K.L.ROY, J. - (1.) THIS reference, under the WT Act, raises a short but by no means an easy point of law to be answered by this Court. The assessee is a limited company and up to the asst. yr. 1956-57, it was assessed to income-tax in respect of its previous year ending with the 31st March of each such year. Consequent on the assessee-company becoming a subsidiary to another company of Bombay, whose financial year was different from that of the assessee, the assessee-company applied to the ITO for permission to change the date of the closing of their accounts from 31st March, 1957, to the 30th June, 1957. By his order dt. 17th April, 1964, the ITO accepted the assessee's request on condition that the assessee was assessed for the asst. yr. 1958-59 in respect of its income, profits and gains for the fifteen months from the 1st April, 1956, to the 30th June, 1957. As the assessee accepted the condition, the income-tax assessment for 1958-59 was made in respect of the aforesaid period of fifteen months. In response to the notice under s. 14(2) of the WT Act for the asst. yr. 1957-58, the assessee contended that, as it had no previous year for the asst. yr. 1957-58, there was no "valuation date" for that year and no wealth-tax assessment could be made on the assessee for that year. The ITO while rejecting this contention observed: "The usual previous year prior to the change sought by the company was the year ended on 31st March, 1957, so that in case income-tax assessment for the asst. yr. 1957-58 were to be made, the year ending on March, 1957, would have been the previous year. It is not essential in order to make a wealth-tax assessment for any year that an income-tax assessment for the same year should actually be made or contemplated.... The crucial words used in the definition of valuation date are: 'If an assessment were to be be made under that Act for that year.' In the instant case the income-tax assessment for 1957-58 was not made solely to avoid hardship to the company resulting from double taxation, for in that the income of the 'previous year ' of twelve months assessable in this year is being included in the income of fifteen months which is being assessed in the asst. yr. 1958-59." Accordingly, the ITO made the wealth-tax assessment on the assessee for the year 1957-58 by treating the valuation date for that year to be the 31st March, 1957. In the assessee's appeal to the AAC from the order of assessment, the AAC accepted the assessee's contention and held as follows : In my opinion, the construction placed by the WTO on the words 'if an assessment were to be made under the Act for that year'is untenable and incorrect. The WTO seems to be of the opinion that if an income-tax assessment for 1957-58 were to be made, there would be a previous year ending on 31st March, 1957, and that the action of the Department in refraining from making such an assessment for 1957-58 does not entitle the assessee to claim exemption from wealth-tax assessment for the same year. The fallacy in the argument of the WTO lies in presuming that he could have made the income-tax assessment for 1957-58 if he would..... The question is whether such income-tax assessment is capable of being made. After the grant of change in the accounting year with the condition that the income or loss of the entire period 1st April, 1956 to 30th June, 1957, should be assessed only in one assessment for 1958-59 there is no more power left with the ITO to make an assessment for income-tax for 1957-58. It is, therefore, not a matter of grace that the ITO did not make the income-tax assessment for 1957-58 as it seems to be his opinion when he says 'in the instant case the income-tax assessment for 1957-58 was not made solely to avoid hardship to the company resulting from double taxation.' In the circumstances, I hold that there was no previous year for income- tax purposes for 1957-58 tax year and, therefore, there is no valuation date for wealth-tax assessment for 1957-58." Being aggrieved with the aforesaid decision of the AAC, the Department appealed to the Tribunal. Before the Tribunal it was submitted on behalf of the Department that the definition of 'valuation date'as given in s. 2(q) of the WT Act permitted the assessment which has been made by the WTO. As that section spoke of "if an assessment were to be made under that Act for that year" if such an assessment was made then the previous year would have ended on the 31st March, 1957, and therefore, the WTO was justified in taking that date as the valuation date. The Tribunal was unable to agree with this contention as, in its opinion, the previous year having been changed from ending in March to end in June, the valuation date would change accordingly, so that the effect would be that even for the purpose of income-tax assessment, if an assessment were to be made for the asst. yr. 1957-58, the previous year would end on the 30th June, 1956, and not on the 31st March, 1957. Now, since the 30th June, 1956, falls outside the period when the WT Act came into force, no assesment could be made on the assessee in respect of the asst. yr. 1957-58. Accordingly, the Tribunal dismissed the Departmental appeal. At the instance of the CWT, the following question of law has been referred to this Court by the Tribunal: "Whether, on the facts and in the circumstances of the case, and having due regard to the definition of 'valution date 'under s. 2(q) of the WT Act, 1957, the Tribunal was right in holding that no assessment could be made under the WT Act on the assessee for the assessment year 1957-58. The relevant provisions of the IT Act, 1922 and the WT. Act, 1957, as in operation in respect of the asst. yr. 1957-58, may now. be set out for convenience. Sec. 3 of the WT Act imposes a charge of tax, subject to the other provisions of that Act, for every financial year commencing on and from the 1st day of April, 1957, in respect of the net wealth on the corresponding valuation date of every individual, HUF and company at the rate or rates specified in the Schedule to the Act. Sec. 2 (q) defines "valuation date" in relation to any year for which an assessment was to be made under that Act to mean the last day of the previous year as defined in cl. (11) of s. 2 of the IT. Act. if an assessment were to be made under that Act for that year. The relevant provisions of s. 2(11) of the IT Act, 1922, are as follows:
(2.) (11) 'Previous year'means-- (i) in respect of any separate source of income, profits and gains-- (a) the 12 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 day 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: Provided that where in respect of a particular source of income, profits and gains, an assessee has once been assessed,..... he shall not, in respect of that source .... exercise the option given by this sub-clause so as to vary the meaning of the expression 'previous year'as then applicable to him except with the consent of the ITO and upon such conditions as the ITO may think fit to impose;...." Mr. S. Mukherjee, learned counsel for the Department, submitted that under s. 2(q) of the WT Act, the "valuation date" would be the end of the previous year for the purpose of assessment to income-tax. If an assessment for income-tax could have been made for the year 1957-58 such valuation date would be either the 31st March, 1957, or the 30th June, 1956. He submitted that the Tribunal was not right in holding that no assessment to wealth-tax could be made for the asst. yr. 1957-58 if the corresponding valuation date was the 30th June, 1956, which was earlier than the date on which the Act came into operation. He contended that under the charging section of the WT Act, assessment to wealth-tax is to be made in respect of every financial year commencing from the 1st April, 1957. If the assessee's contention is accepted then there would be no assessment to wealth-tax for the asst. yr. 1957-58 and that would be contrary to the provisions of the charging section. Dr. D. Pal, learned counsel for the assessee, did not make any attempt to support the decision of the Tribunal that if the valuation date was the 30th June, 1956, then no assessment to wealth-tax could be made in respect of the asst. yr. 1957-58. Dr. Pal submitted that the Tribunal was in error in holding that there was any previous year for 1957-58 which ended on the 30th June, 1956. By the order of the ITO accepting the assessee's proposal to change the date of its closing of accounts from the 31st March, 1957, to the 30th June, 1957, on condition that the income for the entire period of 15 months were to be assessed for the asst. yr. 1958-59, there could not be any previous year for the asst. yr. 1957-58. The assessee has already been assessed to income-tax in respect of his income for the period 1st April, 1955, to 31st March, 1956, in the assessment year 1956-57, and if the income for the period 1st April, 1956, to 30th June, 1957, was to be assessed in the asst. yr. 1958-59, there could be no assessment to income-tax for the asst. yr. 1957-58. Dr. Pal, therefore, submitted that the AAC was right in holding that there was no previous year for income- tax purposes for 1957-58 tax year and, therefore, there could be no valuation date for the wealth- tax assessment for 1957-58. The provisions of s. 2(11) of the IT Act, 1922, were considered by the Supreme Court in Esthuri Aswathaiah vs. CIT (1966) 60 ITR 411 (SC), and the Supreme Court held, inter alia: (i) that the ITO had power to treat the period of 21 months as the previous year for the asst. yr. 1952-53; (ii) that the total income for the period of 21 months had to be assessed at the rate specified in the relevant Finance Act for that total income and the ITO could not apply the rate applicable to the income of the last period of 12 months. The Court further observed: "A combined reading of the several clauses of s. 2(11) of the Indian IT Act, 1922, shows that the length of a previous year need not necessarily be 12 calendar months. Under s. 2(11)(i)(b), the previous year is such period as may be determined by the Central Board of Revenue or such authority as the Board may authorise in this behalf and the period so determined may be more or less than 12 months." It would, therefore, follow that when the ITO accepted the assessee's proposal to assess the income for the period 1st April, 1956, to 30th June, 1957, for the asst. yr. 1958-59, he was in effect accepting that period as the previous year for the asst. yr. 1958-59, under the proviso to s. 2(11)(i) of the IT Act. If that be the position, then there could not be a previous year for income-tax purposes for the asst. yr. 1957-58, and there could not be a corresponding valuation date for wealth-tax purposes also for the asst. yr. 1957-58. In our opinion, the reason given by the AAC in setting aside the assessment is correct and the answer to the question referred to this Court must be in the affirmative and in favour of the assessee. Considering the facts of this case there would be no order as to costs.;