RADHA DEVI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the Tribunal referred the following question relating to the asst. yr. 1973-74 for the opinion of this Court :

(2.) THE facts, as found by the Tribunal, are that the assessee showed dividend income of Rs. 1,000 by estimate, but she did not show any income by way of interest. The ITO noticed that the assessee had advanced Rs. 4,00,000 to a firm, M/s Durga Glass Works. The interest that accrued on the aforesaid loan, was not shown by the assessee, though she followed mercantile system of accounting. For the asst. yrs. 1969-70 and 1970-71, the ITO noticed that the interest income from the aforesaid firm was estimated and included in the total income of the assessee on the basis of mercantile system of accounting. Similarly, the ITO estimated interest income at Rs. 25,000 on the aforesaid loan advanced to the firm and brought the same to tax on the basis of mercantile system of accounting. On appeal, the assessee before the AAC disputed the addition of Rs. 25,000 in her total income on the ground that cash system of accounting was followed by her in respect of the interest income from the aforesaid firm during the previous year relevant to the asst. yr. 1973-74. The AAC following the orders relating to the asst. yrs. 1969-70 and 1970-71, affirmed the order of the ITO. On further appeal, the Tribunal held as follows:

(3.) IN Shiv Prasad Ram Sahai vs. CIT (1966) 61 ITR 124 (All) : TC 1R.232, this Court held that, if the assessee has once chosen the mercantile system for a transaction and has regularly employed that system, it is not open to him unilaterally at any time during subsequent accounting years to change that system. The variation could be only by mutual consent. The assessee has not shown that she had changed over to the cash system from mercantile system by mutual prior consent of the AO. Following the said authority, we answer the aforementioned question in the affirmative, i.e., against the assessee and in favour of the Revenue.