N K BRAHMACHARI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The Tribunal has referred the following question of law under Section 256(1) of the Income-tax Act, 1961 :

(2.) In this case, the assessment years involved are 1971-72 and 1972-73. The assessee had made various advances to Brahmachari Research Institute (P.) Ltd. at interest payable at the rate of 6 per cent. per annum. No interest on these advances were shown by the assessee in his income-tax return for the relevant assessment years. The case of the assessee is that as and when the interest was received, he disclosed this in his return. As no interest was received in these years, he did not show this as income in his returns. The Income-tax Officer assessed the interest due in the hands of the assessee on accrual basis. There is no finding that the accounts were maintained by the assessee on accrual basis. The only thing that has been held against the assessee is that Brahmachari Research Institute (P.) Ltd. used to maintain its accounts on mercantile basis and had shown this liability to pay interest on accrual basis in its accounts.

(3.) If Brahmachari Research Institute (P.) Ltd. maintained its accounts on mercantile system, it does not follow that the assessee must be assessed on mercantile basis, unless it is shown that he had also maintained his accounts on mercantile basis. The assessee's contention is that in the past years also he had shown receipts on cash basis as and when interest was received and tax was levied accordingly.