Commissioner Of Income-Tax vs Smt. Renu Khanna
1985 Latest Caselaw 341 Del

JUDGMENT

D.K. Kapur, J.

1. This is a petition under section 256(2) of the Income-tax Act, 1961, relating to the assessment year 1976-77, which prays for a reference regarding the following three questions :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the entire capital gain is not taxable in the assessment year 1976-77 ?

2. Whether, on the facts and in the circumstances of the case, option under section 3 of the Income-tax Act, 1961, was available to the assessed ?

3. Whether, on the facts and in the circumstances of the case, there was 'making up of accounts' in the present case within the meaning of section 3 of the Income-tax Act, 1961 ?"

2. The facts of the case are that the assessed sold gold ornaments in a short period from December 22, 1975, to December 29, 1975, on various dates. This sale was disclosed under the Voluntary Disclosure Scheme, 1975, which was accepted by the Commissioner of Income-tax (Appeals). The sales were as follows :

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Dates                                           Sale proceeds
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                                                       Rs.
22-12-1975                                          45,445.00
22-12-1975                                          19,387.00
24-12-1975                                          24,828.00
26-12-1975                                           8,183.00
29-12-1975                                          20,042.75
29-12-1975                                          10,447.36
                                                 -------------
                                                 1, 28,333.11
                                                 -------------
 
 

The assessed filed a voluntary return on April 30, 1976, which included capital gains up to December 23, 1975. The Income-tax Officer in the assessment order included the entire capital gains as gains which arose in the assessment year 1976-77.

3. On appeal, it was held by the Appellate Assistant Commissioner that the assessed was entitled to treat the previous year for the purpose of capital gains as the year ended on December 23, 1975. This was because of the language of section 3(1)(b) of the Income-tax Act, 1961. The assessed had produced a note-book which recorded the transactions. If the assessed opts under section 3(1)(b) to choose the previous year, the option cannot be overruled by the Income-tax Officer.

The Tribunal took the same view.

In our view, the questions of law have an obvious answer because section 3(1)(b) is worded as follows :

"3. (1) For the purposes of this Act, 'previous year' means -...

(b) if the accounts of the assessed have been made up to a date within the said financial year, then, at the option of the assessed, the twelve months ending on such date,.."

4. This shows that the assessed has the option either to choose the financial year corresponding to the assessment year which would be the year ending on March 31, 1976, or to choose a year up to which the accounts are made up, which happens to be December 23, 1975.

5. We agree with the Tribunal that either this is a finding of fact or, if it is a question of law, the answer is so evident as not to require a reference. We would accordingly reject the application leaving the parties to bear their own costs.