Jamal Soap Factory, Narayanganj
Commissioner of Income Tax, Dacca Zone, Dacca,
F.K.M.A. Munim J
Ruhul Islam J
Shahabuddin Ahmed J
Jamal Soap Factory, Narayanganj……………………………………………..Appellant.
Commissioner of Income-Tax, Dacca Zone, Dacca………………Respondent
July 10, 1980.
C.R. Ali, Advocate, instructed by Abu Backkar, Advocate-on-Record—For the Appellant.
Hubibul Islam Bhuiyan, Advocate, instructed by Sajjadul Haq, Advocate-on-Record—For the Respondent.
Civil appeal No. 120 of 1978
(From the judgment and order dated April 3, 1975 passed by the High Court Division in Income-tax Reference Case No. 2 of 1969)
Ruhul Islam J.- This appeal by special leave arises from the judgment dated April 3, 1975 of the High Court Division in Reference Case No. 2 of 1969 made under section 66(1) of the income-Tax Act by the Income Tax Appellate Tribunal. The Tribunal asked the opinion of the High Court by framing to following question:
“Whether in the facts and peculiar circumstances of the present case, the Tribunal was justified is not interfering with the action of Income-tax Officer in connection with the income of that branch M/s. Jamal Jute Baling & Co. for the assessment years 1365 and 1366 B.S. while framing the assessment of M/s Jamal Soap Factory, Narayanganj for the Assessment year 1960-61”.
2. The material facts which led to making of the reference are that: The Assessee was assessed of the income of the jute sec-tion for the period of 1365 B.S. and the Income-Tax Officer considered that the correct accounting period for the assessment year would be the accounting year 1366 B.S. and on taking this view the Income-Tax Officer required the Assessee to give his opinion; and the Assessee by the letter dated June 30, 1965 informed the income-Tax Officer that they baa no objection to the adding of the income of the years 1365 and 1366 B.S. The Income-Tax Officer made the Assessment for the period of 1365 and 1366 B.S. while making the assessment for the year 1960-61. The assessee having felt aggrieved by tins combined assessment unsuccessfully preferred an appeal before the Appellate Assistant Commissioner; thereafter an appeal was preferred before the Income-tax Appellate Court. The Tribunal while noticing the irregularity commuted by the Income-tax Officer, namely, the propriety of inclusion of income of two previous years in one assessment, dismissed the appeal with the following observation.
“It is thus apparent that the action objected to be based on the assessee’s own consent. In the peculiar circumstances of the case and in view of the assessee’s own consent to the action taken we do not think that the asses-see can now retrace its own action and seek relief in this forum.”
The Tribunal, however, considering this as an important question of law referred the question for the opinion of the High Court. The High Court answered the question in the affirmative. Leave was granted to examine the question whether income-tax payable for the year 1365 B.S. having become barred by limitation could be saved even by consent of the assessee and tagging it with their income of the subsequent year and treating their both as one previous year.
3. Determination of the question raised for our consideration depends mainly on the construction of the expression “previous year” as defined under section 2(11) of the Income-tax Act. The expression ‘previous year’ means—
“(i) in respect of any separate source of income profits and gains—
(a) the twelve months ending on the 30th day of June next preceding the year for which the assessment is to be made, or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending on any date other than the said 30th day of June then at the option of assessee, the year ending on the date to which his accounts have been so made up:
Provided that where in respect of a particular source of income, profits and gains of an assessee has once been assessed, or where in respect of a business, profession or vocation newly set up an assessee has exercised the option under sub-clause (c). He shall not in respect of that source or, as the case may be. business, profession or vocation exercise the option given by this sub-clause, so as to vary the meaning of the expression previous year as then applicable to him except with the consent of the Income-tax Officer and upon such conditions as the Income-Tax Officer may think fit to impose; or
(b) In the case of any person, business or company or class of person, business or company such period as may be determined by the Central Board of Revenue or by such authority as the Board may authorise in this behalf; or
(c) where a business, profession or vocation has been newly set up in the financial year preceding the year for which assessment is to be made, the period from the date of the setting up of the business or profession or vocation to the 30th day of June, nest following or to the last day of the period determined under sub-clause (b) or, if the accounts of the assesses are made up in respect of a period not exceeding twelve months from the date of the setting up of the business, profession or vocation and the case is not one for which a period has been determined under sub-clause (b), then at the option of the assessee, the period from the date of the setting up of business, profession or vocation to the date to which his accounts have been so made up:
Provided that when the date to which the accounts have been so made up does not fall between the setting up of the business, profession or vocation and the next following 30th day of June inclusive it shall be deemed that there is no previous year for the said assessment year and the previous year which would otherwise have been determined according to the option exercised by the assessee shall be deemed to be the previous year for the next succeeding assessment year.
(ii) in respect of the share of the income, profits and gains of a firm where the assessee is a partner in the firm and the firm has been assessed as such, the period as determined for the assessment of the income, profits and gains of the firm.”
4. For proper appreciation of the expression “previous year” section 3 containing the provision of charge of Income-tax needs to be referred to. Section 3 reads as under: —
“3. Where any Central Act enacts that income-tax shall be charged, for any year at any rate or rates, tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year or the previous years, as the case may be, of every person.
Provided that where by virtue of any provision of this Act—
(a) income-tax is to be charged in respect of a period other than the previous year or previous years, as the case may be, income tax shall be charged accordingly;
(b) income-tax is to be deducted at source or paid in advance; it shall be so deducted or paid, as the case may be.”
5. From a reading of the two provisions quoted above it appears that the subject of charge is not the income of the year of assessment but the income of the previous year. For the purpose of assessment the financial year from 1st July to 30th June has been followed. Previous year means fiscal year that, is, the 12 months ending the 30th June next preceding the year of which the assessment was to be made. Normally, the previous year would consist of a period of twelve months as described in section 2 (11) (i) (a) but the proviso lays down an exception that the period of twelve months may be varied when an assessee wants to change the accounting year, there is the possibility of prolongation of the previous year beyond the normal period of twelve months, and the assessment may be made for that period at the instance of the assessee. Because, the language of the proviso to sub-clause (ii) of clause (a) of sub-section (11) of section 2 does not confer upon the Income-tax Officer unrestricted powers for mating accumulative assessment for a period extending twelve months of his own Thus, there might be occasions for assessing for the period exceeding twelve months by one assessment, when request comes from the assessee for changing the accounting period and change of the accounting period when granted by the Income-tax Officer, may involve assessment of the income of a period exceeding 12 months by one assessment. This is permissible because there is no provision of law to assess the income from one source twice in the same charge year. Again, such accumulative assessment for a period exceeding 12 months is permissible only in a case when the income previous to the period of twelve months, namely, the assessment year, is not barred by limitation. Consensus of judicial opinion is that in such a case the period already barred by limitation cannot be tagged lo the subsequent period. In the instant case the accounting period was 1366 B.S. but the Income-tax Officer finding some anomaly in the accounts and with a view to remove the same included the income of 1365 B.S. with the income of 1366 B.S. that is, the assessment year. According to the Department, the assessee accepted the proposition, and in support of this a reference was made to a letter dated 30th June, 1965. The letter reads:
“Re:-Jamal Jute Baling & Co. Assessment years 1365 B.S. and 1366 B.S. File No. 2479/I/NGJ. We submit that we have no objection to your adding the assessment years J365 B.S. and 1366 B S. of our above mentioned firm to the assessment year 1366 B.S. of Jamal Soap Factory, Narayanganj.”
6. The Tribunal as well as the learned Judges of the High Court Division accepted the case of the Department on the observation (hat the action objected 10 were based only on the assessee’s own consent. This is not a case of change of accounting year which might involve extending the period of twelve months and making assessment for the entire period by one assessment order This is a case where admittedly assessment-of income of a period exceeding twelve months was made treating the income of 1365 B.S. as previous year and thereby purporting the legalising the assessment for the time barred income, which the Income-Tax Officer was not competent to do.
7. Mr. C.R. Ali, the learned Advocate appearing for the appellant rightly submitted that the purported consent of the assessee could not give jurisdiction to make an illegal assessment by the Income-Tax Officer which the Income-Tax Act does not provide for. There is some force in the submission that this was just a device adopted by the Income-tax Officer to make an assessment of the income for the year 1365 B S. for which the Act does not provide any authority. Even by consent the scope of “previous year” could not be enlarged, and thereby comprising the income of a period in the assessment which was already barred by limitation. Mr. C.R. Pal pointed out oil the basis of arithmetical calculation that on account of tagging of the two periods the income liable to assessment was increased. In our opinion the order of assessment so far as it relates to the income for the period 1365 B.S. suffers from want of jurisdiction. In the result, the appeal in allowed and the question is answered in the negative. We make no order as to costs.
Source: 1981, (AD)