TMI Blog1971 (3) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ided 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 : " We have considered the matter carefully and in our opinion the most equitable, reasonable, and certain method of assessment in this type of case is the met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y which they could not have been able to tax any portion of the income from 1924 to 1935 or to have adopted, as they did, the accrual basis ; but having adopted the first system or the second, they cannot be allowed to change their ground whenever it suits them to do so. " In the aforesaid case, no method of accounting had been employed by the assessee. Therefore, the Income-tax Officer could act under section 13 of the 1922 Act. The Income-tax Officer decided to act on the accrual basis. The loan transactions of the assessee were some time before the year 1921-22. The interest on these loans was never included by the assessee in any of the assessments made prior to 1924-25. In the year 1924, the Income-tax Officer discovered for the first time the existence of the first loan, raised on the mortgage bond of September, 1915. He also knew that no interest had been received by the assessee. The Income-tax Officer, however, from the year 1924 onwards proceeded to add to the assessable income of the assessee a sum of Rs. 8,750 every year calculating this amount not on the basis of what the assessee actually received but on the basis of the amount of the interest accruing to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tever they could recover. Section 34 is quite clear and does not enable the department to tax escaped income more than a year after it ought to have been taxed. " It is contended by the learned counsel for the assessee that in the present case also the interest in the three previous assessments was assessed to income-tax on accrual basis. Therefore, the interest that has accrued in pursuance of the court's order has to be taxed on accrual basis and not on receipt basis. In short, the assessee wants to invoke the rule of estoppel. 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 ? After considering the respective contentions of the learned counsel for either side, we have come to the conclusion that the rule laid down in Jug Sah Muni Lal Sah's case applies. It is significant that the existence of the mortgage was discovered by the Income-tax Officer in the assessment year 1959-60. At that time, two courses were open to him. He could have waited till the interest was received and then brought it to tax, or he could have proceeded to assess t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e corresponding provision in the 1961 Act, namely, section 145. In order to appreciate the contention both section 13 of the 1922 Act and section 145 of the 1961 Act are reproduced below : -------------------------------------------------------------------------------------------------------------------------------------------------- 1922 Act 1961 Act -------------------------------------------------------------------------------------------------------------------------------------------------- " 13. Income, profits and gains shall 145. (1) Income chargeable under the be computed, for the purposes of sections head 'Profits and gains of business or 10 and 12, in accordance with the method profession' or 'Income from other of accounting regularly employed by the sources' be computed in accordance with assessee : the method of accounting regularly employed by the assessee : Provided that, if no method of accounting Provided that in any case where the has been regularly employed, or if the accounts are correct and complete to the method employed is such that, in the satisfaction of the Income-tax Officer, but opinion of the Income-tax Officer, the income, the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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