High Court Upholds Assessing on Cash Basis after Legitimate Accounting Method Change

The High Court affirmed the Tribunal's decision allowing the assessee to be assessed on the cash basis, following a legitimate change in accounting method from mercantile to cash basis. The Court found no malice in the change, noting consistent adherence to the new method and past acceptance by the tax department. Justice Sudhindra Mohan Guha concurred with this decision, directing each party to bear its own costs.

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Issues involved:
The issue involves the assessment year 1966-67 and whether the assessee was entitled to change the method of accounting from mercantile basis to cash basis and insist on being assessed on the cash basis.

Judgment details:

1. The Tribunal referred the question of whether the assessee could elect to be assessed on the cash system of accounting. The company changed its accounting method from mercantile basis to cash basis with proper resolutions and shareholder approval. The Tribunal found no mala fide motive in the change and noted that the new method was consistently followed. The Tribunal held that the assessee could be assessed on the cash basis, supported by evidence and past acceptance by the tax department. The High Court agreed with the Tribunal's findings, stating that the question must be answered in the affirmative in favor of the assessee. The Tribunal's decision was not challenged as perverse or lacking evidence. Each party was directed to bear its own costs.

2. Justice Sudhindra Mohan Guha concurred with the decision of the High Court, supporting the assessment of the assessee on the cash system of accounting.

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