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1989 DIGILAW 83 (CAL)

BISWANATH GOENKA v. COMMISSIONER OF INCOME-TAX

1989-03-03

BHAGABATI PRASAD BANERJEE, SUBHAS CHANDRA SEN

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SUHAS CHANDRA SEN, J. ( 1 ) THE question referred by the Tribunal is as under :"whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the share income of the assessee from the firm, Credit Transactors, for the period ending April 14, 1967, considered and allocated in the assessment of the firm for the assessment year 1967-68 was assessable in the assessment of the assessee for the assessment year 1968-69. "the reference is under Section 256 (1) of the Income-tax Act, 1961. The dispute is about the correctness of the year of accounting in which the share of profit of a partnership firm of which the assessee is a member is included. ( 2 ) IN the statement of case, the facts are stated as under :"the assessment year involved is 1968-69. The assessee is a partner of Credit Transactors. The assessee maintained accounts and the accounting period relevant to the assessment year 1968-69 ended on December 31, 1967. The previous year of Credit Transactors relevant to the assessment year 1967-68 ended on April 14, 1967. In the first assessment for the assessment year 1967-68, the assessee's share of profit was allocated at Rs. 53,697. In his original return for the assessment year 1968-69, the assessee included the share income from the firm in respect of the accounting period of the firm ending on April 14, 1967. In his original return for the assessment year 1967-68, he did not include that share income. He, however, submitted revised returns for both the years and in the revised return for 1967-68, he included the share income from the firm as allocated in firm's assessment for 1967-68 and excluded that share income in the revised return for the assessment year 1968-69. In the assessment year 1967-68, the Income-tax Officer observed that the share income from the firm for its accounting period ending on April 14, 1967, could not be included in the assessee's assessment for that year. As a result of the above observation, the Income-tax Officer included the share income from the firm in the assessment of the assessee for the assessment year 1968-69. In appeal before the Appellate Assistant Commissioner, the assessee objected to the inclusion of the share income from the firm in respect of its accounting period ending on April 14, 1967. As a result of the above observation, the Income-tax Officer included the share income from the firm in the assessment of the assessee for the assessment year 1968-69. In appeal before the Appellate Assistant Commissioner, the assessee objected to the inclusion of the share income from the firm in respect of its accounting period ending on April 14, 1967. According to the assessee, the share income from the firm was to be included in the assessee's assessment for the assessment year 1967-68 and not in the assessment year 1968-69. The Appellate Assistant Commissioner observed that under Section 3 (1) (f), the previous year of the assessee in respect of the share income from the firm was the same as the previous year of the firm and that the previous year must be the financial year preceding the assessment year and that as the firm's previous year ended on April 14, 1967, after March 31, 1967, the assessee's share income from the firm for that period could not be included in the assessee's assessment for the assessment year 1967-68 and that it was to be included in the assessment year 1968-69. ( 3 ) IT was urged by counsel for the assessee before the Tribunal that the Appellate Assistant Commissioner erred in taking a different assessment year for the assessee from that of the firm. According to him, the object of the provision of Section 3 (1) (f) was to have the same assessment year both for a partner and the firm in respect of the same accounting period so that the share income of a partner allocated in one assessment year of the firm should fall in the same assessment of a partner. ( 4 ) THE relevant part of Section 3 is as follows :"3. 'previous year' defined.-- (1) For the purposes 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 ; or. . . . . (f) where the assessee is a partner in a firm and the firm has been assessed as such, then, in respect of the assessee's share in the income of the firm, the period determined as the previous year for the assessment of the income of the firm ; or"according to Clause (f), the previous year of a partner of a firm in respect of the share of profit from the firm shall be the same as that of the firm. The case of the assessee does not fall either under Clause (b) or (c) ; it is Clause (a) which applies to the assessee's case. The previous year of the firm ended on April 14, 1967, and vide Clause (f), the assessee's accounting period in respect of the share of profit from the firm is also to be taken to have ended on April 14, 1967, and this date falls in the financial year 1967-68 and according to Clause (a) the assessment year of the assessee is 1968-69. ( 5 ) THE provision of Section 2 (11) (ii) of the Indian Income-tax Act, 1922, has been rewritten in Section 3 (1) (f) of the 1961 Act but is substantially the same. The facts in the case of CIT v. M. S. Sheikh Rowther [1962] 46 ITR 259 (Ker) were that the accounting period of the firm ended on April 30, 1958. The assessee partner had some other sources of income for which the accounting year ended on March 31, 1958. It was held that the share of profit from the firm could not be assessed in the hands of the partner in the assessment year 1958-59. In our view, this decision applies to the facts of the case. We, therefore, do not find any reason to interfere with the order of the Appellate Assistant Commissioner. ( 6 ) ON behalf of the assessee, our attention has been drawn to Section 3 where the previous year has been defined. It has been contended that under Section 3 (1) (c), the court has to determine the period of previous year and there is a circular of the Board which will be applicable to this case. The provisions of Clause (c) will be attracted only when Clauses (a) and (b) are not applicable. It has been contended that under Section 3 (1) (c), the court has to determine the period of previous year and there is a circular of the Board which will be applicable to this case. The provisions of Clause (c) will be attracted only when Clauses (a) and (b) are not applicable. In this case, it will be seen that the accounts of the assessee have been made up to a date falling within the financial year ending on March 31, 1968. The assessee himself is showing the accounts up to the accounting year ending on December 31, 1967. This last date falls within the financial year 1967-68, the relevant assessment year will be 1968-69. ( 7 ) IF Section 3 (1) (f) is applied and the assessment year of the firm is taken as the assessment year, even then the relevant year will be 1968-69 since the previous year of Credit Transactors, a firm, relevant to the assessment year 1967-68, ended on April 14, 1967. This is a date which falls within the year ended March 31, 1968. ( 8 ) THEREFORE, from any angle the relevant year was the accounting year 1968-69. Therefore, we fail to see how the assessee could say that the share of profit cannot be assessed in the assessment year 1968-69. ( 9 ) UNDER these circumstances, the question is answered in the affirmative and in favour of the Revenue. There will be no order as to costs.