TMI Blog1939 (8) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment in 1934-35 within the meaning of Section 34 and could be assessed under that section. The questions as framed are somewhat confused. The real question which arises in the present case is whether the sum of ₹ 90,000 or part thereof can be assessed as being the income of the previous year under the provision of Section 34 of the Indian Income Tax Act. The fact which have been stated by the Commissioner to determine these two questions are these :- On the 10th September 1915 the Raja of Parsauni executed a mortgage bond for ₹ 87,500 in favor of the assessee. The annual interest payable under the terms of the bond was ₹ 8,750. On the 5th August 1919 the assessee took another mortgage from the Raja of Parsauni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery was made by the Income Tax Officer in this way :- The assessee instituted a suit sometimes before 1929 to recover his dues on all the three mortgages of 1915, 1919 and 1921. On the 5th April 1929 a preliminary decree was passed in favour of the assessee for a reduced amount of ₹ 3,71,000 consolidating his aggregate dues, i.e., principal and interest on all the three documents. The final decree was passed some time later for a sum of ₹ 4,00,000 odd. In execution of this decree the property of the mortgagors was put to sale, the sale was confirmed on the 16th December 1932, which fall within previous year of the assessee, that is, 1340 Fasli. The assessee thus realised in the shape of property a sum of ₹ 3,06,590. It wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been realised in 1940 Fasli, namely, ₹ 1,91,000 after subtracting from it the amount of ₹ 96,250 which had already suffered taxation during the eleven years. In other words, he assessed the assessee on this escaped income at a figure of ₹ 95,750. The matter was taken up in appeal before the Assistant Commissioner of Income Tax who by his order dated the 21st December 1936 reduced the assessable income on this head by a sum of about ₹ 5,000 which we are told was in the nature of additional law expenses which were allowed by the appellate authority, thereby fixing the assessable figure at a sum of ₹ 90,345. The question formulated before us invite a decision of the contention raised that the assessee is not l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities, but that whatever income escaped, escaped assessment earlier than 1924. Mr. Gupta on behalf of the Income Tax Department on the other hand contends that as the assessee has not adopted any system whatsoever which may be said to be a system regularly employed in respect of his accounts, it was open to the Income Tax Department to consider the whole amount, which was admittedly received by the assessee, as being assessable on the cash basis because he argues that under Section 13 of the Indian Income Tax Act it is open to the Income Tax Authorities to adopt any basis which may choose under the provision to that section in order to determine the assessable income. In my opinion Section 13 has no application whatsoever to the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... together will interest at such rate as he may think fit to allow under provision to section 66(7). I wish to say a few works as to the argument of the learned standing counsel that no system has been regularly employed by the assessee. The Commissioner of Income Tax in paragraph 5 says at one place that is clear that no method of accounting was employed by the assessee in respect of the three loans refereed to. At page 25 he again says that when the Income tax Officer went to make the reassessment for 1934-35, he found that no method of accounting has been regularly employed by the assessee in respect of the interest on the three loans referred to . In my opinion the learned Commissioner was entirely in error in approaching the case in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of the observations made by me above. In the circumstances there will be no order for costs in the Court. FAZL ALI, J. - It is common ground that though in the year 1924-25 the assessee did not receive any interest on the mortgage bond for ₹ 87,500 yet the Income Tax authorities proceeded to tax then as if they has actually received a sum of ₹ 8,750, that being the yearly interest payable by the mortgages under the bond. The question is whether the Income tax authorities having once elected to adopt this mode of taxation, which was undoubtedly open to them, can now turn round and adopt a totally different made. In my opinion they cannot do so and the show matter can be tested in this way. Let us assume that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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