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TMI Blog1994 (9) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal was justified in allowing the assessee's appeal on the ground of the absence of a specific finding on the part of the Income-tax Officer that the true profits could not be ascertained from the method of accounting adopted by the assessee ?" The assessee carries on business of lending and receiving money. On the money lent, he charges interest but on the money which he borrows, he pays interest. In the month of account which he had been maintaining, he did not show the interest accrued to him on a sum of Rs. 3,02,168 admittedly loaned by him. He has, however, shown the interest payable by him in his account books even though he has actually not paid the same. His explanation for not showing interest on the amount of Rs. 3,02,168 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligation to reach the said true profit. Since this was not done, the Tribunal disallowed the addition and directed the Income-tax Officer to amend the assessment accordingly. Thereafter, the Revenue has requested for the reference which has been made. There is no doubt that the system of accounting followed in the relevant years, i.e., assessment years 1972-73 and 1973-74, is the same system that has been followed by the assessee for earlier years. The accounts of the earlier years have been admittedly accepted by the Department. It is true that each accounting year is a unit by itself and the Income-tax Officer has ascertained the taxable profit each year in accordance with law and in doing so, the decision in the earlier year would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable. Whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation. (2) The concept of real income would apply where there has been a surrender of income which in theory may have accrued but in the reality of the situation, no income had resulted because the income did not really accrue. (3) Where a debt has become bad, deduction in compliance with the provisions of the Act should be claimed and allowed. (4) Where the Act applies, the concept of real income should not be so read as to defeat the provisions of the Act. (5) If there is any diversion of income at source under any statute or by overriding title, then, there is no income to the assessee. (6) The conduct of the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not justified in adding the amount of interest to the income of the assessee during the relevant year. Under the circumstances, it must be held that the Tribunal was right in deleting those additions. In this view of the matter, the question referred to this court must be answered in the affirmative and against the Department though for different reasons. As regards the second question, it is really not an independent question but, the basis for making the addition of interest to the income of the assessee. The case of the assessee as would be clear from the assessment order was that the loans having become stagnant, interest has not been shown on the mere possibility. If this submission be found to be correct, there would be no justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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