TMI Blog1996 (2) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 20-1-1996 for the assessment years 1983-84 to 1986-87. All the additional grounds are related to the grounds already filed. They are admitted. 4. The assessee is an individual deriving income from business by way of selling agency commission and income from other sources. He has also derived some capital gains. 5. One of the common grounds for all these years is regarding the taxability of the income by way of interest income derived by the appellant from one M/s. Somaiya Organo Chemicals Ltd., in which the appellant is one of the substantially interested persons. The amounts involved are as follows : A.Y. 1983-84 interest income Rs. 2,37,633 A.Y. 1984-85 interest income Rs. 1,37,572 commission Rs. 60,000 A.Y. 1985-86 commission Rs. 1,80,000 interest Rs. 1,74,200 A.Y. 1986-87 interest Rs. 1,88,748 commission Rs. 1,45,500 6. The appellant had an A/c. in the Books of M/s. Somaiya Organic Ltd. and the commission and interest amounts are credited to this A/c. in the Books of this Company. The Assessing Officer brought these amounts credited in the books of the appellant in the books of the company to tax on the ground that the amounts accrued to the assessee and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crued on accumulated balance of commission and deposits also to be taxed on accrual basis. 4. I have considered the submissions of the appellant. The appellant is adopting cash system on the basis of withdrawals and for the accrual income on accrued basis in the books. The appellant has easy access to the books of account. I have considered the points raised before the I.T.A.T. with regard to these disputed matters. I beg to differ with the conclusion arrived at by the I.T.A.T., as in my view, the scheme of the Income-tax Act for taxing income has been overruled by the choice of method of accounting adopted by the appellant. " It appears there is some misunderstanding about the order of the Tribunal for the assessment year 1980-81. The Tribunal obviously did not hold that system of the appellant is immaterial as observed by the CIT(A). However, one thing is clear that the CIT(A) did not choose to follow the order of the Tribunal for the assessment year 1980-81. She followed her order for the assessment year 1984-85 for the subsequent assessment years involved herein. 8. Various grounds are raised by the appellant in support of his contention that the commission income and int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mi Mudaliar's case is an authority for the proposition that the Assessing Officer has to compute the income in accordance with the method of accounting regularly employed by the assessee. We also find that the analogy of the credit entry in the Pass Book given by the CIT(A) may not be really comparable because the right to withdraw monies from a checkable account is with the account holder and this is not the position with the credit balance in the books of a third party. There is, of course, a decision of the Madras High Court in the case of Sundaram Co. Ltd. v. CIT [1959] 36 ITR 162 which apparently is in favour of the Department. In this case, it is held that there should not be an unconscionable gap or interval between the time of credit by the third party and the taking into account as income in the books of the recipient. However, we are of the view that this decision proceeded on the peculiar facts of that case where the Department went into those details and built up a case of unconscionable delay. In the present case, the Department has only analysed the provisions of the I.T. Act such as section 4, section 5, section 45 and section 198 and have concluded that the cash b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng years, he should include the said income in the assessment of the succeeding assessment year. " The Court has also made the following interesting observation : " Method of maintaining accounts is one thing and the actual entries in the accounts maintained is a different thing. What is relevant is the method of accountancy and not the actual entries. " The principle laid down by the Hon'ble Supreme Court in the above decision is that the method of accounting has to be respected unless there are weighty reasons for deviating from it. We find no such weighty reasons have been made out in this case. Respectfully following the decision of the Tribunal in the year 1980-81 and of the Apex Court cited supra we hold that the above amounts of interest and commission should be taxed in respective years on cash basis as claimed by the assessee. 10A. Two additional grounds raised by letter dated 20th January, 1996 for the assessment year 1983-84 read as follows : " The CIT(A) ought to have held that the amount of Rs. 1,25,766 being commission received from Somaiya Organo Chemicals Ltd. should not have been taxed on a protective basis, since the commission was taxed in the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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