High Court Of Punjab & Haryana
CIT vs. Ravinder Kumar
Sections 3, 3(4), 3(1)(d)(ii)
Asst. Year 1974-75
Gokal Chand Mital & S.S. Sodhi, JJ.
IT Ref. No. 149 of 1980
16th November, 1988
Ashok Bhan with Ajay Mittal, for the Revenue : Ramesh Goyal, for the Assessee
GOKAL CHAND MITTAL, J.:
The Tribunal, Chandigarh, has referred the following two questions for the opinion of this Court, the first being at the instance of the Revenue and the second at the instance of the assessee.
” 1. Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the assessee had a right in law to exercise an option for adoption of a particular previous year in respect of the agricultural income which was brought within the tax net for the first time during the asst. yr. 1974-75 ?
2. Whether the Tribunal, in the context of the relevant provisions of law relied upon by the assessee to show that the agricultural income for the period from September 8, 1972 to September 7, 1973, was not includible in the total income of the assessee, erred in law in holding that the interpretation of the expressions ‘in the previous year’ and ‘during the previous year’ was not material ?”
The assessee is a partner in various firms and is also having agricultural income. He was maintaining books of account for his agricultural income as well. Agricultural income is not subjected to income-tax. However, by the Finance Act of 1973, which came into force w.e.f. April 1, 1973, agricultural income had to be taken notice of for imposition of rate of tax. For the purposes of taxation, the previous year in the case of the assessee ended on September 7, each year, that is, his income for 12 months prior to September 8 had to be taken into account for assessing the income of each year. However, the assessee made a deviation for the first time and closed the agricultural books of account on March 31, 1973, instead of doing so on September 7, 1973. He again started books from April 1, 1973, and closed them on September 7, 1973. During the assessment proceedings relating to the asst. yr. 1974-75, the assessee’s claim was that his agricultural income of Rs. 6,880 for the period April 1, 1973, to September 7, 1973, had to be taken notice of for rate purposes as he has opted to do so under s. 3 (1 ) (d) (ii) of the IT Act, 1961, (for short “the Act”). For the period September 8, 1972, to March 31, 1973, the assessee returned an agricultural income of Rs. 11,825 but the ITO did not agree with the assessee and included agricultural income for the entire previous year from September 8, 1972, to September 7, 1973, amounting to Rs. 18,705, in the total income of the assessee for rate purposes. The AAC confirmed the order of the ITO but, on appeal to the Tribunal, the assessee’s viewpoint was accepted. The Tribunal considered the agricultural income to be from a new business and allowed him to have the option of the previous year and obviously this was done by applying the provisions of s. 3 ( 1 ) (d) (ii) of the Act.
On consideration of the matter, we are of the view that the Tribunal erred in disturbing the decisions of the ITO and of the AAC. The first mistake committed by the Tribunal was that it considered the inclusion of agricultural income for rate purposes w.e.f. April 1, 1973, as the setting up of a new business or profession by the assessee regarding agriculture which was not a new endeavour. He was already having agricultural income and was maintaining his books of account for that income from September 8 to September 7, of the following year, as was being done in respect of the income from firms in which he was a partner. When he came to know of the Finance Act of 1973, which was enforced w.e.f. April 1, 1973, that agricultural income is also being included for finding out the rate of tax applicable, he closed his books of account relating to the agricultural income on March 31, 1973, instead of closing on September 7, 1973. He started new books from April 1, 1973, and again closed them on September 7, 1973. If it had been a case of new business or profession, the question of closing his earlier books of account on March 31, 1973, and again starting fresh accounts from April 1, 1973, and again closing on September 7, 1973, would not have arisen. Since it is not a case of a new business or profession, s. 3(1)(d)(ii) of the Act would not be applicable. In fact, s. 3(4) of the Act prohibits the changing of previous year without the consent of the ITO. He was already an assessee as he was being assessed on income received from the firms in which he was a partner and as such he was maintaining his books of account from September 8, to September 7, of the following year and in this manner, his previous year was being considered for assessment purposes. He was also having agricultural income much prior to April 1, 1973. The only change that came about was that the agricultural income was to be taken into consideration for rate purposes and this cannot be held as setting up of a new business or profession.
If an assessee is already in a business and adds to his business, the provisions of s. 3 (1) (d) of the Act would not be applicable to him and if he would like to have a change in the previous year, he will have to seek the permission of the ITO under s. 3(4) of the Act. Hence, the decision of the Tribunal was totally misconceived and based on erroneous facts. Accordingly, we answer the first question in favour of the Revenue and against the assessee in the affirmative to the effect that the Tribunal erred in law in holding that the assessee had a right to exercise his option for adoption of a particular previous year in respect of agricultural income which was brought within the tax net for rate purposes for the first time since the asst. yr. 1974-75. Adverting to question No. 2, no worthwhile argument was raised for taking a different view. We are of the opinion that the Tribunal rightly decided this matter. The question is answered against the assessee, in the negative, that is, the Tribunal did nor err in holding the interpretation of the expressions “in the previous year” and “during the previous year” was not material. The parties are left to bear their own costs.
[Citation :180 ITR 203]