TMI Blog1975 (5) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... r relevant to the assessment year 1957-58, the assessee had received interest from the income-tax department on advance tax relating to the assessment years 1951-52 and 1952-53. This interest the assessee did not show in its return for the year 1957-58. After the assessment was made the Income-tax Officer discovered this omission and he accordingly on 19th September, 1964, commenced proceedings against the assessee under section 148 read with section 147(a) of the Act and made a reassessment by including in its income the two amounts of interest received by the assessee on advance tax. The assessee challenged the inclusion on two grounds: (1) that the case was not covered by section 147(a) of the Act, and (2) that the interest related to the assessment years 1951-52 and 1952-53, and the same could not be assessed in the assessment year 1957-58. Both these contentions of the assessee were negatived by the Income-tax Officer, the Appellate Assistant Commissioner of Income-tax and the Income-tax Appellate Tribunal. The assessee is aggrieved and at his instance the Tribunal has submitted the following two questions of law for the opinion of this court: " (1) Whether, on the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee had earned interest on advance tax because he himself had calculated the interest and adjusted the same against the demand for the assessment year 1957-58 at the time of final assessment for the year in question. In the alternative, it is pleaded that the Income-tax Officer could with due diligence have discovered this fact. Now, there is no material on record to show that the Income-tax Office was aware of the fact that the assessee had earned income from interest and he deliberately omitted to include the same in the assessment for the year 1957-58. It is possible, however, to contend that the Income-tax Officer could have discovered this fact from the assessment records of the assessee. In our opinion, this possibility does not change the legal position. The primary duty to disclose all income lies upon the assessee and the fact that the Income-tax Officer with due diligence could have discovered the assessee's true income does not absolve the assessee from discharging his primary duty. In some cases an assessee may dispute that a particular receipt is his income. Even in such a case the assessee is required to disclose all material facts to the Income-tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the written down value of some machinery for the purpose of depreciation allowance and, as such, the depreciation allowance granted to the assessee was in excess of what was actually due to him. The Income-tax Officer, on discovering this mistake more than 4 years after the expiry of the assessment year, issued notice under section 34(1)(a) of the Indian Income-tax Act, 1922, for reassessment. The assessee filed a writ petition in the High Court contending that the income had not escaped assessment because of any omission or failure on his part. The writ petition was dismissed by a learned single judge and the assessee's Letters Patent appeal was also dismissed. On appeal the Supreme Court set aside the judgment of the High Court holding that the High Court did not consider whether income escaped assessment by reason of omission or failure on the part of the assessee to disclose fully and truly all necessary facts for assessment and remanded the case for determination of the question whether by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment of the assessee for the 3 years in question, any income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t because the assessee omitted to show them in its return. We may now take up the question No. 2. The argument is that as the interest related to the assessment years 1951-52 and 1952-53, it could have been included in the assessments for those years and not in the assessment year 1957-58 as the assessee followed the mercantile system of accounting. Now, even in a case where the mercantile system of accounting is followed, income may accrue when a right to receive it arises, even if it is not actually received. The question in the instant case is as to when did the interest income arise. Advance tax is payable by an assessee under section 18A of the Indian Income-tax Act, 1922, The advance tax so paid shall be adjusted against the tax determined on assessment, provisional or regular. Sub-section (5) provides : The Central Government shall pay simple interest-- (i) at two per cent. per annum on any amount payable in accordance with the provisions of this section before the 1st day of April, 1955, and paid accordingly; (ii) at four per cent. per annum on any amount payable in accordance with the provisions of this section after the 1st day of April, 1955, and paid acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes to the conclusion that such a right accrued or arose to the assessee in a particular accounting year, he shall include the said income in the assessment of the succeeding assessment year. No power is conferred on the Income-tax Officer under the Act to relate back an income that accrued or arose in a subsequent year to another earlier year on the ground that the said income arose out of an earlier transaction. Nor is the question of reopening of accounts relevant in the matter of ascertaining when a particular income accrued or arose." There an assessee who supplied bread to a Government hospital under a contract during the period April 1, 1948, to March 31, 1949, made certain representations to the Government after the close of the year that he had incurred loss. The Government directed payment of the sum of Rs. 12,447 to the assessee by way of compensation for the loss sustained in respect of the supply of bread. That amount was received by the assessee in the accounting year 1950-51. It was held by the Supreme Court that the amount ought to be included in the profits of the year 1950-51 relevant to the assessment year 1951-52 and that it could not be related back to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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