Law:

Section:

Section 263, read with section 3(4), of the income-tax act, 1961-Revision-Orders prejudicial to revenue-whether grant or refusal of consent by ito under section 3(4) to assessee for change of previous year constitutes an order, which can be revised by commissioner under section 263-held, yes Section 3(4) of the income-tax act, 1961-Previous year-Whether ito could refuse to give his onsent under section 3(4) for change of previous year without giving assessee opportunity of being heard-held, no Facts The assessee-company's request for change of previous year was accepted by the ITO subject to certain conditions. This resulted in treating the period of 16 months from 1-1-1975 to 30-4-1976 as the previous year for the assessment year 1977-78. The Commissioner, however, treated tbe aforesaid order of the ITO as erroneous and prejudicial to the interests of the revenue on the ground that the ITO had failed to take note of the Finance Act, 1976, while according the approval, resulting in loss of the revenue. The Commissioner, therefore, set aside the ITO's order by invoking section 263. Thereupon, without hearing the assessee, the ITO passed a fresh order on 21-3-1979 rejecting the assessee's request for change of previous year on the ground that it would seriously prejudice the interests of the revenue. On writ petition, the assessee challenged the validity of the impugned orders: Held 1. The grant of consent or refusal for change of previous year under section 3(4) amounts to an order within the ordinary meaning of that word, since it is made on the application of the assessee. The exercise of discretion is required. Consent may be granted subject to such conditions as the ITO may think fit to impose. This calls for application of mind. Moreover, the grant of conditional consent or refusal to consent must be explained in a speaking order. The grant or refusal of consent would, therefore, be an order and would fall within the scope of section 263. 2. Provisions of section 3(4) cannot be used to decline consent to a bona fide request of the assessee, because of a comparatively insignificant loss of revenue. Although section 3(4) empowers the ITO to impose such…

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