Sabyasachi Mukharji, J. - (1.) This reference arises out of the proceedings for the assessment years 1962-63 and 1963-64, the corresponding previous years having ended on 31st December, 1961, and 28th February, 1962, respectively. The income-tax assessments were completed under Section 143(3) of the I.T. Act, 1961, on a total income of Rs. 58,47,380 and Rs. 31,13,458 on 22nd February, 1964, and 23rd March, 1964, for the two assessment years respectively. The assessee had discontinued its business in India on 28th February, 1962, and had filed a claim under Section 25(3) of the Indian I.T. Act, 1922, on 27th March, 1962. In the said claim, it was stated by the assessee as under : "With reference to our letter dated 12th March, 1962, and in accordance with the provisions of the above Section whereby no income-tax and super-tax shall be payable by us in respect of the income, profits or gains for the period between the end of the previous year and 28th February, 1962, by virtue of our business having been charged under the provisions of the Indian Income-tax Act, 1918 (VII of 1918), we hereby claim that the income, profits and gains of the previous year shall be deemed to have been the income, profits and gains of the said period, and accordingly request that an assessment shall be made on this basis."
(2.) It was submitted by the assessee that the claim had been filed under the provisions of the 1922 Act and, therefore, it was filed before the enforcement of the 1961 Act which came into effect from 1st April, 1962. The ITO rejected the assessee's claim under Section 25{3) of the Indian I.T. Act, 1922, on the ground that the relevant date of discontinuance of business fell in the previous year for the assessment year 1963-64 which was governed by the provisions of the I.T. Act, 1961. According to him, the provisions of Section 25(3) of the Indian I.T. Act, 1922, were not attracted under the -new Act.
(3.) The assessee filed appeals before the AAC against the order of the ITO and submitted that once the option was exercised by the assessee, the exemption was also applicable for the immediately preceding year, that is, 1961, for substituting that calendar year's income by the income of the broken period, that is to say, 31st December, 1961, to 28th February, 1962. It was, further, contended that the exemption was attracted on the happening of certain events, namely, the discontinuance of business which, in the instant case, took place on 28th February, 1962, and at that point of time the Act of 1922 was in force. Therefore, the assessee submitted that the exemption being substantive in nature, a right had already accrued to the assessee and that right could not be taken away without any specific provision in the repealing Act. The AAC, however, did not accept the submission and affirmed the order of the ITO rejecting the assessee's claim for relief under Section 25(3) of the Indian I.T. Act, 1922.;