JUDGMENT

PATHAK, J. - This is a reference made by the Income Tax Appellate Tribunal u/s 66 (1) of the Indian Income Tax Act read with Section 21 of the Excess Profits Tax Act. The questions referred for the decision of this Court by this reference are as follows :-

"(1) Whether the assessee having once exercised his option u/s 8 (2) of the Excess Profits Tax Act (viz., that the business be deemed not to have been discontinued) before the prescribed date and the option so exercised having been accepted by the Excess Profits Tax Officer and the assessment made on the basis thereof (in respect of a chargeable accounting period), the assessee is entitled to withdraw the above option later on at the appellate stage with a view to claim that the business be deemed to have been newly commenced ?

(2) if the answer to question No. (1) above be in the affirmative, whether in the present case, the previous year 1938 determined for the assessment for 1939-40 can by itself be selected as a standard period by the assessee under sub-clause (d) of Section 6 (2) read with the proviso thereto, there having been no (and could not have been any) assessment for 1938-39 for a business deemed to have been newly started on 1st January, 1938, and having the calendar year as its previous year and consequently no previous year determined for that assessment."

The assessee is the firm of Messrs. A. H. Wheeler & Co. The chargeable accounting periods in respect of which this firm has been assessed to excess profits tax are two : (1) 1st September, 1939, to 31st December, 1939, and (2) 1st January, 1940, to 31st December, 1940. In October, 1940, a notice u/s 13 of the Excess Profits Tax Act was issued to the assessee calling upon him to furnish a return with respect to the first of the chargeable accounting periods mentioned above. By letter, dated November 6, 1940, the assessee while asking for an extension of the date for the delivery of the return, purported to exercise the discretion conferred upon it by Section 8 in consequence of the change having taken place in the persons carrying on the business as a result of the death of one of the partners, and the assessee gave intimation to the Excess Profits Tax Officer in the following terms :-

"Further a change in the constitution of the firm took place with effect from 1st January, 1938, on account of the death of the then senior partner, Mr. E. E. Moreau, but we should like you to treat this business as not having been discontinued for the purposes of computation of standard profits."

That officer informed the assessee by letter, dated November 22, 1940, that the election made in the assessees letter was approved. In the month of May, 1941, a notice u/s 13 of the Excess Profits Tax Act was issued in respect of the second of the two above-mentioned chargeable accounting periods. It appears that the returns were filed by the assessee in respect of both the chargeable accounting periods in due course. Having elected to treat the business as continuing despite the death of one of the partners, the assessee-firm proceeded to exercise the option conferred upon it by Section 6 (2) in the matter of the selection of the standard periods and asked for the fixation of the standard periods in accordance with clause (d) of sub-section (2) of Section 6 for the purpose of determining the standard profits of the business in relation to both the above-mentioned chargeable accounting periods. The result was that on June 30, 1942, the assessment to excess profits tax was made in respect of both the chargeable accounting periods on the footing that there was no discontinuance of business. Pursuant to the assessment, notice of demand were served upon the firm on July 3, 1942. One day before the service of the notice, namely, on July 2, 1942, the firm addressed a letter to the Excess Profits Tax Officer stating :-

"We have just discovered that it will probably be more advantageous for us to select a slightly different standard period