Law:

Section:

Section 3 of the Income-tax Act, 1961 – Previous year – Assessment year 1965-66 – Assessee did not exercise option under section 3(1)(b) before assessing authority or AAC or even before Tribunal – Controversy centered on date of commencement of business by assessee – Tribunal determined date of commencement of business and directed that ITO would make fresh assessment after giving an opportunity to assessee to exercise option as provided under section 3(1)(b) – Whether since assessee had got right of option, that right could be exercised by him even at a late stage in assessment proceedings - Held, yes – Whether, therefore, there was no error in order of Tribunal - Held, yes FACTS The assessee did not exercise his option in terms of section 3(1)(b ), before the assessing authority or the AAC or even before the Tribunal in specific terms. The controversy centered on the date of commencement of the business, the assessee-contending that it was on 31-12-1963, and the revenue contending that it was earlier. The Tribunal after having determined the date of commencement of the business, proceeded to observe that the assessee would have a right to exercise his option under section 3(1)(b) and that, if he did exercise his option, the assessing authority, the ITO, would make a fresh assessment on the basis of that option. On reference : HELD Since the assessee had got the right of option, that right could be exercised even at a late stage in the assessment proceedings. Even before the Tribunal the assessee could ask for the option to be exercised under section 3(1)(b) if the case would not fall under any other clause. Therefore, there was no error in the Tribunal having permitted the assessee to do so if he so desired. Therefore, the Tribunal was right in law in setting aside the assessment made by the ITO for the assessment year in question, and directing the ITO to redo the same after giving an opportunity to the assessee to exercise the option as provided under section 3(1)(b). Note : The case was decided in favour of the assessee. JUDGMENT Govindan Nair, CJ.—The question referred to us for the assessment year 1965-66 by the Tribunal, Madras Bench, reads as follows.…

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