Calcutta H.C : The writ petitioner No. 1 is a company carrying on business of plantation and production and marketing of tea.

High Court Of Calcutta

Empire Plantations (India) Ltd. & Anr. vs. Union Of India & Ors.

Section 3(4)

Kalyan Jyoti Sengupta, J.

Matter No. 3243 of 1988

18th October, 2001

Counsel Appeared

Dr. Pal, for the Applicants : Ram Chandra Parsed, for the Respondents



By this writ petition the petitioner has challenged two orders passed by the ITO, ‘D’ Ward, Company, District II, Calcutta, being the respondent No. 2 and the CIT, West Bengal (II), who have rejected the petitioner’s application for obtaining consent to change the previous assessment year. The writ petitioner No. 1 is a company carrying on business of plantation and production and marketing of tea. The petitioner No. 2 is the principal officer of the petitioner No. 1. The petitioner No. 1 is an income-tax assessee and at all material times had and still has been maintaining its accounts from 1st April of each year upto 31st March of the next year, i.e., the previous year under s. 3(4) of the IT Act, 1961 (as it was prevailing at that time), applicable to the petitioner No. 1, assessee-company was from 1st April to 31st March.

2. Briefly stated fact of this case is that in the year 1983-84 at the time of preparing and finalizing accounts of the petitioner-company it was ascertained that at the end of March substantial quantity of tea remained unsold and as such the said unsold tea had to be valued at estimated price for the purpose of accounting. It was thus realized that the inconvenience of fixing estimated price for unsold stock of tea could be avoided only by changing the accounting year ending from 31st March to 30th June, since by that time a good quantity of unsold stock of tea could be sold, and the assessee-company need not settle its accounts on the basis of imaginary and estimated price of its products. Considering the practical inconvenience and to remove the same permanently the management decided to change the previous year for the accounting purposes. Therefore, the petitioner-company after having adopted valid resolution dt. 29th March, 1985, filed an application dt. 17th June, 1985, before the respondent No.

2 for according consent to change the previous year as required under s. 3(4) of the IT Act, 1961. At that point of time the law was that assessee could change the previous year with the consent of the concerned ITO. However, no consent was accorded to the writ petitioner-assessee and as such the writ petitioner could not effect change of assessment year. Against the order of refusal to accord consent the writ petitioner filed an application for revision of the above order with the respondent No. 3 who, however, has rejected the application for revision and refused to accord permission and/or consent.

3. Dr. Pal, learned senior advocate appearing in support of this application contends that though the power under s. 3(4) of the aforesaid Act conferred upon the ITO is discretionary one but this has to be exercised judicially. Upon true and proper interpretation of the said section it would emerge that according consent is a rule and refusal is an exception however, such consent can always be given on certain terms and conditions which may be imposed to protect the revenue. In this case, he contends, that the petitioner all the time was and still is willing to make good any loss of revenue and on the basis of this undertaking the consent should have been given. In fact, he has drawn my attention to the reason for refusal in giving consent by the respective authorities and submits that if the loss which might be suffered by the Revenue is made good, there cannot be any difficulty in giving consent. He has also drawn my attention to a Division Bench judgment of the Guwahati High Court which has held on identical facts and circumstances of a case that consent could be given if the assessee is willing to make good the loss. He further contends that by virtue of the interim order the assessment of the petitioner for all the pending years has not yet been done though his client has filed returns for the asst. yr. 1985-86 but the assessment has been stayed in view of the interim order.

4. Mr. Ram Chandra Prasad, learned advocate, while opposing this application contends that according consent under s. 3(4) of the aforesaid Act is discretionary one and it cannot be claimed as a matter of right when the consent has been refused. It is not for the writ Court to examine justification in exercise of discretion in negative way nor reasonableness of reasons. He points out to the reasons given by both the authorities and contends that if the previous year is allowed to be changed then there will be no assessment for one year and the Revenue will be suffering loss to a great extent. As such this application is liable to be dismissed.

5. Having heard respective contentions of the learned Advocates, in this case the only point which fallen for consideration is whether the ITO and the Revising Officer, viz., the respondent No. 3 are justified in refusing to give consent to change the previous year or not.

6. It appears from the two orders as well as from the stand taken in the affidavit-in-opposition that reason for refusal to give consent is that the Revenue will be suffering loss. Upon careful examination of order of the Revising Officer it appears to me that he has merely accepted mechanically the order of the ITO without applying his own mind. He has not examined on the subsequent development whether consent could have been given or not. In course of hearing of the revision application it was specifically stated by the petitioner assessee that it was ready to give and indeed gave undertaking that the loss which might result in change would be made good, however, he did not accept this undertaking. In my view he had fallen in error by not taking into consideration of the undertaking of the assessee petitioner. Therefore, he has failed to exercise his jurisdiction by not taking into consideration of the petitioner’s undertaking. If the impediment for granting consent is removed then there cannot be any difficulty to grant consent and this has been overlooked totally by the Revising Officer.

7. The judgment of the Division Bench of the Guwahati High Court on the identical facts has accepted that in the event the assessee undertakes to make good loss which might result in change of previous year, the consent should not be withheld. Accordingly the direction was given by the Division Bench of the Guwahati High Court to consider the application afresh of the assessee-company in that matter for change in the previous year in the light of the observation made therein.

8. Upon careful reading of s. 3(4) of the IT Act 1961 (as it was then prevailing) it appears to me that the consent cannot be withheld unreasonably. The assessee is always free to change his accounting year for the purpose of furnishing return and however this cannot be done at the loss or prejudice of the Revenue and that is why consent of the ITO has been preserved. If it is found that no loss would be suffered in the change of previous year normal right and/or liberty of the assessee cannot be fettered away by withholding consent. Therefore, I am of the view that both the ITO being the respondent No. 2 and the Revising Officer being the respondent No. 3 have unreasonably withheld the consent, as such I set aside these two orders. After holding as above I could have remanded this matter for fresh consideration. However, having regard to the fact that this is an old matter, and moreover when the returns have been filed and those have not been assessed as yet because of interim order I dispose of the application by the following order :

The respondent No. 2 now shall give consent for effect in the change of the previous year as applied for, in the event the petitioner gives undertaking to make good the loss of revenue which might result in such change and shall pay the same immediately after order of assessment. The petitioner, therefore, shall file revised returns within a period of twelve weeks from the date of communication of this order, failing which, this application will stand dismissed and the order passed hereunder will stand recalled.

There will be no order as to costs.

[Citation : 255 ITR 140]

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