Andhra Pradesh H.C : Whether, on the facts and in the circumstances of the case, the reassessment made by the ITO under s. 147 of the IT Act, 1961, was barred by limitation and, therefore, not valid in law ?

Counsel Appeared

M.S.N. Murthy, for the Assessee : A. Satyanarayana, for the Revenue

B.P. JEEVAN REDDY J.:

Two questions are referred for our opinion under s. 256(1) of the IT Act, 1961. They are : “(1) Whether, on the facts and in the circumstances of the case, the reassessment made by the ITO under s. 147 of the IT Act, 1961, was barred by limitation and, therefore, not valid in law ? and (2) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the sum of Rs. 50,000 received by the assessee from the liquidator on 28th Feb., 1961, was rightly assessed to tax in terms of s. 46(2) of the IT Act for the asst. yr. 1962-63 ?”

So far as the first question is concerned, the matter is foreclosed so far as this Court is concerned by the decision in W. A. No. 446 of 1974 dt. 9th July, 1974. It so happened that when notice under s. 147 r/w s. 148 was issued to the assessee proposing to reopen the assessment, he challenged the said notice on two grounds, namely, (a) that the ITO had no jurisdiction to issue such notice since there was no reasonable satisfaction as required by law, and (b) that the notice is barred by limitation. Both the grounds were dealt with and the contentions of the assessee negatived. Question No. (1), now referred, again pertains to the very same plea of limitation. It is evident that the said question cannot be raised over again at this stage of the proceedings. Indeed, that is the opinion of the Tribunal and we agree with it.

So far as the second question is concerned, the question is whether the said amount should be treated as income in the previous year relevant to the asst. yr. 1962-63 as contended by the Revenue or in the previous year relevant to the asst. yr. 1961-62 as alleged by the assessee. The said amount was received by the assessee on 28th Feb., 1961, from the liquidator, Guntur Power and Light Ltd., Madras, which had gone into liquidation, and the shares of which were held by the assessee. For answering this question, it is necessary to state a few facts.

The assessee is having income from business. It is following the calendar year as the previous year for that purpose. It received the said sum of Rs. 50,000 on 28th Feb., 1961, as stated above, which would mean that it is received in the previous year relevant to the asst. yr. 1962-63. The contention of the learned counsel for the assessee, however, is that the said sum of Rs. 50,000 is not business income and that it did not enter the said amount in the account books maintained by it for its business purpose and, therefore, for the said income, the financial year would be the previous year. If so, he contends, the amount must be held to have been received in the previous year relevant to the asst. yr. 1961-62. We do not find it possible to agree. The expression “previous year”

is defined in s. 3 of the IT Act, 1961. Only cls. (a) and (b) are relevant for our purpose which read as follows : “3. (1) For the purpose of this Act, ‘previous year’ means (a) the financial year immediately preceding the assessment year; or (b) if the accounts of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, the twelve months ending on such date;”

Reference may also be made to sub-s. (3) of s. 3 which says : “Subject to the other provisions of this section, an assessee may have different previous years in respect of separate sources of this income.”

The above provisions, when read together, disclose that ordinarily speaking, the financial year would be the previous year. But it is open to the assessee to opt for any other previous year so long as the accounts of that previous year are made up to a date falling within the preceding financial year. It is also permissible for an assessee to have different previous years in respect of separate sources of his income. Now, in this case, it must be remembered that the assessee was adopting the calendar year as the previous year. It did not indicate either expressly or in any other manner that it wanted to have a different previous year for this income, assuming that it is not business income. In the absence of such indication, the assessing authority was justified in treating the calendar year, which has already been adopted by the assessee, as its previous year for this income as well. The contention of learned counsel for the assessee that, since it has not entered the said amount in its books, the financial year must be treated as the previous year for this head of income cannot be accepted. The matter cannot be predicated upon entering or not entering the said amount in the books of account. Unless the assessee otherwise specifies, the previous year which it is already adopting shall be treated as previous year for other heads of income as well. In other words, the presumption is that the assessee has one previous year for all heads of income unless it says that it shall have different previous years for different heads of income (vide s. 3(3) of the Act). In this view of the matter, we are of the opinion that the Tribunal was justified in holding that the income must be treated as having been received in the previous year relevant to the asst. yr. 1962-63.

The questions referred are accordingly answered in favour of Revenue and against the assessee.

No costs.

[Citation : 175 ITR 313]