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TMI Blog1970 (9) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... itted position that very often it so happens that the assessee is called upon to carry out some additional work, which is not covered by the contract between the parties. For the sake of convenience, we shall call the work covered by the contract as " tender " work and the additional work which is not covered by the contract as " non-tender " work. Now, whenever an occasion for undertaking non-tender work arises, the rates are very often not settled between the assessee and its customers. However, the assessee executes the extra work covering non-tender items, and, it is found from evidence, that it later on submits its bills for the extra work done by it. The rates which are mentioned in these bills for non-tender work are pitched a little high because it has been the experience of the assessee that at the time of ultimate settlement of these bills, the customers would insist on making allowance for some deductions. It is an admitted position that the assessee credits the total amount of the bills for non-tender work which contain a higher rate of charges to the respective works accounts, kept by it in its account books. It may be recalled here that the rates which are mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount accrued to the assessee during the respective periods. According to the department, the assessee's estimate of the amount, which it was likely to receive from its customers, and posting of the profit and loss account on that basis would not alter the fact that the whole amount of the bill preferred by the assessee and credited to the works account represented its accrued right to receive the same from its customers. In this view of the matter, the kasar amounts for the assessment year in question were not allowed to be deducted by the department. So far as the assessment year, which is relevant for the purpose of this petition is concerned, the kasar amount is of Rs. 26,000. The contention of the assessee is that this amount should not be added back for the purpose of assessing its income during the accounting period. Being dissatisfied with this decision of the Income-tax Officer, the assessee preferred an appeal before the concerned Appellate Assistant Commissioner who also agreed with the view taken by the Income-tax Officer. The assessee thereupon preferred a second appeal before the Tribunal and the Tribunal took the view that the bills submitted by the assessee in regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been explained in many cases. This system brings into credit what is due, immediately it becomes legally due, and before it is actually received, and it brings into debit expenditure the amount for which a legal liability has been incurred before it is actually disbursed. Therefore, the central idea which is involved in this system is that, if a certain amount has actually accrued due to the assessee, then it does not matter that it is not actually received. The accrual of the amount would justify the assessee in crediting the same in his account books. If he does so, then the evidence of that credit entry would, in ordinary circumstances, be considered as sufficient evidence to show that the assessee concerned has earned that amount. However, mere posting of an entry in the account books of the assessee would not always supply a conclusive nature of evidence on the question whether the disputed amount has accrued to the assessee or not. If there are other facts going to throw light on the question, whether the amount has really accrued to the assessee or not, then the posting of a credit entry in the account books of the assessee should be appreciated in the light of that evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion whether the income has accrued or not is not a mere matter of cogency of the entries made in the account books of the assessee, but is essentially one of substance and of the real nature of what happened because a book entry is not conclusive proof of the question whether the assessee had become entitled to the sums or not. In that case the said High Court was dealing with an assessee who followed the mercantile system of accounting This decision is affirmed by the Supreme Court in Commissioner of Income-tax v. Shoorji Vallabhdas and Co. holding that, if income does not result at all, there cannot be a tax, though in book-keeping an entry is made about a " hypothetical income ", which does not materialise. Their Lordships have in this case further observed that, when the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. Similar view is also taken in the Bombay case of H. M. Kashiparekh & Co. Ltd. v. Commissioner of Income-tax. Now, so far as the facts of this case are concerned, it is undoubtedly true that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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