A K JALAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this reference under S. 256(1) of the IT Act, 1961 ('the Act') for the asst. yrs. 1983-84 to 1985- 86 the following common question of law has been referred to this Court:

(2.) THE assessee challenged the action of the AO before the CIT (A) and contended that it was entitled to change the method of accounting in respect of the interest income from mercantile to cash as the debtor company was not paying interest regularly. The assessee further claimed that the above change was bona fide.

(3.) THE assessee came up in second appeal before the Tribunal. The Tribunal after considering the rival submissions of the parties and the facts of the case held that the assessee was entitled to change the method of accounting regularly followed by it. For this purpose prior approval of the AO was not necessary. However, the AO was entitled to going to the bona fides of the change. The Tribunal held that the change of method of accounting from mercantile to cash was not bona fide.