RATTAN CHAND DHAWAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Chandigarh Bench, has referred the following question of law for our opinion:

(2.) WE proceed on the agreed basis that the interest which is sought to be brought to tax is to be assessed in the hands of Rattan Chand Dhawan, a Hindu undivided family. This agreement was reached before the Tribunal. The Hindu undivided family assessed in the name of Rattan Chand Dhawan had advanced some moneys in the year 1944 to Nawab Ahsan Ali Khan of Ludhiana, A sum of Rs. 55,000 was the original amount advanced on a mortgage. It carried interest at the rate of 5 per cent. per annum. This advance was not recorded by the Hindu-undivided family in any books of account inasmuch as the family did not maintain any regular books of account. The interest accruing on this mortgage was never assessed to income-tax except for the years 1959-60, 1960-61 and 1961-62. The interest was assessed to income-tax in these years on accrual basis. In each of these three years, a sum of Rs. 2,750, representing the interest for each year, was included in the assessments made on the family on accrual basis. Under a court's decree, the mortgage amount was recovered. The result was that the assessee realised interest amounting to Rs. 40,529, besides the principal. The assessee claimed that the entire amount of interest received could not be taxed to income-tax on receipt basis. The contention was that it should be assessed on accrual basis. This contention has not prevailed either with the Income-tax Officer or on appeal with the Appellate Assistant Commissioner and on further appeal with the Tribunal. The Tribunal disposed of the assessee's contention in the following terms :

(3.) THE short question is whether the department can, having adopted one basis of assessment under Section 13 of the 1922 Act or under Section 145 of the 1961 Act switch over to another basis ?