DIPAK KUMAR SEN, J.

( 1 ) THIS reference arises out of the income-tax assessment of Messrs. Rajasthan Investment Co. Private Ltd. , the assessee, for the assessment years 1968-69, 1969-70, 1970-71 and 1971-72, the relevant previous years ending on the 30th April of 1967, 1968, 1969 and 1970, respectively.

( 2 ) THE facts found and/or admitted in these proceedings are shortly as follows: the assessee is an investment company and its source of income is interest received from loans and advances. Its period of account ends on the 30th April each year.

( 3 ) THE assessee used to maintain its accounts on the mercantile basis. By a resolution of the board of directors of the assessee passed on the 17th March, 1966, it was resolved that with effect from the then current accounting year, i. e. , the 1st May, 1966, the assessee would change its method of accounting from mercantile basis to cash basis and this new method should thereafter be regularly followed from year to year.

( 4 ) AS a result of this change from the 1st May, 1967, onwards the assessee brought into its account whatever interest it actually received and not what was receivable.

( 5 ) DURING the assessment years involved the assessee was entitled to receive interest on loans advanced only from two parties, viz. , Messrs, Surajmal Nagarmal and one B. L. Bagla.

( 6 ) THE Income-tax Officer took note of the fact that Messrs. Surajmal Nagarmal controlled the assessee and that the said firm was regularly crediting the assessee in its account with interest and claiming deductions therefor and concluded that the change of the method of accounting of the assessee was intended only to avoid taxes. Accordingly, the Income-tax Officer added to the income of the assessee all interest receivable by it in all the said years.

( 7 ) BEING aggrieved, the assessee appealed to the Appellate Assistant Commissioner, who concurred with the decision of the Income-tax Officer in the appeals relating to the first three assessment years and confirmed the addition; but in the appeal relating to the assessment year 1971-72 the Appellate Assistant Commissioner, following the decisions of the Tribunal in other cases, accepted the contentions of the assessee and held that the change-over to the cash system of accounting by the assessee was acceptable and what was actually received as interest should be taxed.

( 8 ) FROM the aforesaid orders of the Appellate Assistant Commissioner, there was one appeal by the revenue and three appeals by the assessee. The Tribunal disposed of all the appeals by its consolidated order passed on the 22nd February, 1974.

( 9 ) AT the hearing before the Tribunal copies of the books of account of the assessee were submitted and it was found that so far as B. L. Bagla was concerned there had been no payment of interest whatsoever since 1961 and that the entire dues of B. L. Bagla ultimately had to be written off at the end of the accounting year 1972. It was found further that since 1961, payments received by the assessee from Messrs. Surajmal Nagarmal had been next to nothing and that during the four assessment years there were only two payments, viz. , a sum of Rs. 1,000 paid in 1968-69 and a sum of Rs. 5,000 paid in 1970-71. It was contended on behalf of the assessee that the assessee was compelled to pay tax on amounts which it had not received and was not likely to receive and, therefore, the directors of the assessee resolved to change the method of accounting so that the true and correct state of affairs would be reflected in the accounts.

( 10 ) THE contentions of the revenue before the Tribunal were that the debtor, viz. , Messrs. Surajmal Nagarmal, was enjoying deductions by crediting its accounts and that the object of the change of method of accounting was to avoid payment of proper tax and, therefore, the same should not be accepted. ,

( 11 ) THE Tribunal held that there was nothing to show that the change effected by the assessee in its method of ac

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