Law:

Section:

Section 3 of the Income-tax Act, 1961 - Previous year - Whether question whether assessee should be allowed to change its previous year or not is a question of discretion of ITO and said discretion must be exercised reasonably - Held, yes - Whether where ITO refused to allow change of previous year on ground that assessee had already been allowed to change its previous year recently and that change allowed would cause loss of revenue, it could not be said that discretionary power exercised by ITO in such refusal was arbitrary or on irrelevant consideration - Held, yes FACTS The assessee company used to follow the year ending on 31st December, as its 'previous year'. This system continued up to the assessment year 1982-83. For the assessment year 1983-84, the assessee wanted to change its previous year to the financial year. This change was allowed by the ITO and the assessment for the assessment year 1983-84 was completed on the basis of the previous year from 1-1-1982, to 31-3-1983. On 14-3-1985, the assessee once again wanted to change its previous year from financial year to the year ending on June 30. This prayer was refused by the ITO on the ground that once there had been a change of previous year, the same could not be allowed to be changed again. Moreover, if the assessee was allowed to change its previous year from 31-3-1985 to 30-6-1985, the assessment would have to be done for the assessment year 1986-87 and in such a situation, there would be no assessment for the assessment year 1985-86 and thus there would be a substantial loss of revenue inasmuch as the rate of income-tax for companies had been reduced by 5 per cent and the provisions of section 37(3A) stood omitted with effect from the assessment year 1986-87. On writ: HELD Generally, 'Previous year' means an accounting year of 12 months. It may be the financial year or at the option of the assessee, any other period of 12 months. Whether the assessee should be allowed to change its previous year or not is a question of discretion of the ITO. It is true that the discretion must be exercised reasonably. The ITO had really given two reasons for not allowing the assessee's application. The first…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492