SUHAS CHANDRA SEN, J. - (1.) THE Tribunal has referred the following question of law to this Court under s.256(1) of the IT Act, 1961 : "On the facts and in the circumstances of the case, whether the Tribunal was justified in holding that the income of Rs. 32,250 being the bank interest accrued during the previous year of the assessment of 1973-74?"
(2.) THE assessment year involved is the asst. yr. 1973-74 for which the corresponding period of account is the year ending on 16th Oct. ,1972. The facts stated by the Tribunal in the statement of case are as under : The assessee follows mercantile system of accounting. During the year under consideration, the assessee showed Rs. 11,013 as income in the P&L A/c and Rs.32,250 was credited directly to the capital account. The ITO in the course of the examination of the books of accounts found that the assessee, in fact, received an interest of Rs.43,263 on maturity of fixed deposit during the previous year relevant to the assessment year under appeal. As to the reason for discrepancy, the assessee stated before the ITO that the amount of Rs.32,250 which was not shown in the P&L A/c represented interest income for the accounting years 1968-69, 1969.,70 and 1970-71 in equal proportion inasmuch as the interest accrued to him on maturity of the fixed deposit in the respective years. The ITO found that the assessee did not renew the fixed deposits within the prescribed time, and, therefore, the bank did not agree to pay interest. Subsequently as a result of an agreement sometime in 1972, the bank agreed to pay interest to the assessee. In view of the aforesaid facts, the ITO was of the opinion that the amount of Rs.32,250 accrued to the assessee as a result of an agreement in 1972 and hence it was includible in the total income of the assessee for the asst. yr. 1973-74.
(3.) THE assessee appealed to the AAC and contended that the ITO was not justified in including the sum of Rs.32,250 in the total income of the assessee for the year under appeal. It was urged that the proportionate interest accrued to the assessee at the time when the fixed deposits were matured, i.e., on 20th Nov., 1968 and 21st Feb.,1969 respectively.;