Rajinder Sachar, J.
(1) This order of mine will dispose of C. W. 996 and 997 of 1971.
(2) By consent the facts in C. W. 996 of 1971 were referred to and it was conceded that the result in C. W. 997 of 1971 will be governed by judgment in this case.
(3) The scope and extent of the power of the Income-tax Officer under Section 3(4) of the Income-tax Act, 1961 (hereinafter called the Act) is the question that calls for determination in these writ petitions.
(4) The petitioner
(5) Section 2(9) of the Act defines the assessment year to mean the period of twelve months commencing on the 1st day of April every year. Tax is levied for each financial year commencing on the 31st April at the rate or rates prescribed under the Finance Act and is a charge on the total income of the financial year. The assessed has been given the option to choose his accounting year ending on any day within the preceding financial year as his previous year. But once he has exercised his option than by virtue of Section 3(4) of the Act 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, It is thus not correct to urge as the counsel for the petitioner Mr.Desai contended that the terms that were offered by the petitioner were attractive terms and thereforee it was incumbent on the income-lax officer or respondent No 2 to have allowed the permission sought for. Mr. Desai took me through the various terms offered by the company and sought to suggest that there was no prejudice caused to the Revenue Authority permiting the change in the meaning of the expression previous year and that the refusal of the respondents was thereforee completely arbitrary and untenable, It was pointed out that no reasons have been given as to why the permission has been refused and thereforee it must follow that the decision is arbitrary. It is not possible for me to accept this contention. The statute does not require the recording of reasons by the Income-tax officer when exercising his discretion under Section 3(4) of the Act nor does the Act require that the reasons for refusal have to be communicated to the assessed. The matter being in the discretion of the income-tax officer it is not possible to accept the suggestion that the reasons why discretion has not been exercised in favor of the assessed must be put on record and the same should be communicated to the assessed. Nor is there any merit in the argument that as the terms were attractive and sufficiently met the various objections made by the department the same should have been accepted. This argument seeks to convert this court into a court of appeal over the decision of the Income-tax officer. The statute having conferred the discretion on the income-tax officer, the decision as to whether the change should be permitted and whether it will prejudice the interest of the revenue has to be the decision of the income-tax officer. This court cannot examine the sufficiency or adequacy of the material on the basis of which the decision of Income-tax officer has been arrived, as the same is not justiceable.
(6) It had been sought to be contended by the counsel for the respondents, Mr. Sharma that the discretion of the Income-tax officer under Section 3(4) was so unfettered that his decision was not subject to challenge by means of writ proceedings under any circumstances. Stated so broadly the contention is plainly untenable. No doubtit is for the Income-tax Officer to decide whether to excrcisc his discretion in favor of the assessed under Section 3(4) of the Act, but it can not be accepted that this discretion even if exercised arbitrarily and capriciously, is beyond the scrutiny of this court. Of course this court will not substitute its own opinion or discretion for that of the income-tax officer. But if the assessed is able to show that this discretion has been excrcised in a mala fide or arbitrary manner or on extiet.necus corditiors the same will be subject to challenge under Article 226 of the Constitution. But simply because the income-tax officer has not chosen to agree to the terms offered by the petitioner does not necessarily mean flat he has acted arbitrarily or capriciously. It Js to be remembered that the purpose of the Act is to levy tax and to collect the same. The interest of the revenue is upper most. It is obvious that there would be-many cases with various ramification and each case has to be decided on the peculiar facts on its own case. Simply thereforee because discretion has to be exercised by the income-tax Officer it cannot be said that its refusal per se is always discriminatory. The assessed who so alleges must demonstrate how and in what manner the discretion has been exercised in a fanciful and illegal manner. If the assessed is able to show that the discretion has been exercised in a mala fide manner and not in good faith or arbitrarily this court: will have full power under article 226 of the Constitution to strike down the abuse of power in appropriate case and the assessed will not be without a remedy To this extent, thereforee, it is not possible to accept the contention of the counsel for the respondents that the order passed under Section 3(4) of the Act by the repondents refusing to vary the meaning of the expression of the ' previous year ' as applicable to assessed cannot in any circumstance be challenged.
(7) Mr. Desai fairly did not claim that the assessed had absolute right to claim to have the permission from the income-tax officer within the meaning of Section 3(4) of the Act. He conceded that it was open to the income-tax officer to see whether by permitting the variation of the meaning of the expression ' previous year ' ; as applicable to the petitioner company the interest of the revenue would not be prejudiced. He, however, contended that in the present case the interest of the revenue was not going to suffer and thereforee the orders refusing the permission were illegal. I find no merit in this contention. Mr. Desai had to concede that even by following all the terms that the petitioner-company had offered there would for at least the first year be some loss to the revenue. He, however, suggested that it was such a small loss that this was no reason for refusing the permission to the petitioner-company. But that raises a question about the sufficiency or otherwise of the material and that obviously cannot be examined in this court in a writ proceedings. Some of the reasons mentioned by the petitioner-company for change in the meaning of the expression of the 'previous year 'relate to the difficulty of the general meeting being hell in May and June and to the statements that are to be prepared under the Companies Act. To this the counsel for the respondents had offered during the course of arguments that if the petitioner-company wanted to change the meaning of its ' previous year ' from December to any time up to the end of March the department would have no objection. This consession was offered so that the company if it had genuine difficulty in holding the mseting in June could vary the previous year to March and thus be able to hold the meeting six months thereafter i.e., by September. But he, however, stongly contended that the whole purpose of changing the meaning of the previous year from December io May was to get the benefit of postponing the time for the payment of advance lax and the further postponement of the period for being assessed. In the affidavit filed in return by the income-tax officer, it has also been stated that the reasons given for the change of the ' previous year ' are reasons which are common to every company which is subject to income-tax and company regulations and for identical circumstances and rather subject to identical obligation and that if the petitioner's reasoning if carried to its logical conclusion it would follow that it would not be possible for any company to close its account at any point of time other than that advocated by the petitioner. The fact that the petitioner had been closing consistently its account on '31st December every year also negatives this reason for permission being granted to change the accounting year. It is also stated that the income-tax officer honesty believed that the request of the petitioner asking for permission to change the 'previous year' as applicable to the petitioner is motivated by no other consideration than to create a longer gap between the period during which certain income is earned by the petitioner and the assessment year in which it would fall for assessment, with certain other consequences following i.e. postponement of date of filing the return, postponement of date of completion of assessment, payment for self assessment to taxes, and affording an apportunity of speculation. It is also stated that the petitioner would get advantage at the cost of revenue by getting only five months income assessed in one assessment year and that the petitioner's request to justify the change was not in the interest of revenue and after examining the pros and cons of the question he had come to the conclusion that it would be acting prejudicially to the interest of revenue if he gave assent to the change of the previous year sought by the petitioner. He, thereforee, with-held his consent. This with-holding of the consent is stated to be actuated by considerations of protecting the interest of the revenue and speedy and expeditious realisation of all legitimate taxes due from the petitioner without allowing him to defer the payment thereof byvarying the meaning of the 'previous year'. The with-holding of assent is, thereforee, deposed to be after application of mind and is supported by bona fide reasons is neither arbitrary or capricious. An affidavit in return has also been filed by Mr. P.L. Malhotra Commissioner of Income-tax who has stated that full opportunity was given to the petitioner to establish its case and ultimately the department came to the conclusion that the change desired by the petitioner in the meaning of the expression of the 'previous year' was not justified on merits. It is denied that he had agreed that the refund falling due under Section 141A of the Act would not be paid or that the same would be adjusted against the advance tax payable for the assessment year 1972-73. It was also denied that the petitioner was asked to waive the interest in respect of any refund that may be due under Section 141-A of the Act for assessment year 1971-72. On the other had this is stated to be a suggestion but forward by the petitioner himself. It is definitely asserted that the department examined the various proposals put forward by the petitioner put that it was found that if the change in the meaning of the expression 'previous year' was to be allowed there would accrue substantial loss to the revenue every year because the petitioner would be in a position to defer the payment of advance tax by a period of 7 months year after year.
(8) It is not as if the suggestion by the respondents that by the change in the meaning of the 'previous year' the petitioner will benefit by not paying the advance tax in the current year and postponement of the determination of tax is without any basis will by clear by making a reference to the statements tiled by the petitioner itself (as annexure 'K' in Cw 996/71 & annexure 'L' in , 997/71). In the statement annexure 'K' it is stated that advance tax paid for the assessment year 1971-72 is rupees 82 lakhs. Now if no change of 'previous year' was permitted the whole of this amount will obviously he adjusted against the completed assessment and the petitioner will be paying the advance tax for the assessment year 1972-73 separately. However, if the change of 'previous year' is permitted the statement itself indicated that the petitioner becomes entitled to a refund of Rs. 75.25 lakhs. Similarly in the connected writ petition (CW 997/71) in the statement of account, annexure 'L' it has also been stated that the advance paid for the assessment year 1971-72 was Rs 131.30 lakhs and if the change of previous year is permitted the petitioner becomes entitled to a refund of Rs. 82 lakhs. This amount of course also similarly was sought to be adjusted for the advance tax of 1972-73. It is true that the petitioner has suggested this amount which is refundable may not be refunded to it but may be adjusted against the advance tax in respect of the assessment year 1972-73 as and when it falls due. The result, thereforee, of permitting a change in the meaning of the previous year is to allow the petitioner to avoid having to pay advance tax for the year 1972-73 which he would be liable if no change was permitted. The petitioner was also aware that Section 214 of the Act, provides that the Central Government shall pay simple interest at nine per cent per annum on the amount by which the aggregate sum of any Installments of advance tax paid during any financial year in which they are payable under Sections 207 to 213 exceeds the amount of the tax determined on regular assessment and had indicated that it will waive interest on that amount. The counsel for the respondents has pointed out that even if the petitioner was agreeable to waive the interest the said condition cannot be imposed as it would run contrary to the mandatory provision of the statute, and the department cannot be expected to impose a condition plainly inconsistent with the provisions of the Act. This will also show that the exercise of discretion by the respondents in refusing to allow change of the meaning of the expression 'previous year' is not without any basis or in any manner capricious.
(9) Thus it will be seen that there is a definite assertion by the respondents that the consideration on the basis of which the change in the meaning of the 'previous year' has not been permitted is the consideration of the. interest of the revenue. It cannot be urged within any Seriousness by the petitioner that the consideration of the interest of revenue is not germane or relevant consideration. Rather under the Act interest of revenue is the primary consideration. No malice or bias is alleged any of the respondents. The fact that the terms put forward by the petitioner have not been found by the respondents sufficient to safeguard the nterest of revenue is a good grouad for the refusal. Sub-section (4) of Section 3 in terms forbids the change of the 'previous year'. Thus there is no vested right which the petitioner can claim. The respondents have given the petitioner a very detailed hearing and have by applying the relevant consideration came to the conclusion that the interest of revenue would be prejudiced if change was to be permitted. It would in the circumstances be inexpedient for this court to sit in judgment over the decision taken by the appropriate autorities when no question of male fide or arbitrariness arises. In my view the petitioner has failed to show any reason for interference with the impugned order.
(10) The result is that there is no merit in the writ petitions and the same are dismissed with costs. Counsel's fee Rs. 250.00 one set of costs only.