ITR No. 26 of 1996 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
ITR No. 26 of 1996 (O&M)
Date of decision: November 13, 2009
The Commissioner of Income Tax, Jalandhar ...Appellant
Versus
M/s Punjab Gas Cyclinder Ltd. Ludhiana. ...Respondent
CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL
HON'BLE MR. JUSTICE GURDEV SINGH
Present: Mr. Vivek Sethi,Advocate for the appellant.
Mr. Rajiv Sharma, Advocate, for
Mr. S.K. Mukhi, Advocate, for the respondent.
ORDER
1. Income-Tax Appellate Tribunal, Chandigarh Bench, has
referred following question of law for opinion of this Court arising out
of its order dated 20.7.1995 in ITA No. 167 of 1990 relating to
assessment year 1985-86:-
“(i) Whether, on the facts and in the circumstances of the
case, the Tribunal was right in law in holding that the
assessee had a right to exercise option to adopt its previous
year from 1.1.1983 to 30.6.1984 under Section 3 (1) (e) (i)
and was not required to obtain permission under Section 3
(4) of the Income-tax Act, on the ground that business had
commenced with effect from 1.12.1983”.
2. The assessee is engaged in the business of manufacturing of
ITR No. 26 of 1996 2
cylinders. It filed return for the assessment year in question by treating
the previous year to be from 1.12.1983 to 30.6.1984. The Assessing
Officer held that this amounted to change of previous year without
permission under Section 3 (4) of the Act and on that ground claim for
loss for that year was rejected. The plea of the assessee was that since
new business of the assessee had commenced on 1.12.1983, provision
under Section 3 (4) was not applicable, as the assessee had a right of
choice under Section 3 (1) (e) (i). The Tribunal upheld the plea of the
assessee with the following observations:-
“In the present case, the only controversy to be determined
is whether the assessee did commence business w.e.f.
1.12.1983? If it was so, the assessee had a right to exercise
option in respect of adoption of the previous year u/s 3 (1)
(3) (i) of the Act. There was no other source of income prior
to 1.12.1983. There was no question of any new source of
income in the hands of the assessee. The ld. Counsel has
explained that it was only by mistake that the assessee while
explaining justification for the change in the previous year,
took the plea that it was a new source of income. But that
plea should not damage the assessee’s case, on the basis of
actual facts. This was also pointed out by the ld. counsel
that even if the previous year adopted by the assessee was
not acceptable and the accounting period was treated as
having ended on 31.12.1983 to 31.12.1984, loss could have
been determined and allowed to be carried forward
accordingly. By way of alternative plea, the ld. Counsel has
ITR No. 26 of 1996 3contended that the loss upto the period 31.12.1984, should
have been allowed. It is also explained that the loss from
1.1.1983 to 31.12.1983 had been shown in the books of
account at Rs. 1,63,080/-. Loss from 1.3.1983 to 31.12.1983
had been shown in the books of account at Rs. 8,66,671/-.
Loss from 1.1.1984 to 31.12.1984 had been shown at Rs.
18,02,848/-. The plea of the ld. Counsel is that if the loss
upto 30.6.1984 was not allowed after rejecting the assessee’s
plea. In regard to the adoption of previous year, the loss
should have been allowed, treating the accounting year
having been closed on 30.12.1984. But that has also not
been allowed. In any, 1986-87, the year ending has been
shown by the assessee as 30.6.1985, and that has been
accepted. In view of this also, the ld. counsel has claimed
that the revenue, by its very conduct, has allowed the
previous year adopted by the assessee in subsequent
assessment years. We are in agreement with the ld. counsel
that no misc. income had been shown at all in any of the
three earlier years and there was no question of having any
source of income for those years. We also find substance in
the assessee’s plea that there was not net source of income,
though it was explained mistakenly before the A.O. That
from 1.12.1983, the assessee had started earning income
from a new source. Since the facts are said to be otherwise,
the assessee’s mistaken belief is said to be otherwise, the
assessee’s mistaken belief is said to be of no relevant and of
ITR No. 26 of 1996 4no consequence. Looking to the entire facts, we are of the
view that when the business had commenced w.e.f.
1.12.1983, the assessee-company had a right to exercise the
option to adopt a previous year u/s 3 (1) (e) (i) of the Act.
We, therefore, accept the assessee’s plea that the claim of
loss shown upto 30.6.1984, has to be allowed, treating the
‘previous year’ as ending on 30.67.1984.”
3. We have heard learned counsel for the parties and perused
the record.
4. Learned counsel for the appellant has placed reliance on
Commissioner of Income-tax vs. Ravinder Kumar (1989) 180 ITR 203
(P&H) wherein business not being new business, it was held that choice
of previous year without permission could not be exercised. This
judgment is clearly distinguishable as in the present case, the business
of the assessee has been held to be new business.
5. In view of reasons given by the Tribunal, it stands
established that the business of the assessee commenced on 1.12.1983
and in such a situation the Tribunal was justified in holding that no
prior permission was required under Section 3 (1) (e) (i). The question
referred, thus, has to be answered against the revenue and in favour of
the assessee.
6. Reference is disposed of.
(ADARSH KUMAR GOEL)
JUDGE
November 13, 2009 (GURDEV SINGH )
prem JUDGE
ITR No. 26 of 1996 5