Decided on January 28,1982



S.N. Rotho, Accountant Member - (1.) THIS appeal has been filed by the department against the order dated 16-10-1980 of the Commissioner (Appeals).
(2.) The assessee is an individual deriving income from salaries. The assessment year involved in this appeal is 1978-79. The assessee was deriving salary income from his employer, West Coast Paper Mills Ltd. The previous year adopted by the assessee in respect of that salary income was the financial year up to and including the assessment year 1977-78. On 31-8-1977, the assessee left his former employer and joined the services of Tungabhadra Industries with effect from 1-9-1977. The case of the assessee was that he had the option to choose a separate previous year for each source of his income and that the salary from the West Coast Papers Mills Ltd. represented a different source from the salary derived by him from the Tungabhadra Industries. He returned the income from his former employer received for the period from 1-4-1977 to 31-8-1977 as the income earned during the previous year ended 31-3-1978, relevant for the assessment year 1978-79. Regarding the salary earned by him from his new employer from 1-9-1977 to 31-3-1978, the case of the assessee was that he opted the previous year ending 4-8-1978 for this new source of income which would be assessable only in the assessment year 1979-80. In this view of the matter, he did not include the salary income from his new employer in the return of income filed for the previous year ended 31-3-1978. The ITO did not agree with the contentions of the assessee. He found that the assessee was assessed on salary income on the basis of the previous year ending 31st March. According to him, the assessee could not have two separate previous years for the same salary income. Hence, he included the salary earned by the assessee from his new employer up to 31-3-1978 in the income assessable for the year ended 31-3-1978. In other words, the ITO held that the assessee was not entitled to change the previous year in respect of the income derived from his new employer. The assessee appealed to the Commissioner (Appeals) and contended that the action of the ITO was erroneous. Reliance was placed on the decision of CIT v. Lady Kanchanbai [1976] 77 ITR 123, CIT v. Patiala Sales Corporation (P.) Ltd. [1970] 77 ITR 443, Seth Shiv Prasad v. CIT [1972] 84 ITR 15 and Sobhagmal Lodha v. CIT [1967] 63 ITR 424. The Commissioner (Appeals) went through the decisions and found that the assessee could have a previous year for a separate source of income, as laid down in Section 3(3) of the Income-tax Act, 1961. Referring to the decision in the case of Seth Shiv Prasad (supra}, he observed that when holding shares in different companies could form different sources of income, there was no reason as to why the salaries earned from different employers would not form different sources of income. He also observed that Section 3(1)(b) gave an option to the assessee to make up his accounts to any date other than the 31st March and as the assessee had opted for closing his accounts on 4-8-1978, the assessee could not be prevented from doing so. In this view of the matter, he held that income earned by the assessee from his new employer could not be assessed during the previous year ended 31-3 1978.
(3.) SHRI S. Krishnan, the learned departmental representative, stated before us that the option under Section 3(1)b) related to persons maintaining books of accounts. He referred to the decision in the case of CIT v. V.V.S. Sarma[ 1977] 110 ITR 778 (Mid.) for the proposition that in respect of income from salary for which no books of account were maintained by the assessee, the previous year would be the financial year. According to him, the assessee did not maintain any accounts and, so, the previous year should be taken as the financial year. Referring to the decision in the case of Bhailal Tribhovandas & Co. v. CIR [1968] 68 ITR 136, he stated that "making of accounts" meant "ascertaining the profit or loss of a particular period". Hence, he urged that the decision of the Commissioner (Appeals) deserved to be set aside and that of the ITO deserved to be restored.;

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