ESTHURI ASWATHIAH vs. COMMISSIONER OF INCOME-TAX, MYSORE

CIVIL APPEAL No. 402/1966Supreme Court[1966] 3 S.C.R. 35918 January 1966Bench: 3 JudgesAuthor: K. SUBBA RAO, M. HIDAYATULLAH, R.S. BACHAWAT6 pages
AI SummaryDismissed

What were the facts?

The assessee, Esthuri Aswathaiah, had previously followed a previous year ending on June 30. For the assessment year 1952-53, the assessee requested a change to a previous year ending on March 31, covering a 21-month period from July 1, 1950, to March 31, 1952. The Income-tax Officer sanctioned this change on the condition that the total income for the 21-month period would be taxed at the rate applicable to that 21-month period. The Appellate Assistant Commissioner and the Appellate Tribunal upheld this order. The High Court, on reference, also confirmed the order. The assessee appealed to the Supreme Court, challenging the validity of a previous year exceeding 12 months and the Income-tax Officer's power to impose the condition regarding the rate of tax.

What did the Supreme Court hold?

The Supreme Court held that the length of a previous year is not necessarily restricted to 12 calendar months. Section 2(11)(i)(b) allows for periods determined by the Central Board of Revenue or authorized authorities, which can be more or less than 12 months. Regarding the change in the previous year, the Income-tax Officer has the power to refuse consent, but if consent is granted, ample power exists to impose conditions. The condition that the full period from the end of the previous year for the preceding assessment to the end of the new accounting year should be taken as the previous year for the current assessment is valid and safeguards the revenue. The Court rejected the contention that there could be two previous years for the same assessment year, stating it is repugnant to Section 3. The Court also held that the Income-tax Officer has no power to vary the rate of tax. The condition that the income of the 21-month period should be assessed at the rate applicable to that period is redundant, as the entire income of the determined previous year must be assessed at the rate specified in the relevant Finance Act. The appeal was dismissed.

What were the issues?

1. Whether, under Section 2(11)(a) of the Income-tax Act, 1922, the Income-tax Officer is empowered to sanction a previous year of 21 months, even when the assessee applies for such a change? 2. When the previous year is allowed to be 21 months, is the Income-tax Officer obligated to tax the income for that period at the rate applicable to a proportionate 12-month period? Assessee's contentions: (i) The scheme of the Act, particularly Sections 2(11) and 3, implies that a previous year cannot exceed 12 months. (ii) The Income-tax Officer lacked the power under the proviso to Section 2(11)(i)(a) to direct a previous year of 21 months. (iii) The Income-tax Officer should have sanctioned the change by allowing two previous years: one of nine months (July 1, 1950, to March 31, 1951) and another of 12 months (April 1, 1951, to March 31, 1952). (iv) The Income-tax Officer should have sanctioned the change on the basis that the income for 21 months would be assessed at the rate applicable to the income of the last 12-month period. Revenue's contentions: (Not recorded in the judgment.)

Which sections of the Income-tax Act were involved?

Section 2(11),Section 3,Section 25(1),Section 66A(2)

AI-generated summary — verify with the full judgment below

. ' A B c D E F G H .. ESTHURI ASWATHIAH v. COMMISSIONER OF INCOME-TAX, MYSORE • [K. SUBBA RAO, M. HIDAYATULLAH AND R.S. BACHAWAT, JJ.j Income-tax Act (11 ?f. 192,2). s, 2(11)-Length of previoU3 year-ft should be only 12 calendar months--Previous year of 21 months-Rate a/ tax applicable.

Up to the assessment year lsl51-S2, the appellant adopted the yea• ending on 30th June as the previous ·year applicable to him. For the .... essment year, 1952-53, the assessee filed a return for 21 months com- mencing on !st July 1950 and ending-on 31st March, 1952 and r~uested the Income-tax Officer to accord his ,Sanction to the change of the previous year from an year ending on 30th Jorie to an year ending on 31st March.

The Income-tax Officer sanctioned the· change on condition that the total' income in the period of 21. month$ .en.diµg on 31st March 1952 would be asseosed to tax at the rate applicable to the total income in the sitld 21 months. Tue Appellate Assistant Coqunissioner and the Appellate Tribunal on appeal, and the High Court, on a reference, confirmed the order.

In appeal to this Court it was contended that: (i) the scheme of Act and.particularly ss.

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 2(11)

All 103 judgments and leading authorities on Section 2(11) →

Recent GST High Court judgments

Search GST case law →