITO was erroneous. Reliance was placed on the decision of CIT v. Lady Kanchanbai  77 ITR 123, CIT v. Patiala Sales Corporation (P.) Ltd.  77 ITR 443, Seth Shiv Prasad v. CIT  84 ITR 15 and Sobhagmal Lodha v. CIT  63 ITR 424. The Commissioner (Appeals) went through the decisions and found that the assessee could have a previous year for a separate source of income, as laid down in Section 3(3) of the Income-tax Act, 1961. Referring to the decision in the case of Seth Shiv Prasad (supra}, he observed that when holding shares in different companies could form different sources of income, there was no reason as to why the salaries earned from different employers would not form different sources of income. He also observed that Section 3(1)(b) gave an option to the assessee to make up his accounts to any date other than the 31st March and as the assessee had opted for closing his accounts on 4-8-1978, the assessee could not be prevented from doing so. In this view of the matter, he held that income earned by the assessee from his new employer could not be assessed during the previous year ended 31-3 1978.
4. Shri S. Krishnan, the learned departmental representative, stated before us that the option under Section 3(1)b) related to persons maintaining books of accounts. He referred to the decision in the case of CIT v. V.V.S. Sarma[ 1977] 110 ITR 778 (Mid.) for the proposition that in respect of income from salary for which no books of account were maintained by the assessee, the previous year would be the financial year. According to him, the assessee did not maintain any accounts and, so, the previous year should be taken as the financial year. Referring to the decision in the case of Bhailal Tribhovandas & Co. v. CIR  68 ITR 136, he stated that "making of accounts" meant "ascertaining the profit or loss of a particular period". Hence, he urged that the decision of the Commissioner (Appeals) deserved to be set aside and that of the ITO deserved to be restored.
5. Shri C.A. Guianikar, the learned representative of the assessee, on the other hand, supported the order of the Commissioner (Appeals). He stated that Section 3(1 )(b) laid down that the assessee could make up his accounts to any date within the financial year and the option to do so was with the assessee. He then referred to Section 3(3) which stated that the assessee might have different previous years in respect of separate sources of his income. Regarding the meaning of "source of income", he relied on the decision in the case of Seth Shiv Prasad (supra), referred to by the Commissioner (Appeals) in his order. He then referred to the decision in the case of AM. CIT v. K. Ramchandra Rao  127 ITR 414 (AP) and stated that the said case was a direct authority supporting the case of the assessee. He also referred to the decision in the case of CIT v. Vishnudayal Dwarkadas  123 ITR 140 (Bom.) and pointed out that the decision in that case went against the assessee only because there was no material to show that the assessee had exercised its option and pointed out that, in the instant case, the assessee had clearly exercised his option at the time of filing the return and so the principal laid down in the case of Vishnudayal Dwarkadas (supra) also supported the case of the assessee.
6. We have considered the contentions of both the parties as well as the facts on record. We find force in the contentions raised by the assessee. It has been held in the case of Seth Shiv Prasad (supra) that dividends derived from different companies can constitute different sources of income. On the same analogy, it stands to reason that salary derived from different employers will constitute different sources of income. If that is so, then Section 3(3) says that there can be different previous years for different sources of income. Section 3(1)(7) gives option to the assessee to adopt any previous year of his choice in respect of a new source of income. Admittedly, the assessee had declared before the ITO that he wanted to adopt the year ended 4-8-1978 as the previous year in respect of the new source of his income, namely, the salary from his new employers. He has clearly exercised his option under Section 3(1)(7) in respect of different source, as envisaged under Section 3(3). Hence, we do not see any legal bar for the assessee to do so. The case of the assessee is, indeed, supported by the decision in the case of K. Ramchandra Rao (supra). In that case, the assessee, who was an advocate, was receiving a salary of Rs. 800 per month as an editor of a Law Journal. The previous year in respect of his salary income was the year ended 31st March of every year. He was appointed as a Judge of the Andhra Pradesh High Court on 21-8-1968. The assessee claimed that he maintained separate accounts in respect of salary income as a Judge of the High Court and made up the accounts for the previous year ending 31-7-1969 Consequently, the case of the assessee was that the salary earned as a Judge from 21-8-1968 till 31-7-1969 was not assessable in the assessment year 1969-70. On the other hand, the salary earned from 21-8-1968 to 31-7-1969 was assessable only in the assessment year 1970-71. The Tribunal held that the assessee was quite correct in law to claim what he did. The High Court also confirmed the decision of the Tribunal. In the case before us, the assessee has, admittedly, made up his accounts in respect of salary from his new employer up to 4-8-1978 and so, the income arising from the new source up to 4-8-1978 could not be taxed during the assessment year 1978-79. We also find force in the contention of the learned representative of the assessee that the principle laid down in the case of Vishnudayal Dwarkailas (supra) supports the case of the assessee. Hence, we uphold the order of the Commissioner (Appeals).