- (1.) The appeal raises a question of interpretation of the proviso to cl. (i) (a) of S. 2(11) of the Indian Income-tax Act, 1922. Up to the assessment year 1951-52, the appellant adopted the year ending on June 30 as the "previous year" applicable to him. The assessment for the assessment year, 1951-51 was accordingly made in respect of the previous year ended on June 30, 1950. For the assessment year, 1952-53, the assessee filed a return for 21 months commencing on July 1, 1950 and ending on March 31,1952, and requested the Income-tax Officer to accord his sanction to the change of the previous year from an year ending on June 30 to an year ending on March 31. The Income-tax Officer duly sanctioned the change. In the assessment order for the year, 1952-53 he stated: "The return of income filed for this year is for the period between 1st July 1950and 31st March 1952. The permission to change the previous year is granted subject to the condition that the total income in the period of 21 months ending 31st March 1952 will be assessed to tax at the rate applicable to the total income in the said 21 months." The appellant was apparently happy with this order, and he made no protest before the Income-tax Officer. The assessment for the assessment year 1952-53 was accordingly made in respect of the income of the previous year consisting of 21 months commencing from July, 1, 1950 and ending on March 31, 1952. In his appeals before the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal, the appellant, however, contended that the total income of 21 months should be assessed at the rate applicable to the proportionate income for a period of 12 months. Both the authorities concurrently rejected this contention. On the application of the assessee, the Tribunal referred the following two questions of law for the decision of the High Court of Mysore: "(1) Within the meaning of Section 2(11)(a) of the Income-tax Act, whether the Income-tax Officer is entitled to have the length of the 'previous year' as 21 months though the assessee itself applies for such a change (2) When the length of the assessee' previous year is allowed to be 21 months, whether it is obligatory on the part of the Income-tax Officer to tax the income for the said period of 21 months at the rate applicable to the proportionate income for a period of 12 months - At the hearing of the reference, the second question of law was not pressed. The first question of law was pressed, and it was contended that according to the scheme of the Indian Income-tax Act, there cannot be a previous year consisting of more that 12 months and the Income-tax Officer was not competent to constitute a previous year consisting of 21 months under the proviso to cl. (i) (a) to S. 2(11). The High Court rejected this contention and answered the questions in favour of the Revenue and against the assessee. The assessee now appeals to this Court on a certificate granted by the High Court under S. 66A(2) of the Indian Income-tax Act, 1922.
(2.) Mr. Srinivasan repeated before us the contentions which he urged before the High Court. He submitted that the scheme of the Act and particularly Ss. 2(11) and 3 show that there cannot be a previous year consisting of more than 12 months, and the Income-tax Officer had no power to direct under the proviso to Cl. (i) (a) of S 2 (11) that the previous year should consist of 21 months. We are unable to accept this contention.
(3.) Section 3 is the charging Section. For any assessment year, income-tax is charged on the income of the previous year. Section 3 does not define the length of the previous year. The "previous year" is defined in S. 2(11). The main part of cl. (i)(a) of S. 2(11) reads : "(11) 'previous year' means - (i) in respect of any separate source of income, profits and gains - (a) the twelve months ending on the 31st day of March next preceding the year for which the assessment is to be made, or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then at the option of the assessee, the year ending on the date to which his accounts have been so made up.";