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[2008] 303 ITR 305 (Madras) HIGH COURT OF MADRAS Commissioner of Income-tax v. Tamil Nadu Small Industries Devp. Corpn. P.D. DINAKARAN AND P.P.S. JANARTHANA RAJA, JJ. T. C. (A) NO. 2400 OF 2006 OCTOBER 25, 2006 Section 145 of the Income-tax Act, 1961 - Method of accounting - Change of Assessee, following mercantile system of accounting, could follow cash system in respect of interest received on deposits from a company [A.Y. 1993-94]. The Assessing Officer, finding that though the assessee followed mercantile system of accounting, followed the cash system of accounting, only with respect to the interest received on deposits from a company treated the interest accrued during the relevant period as income on the mercantile basis. The Tribunal held that the assessee was entitled to follow the cash system of accounting with regard to interest. Held that in view of the decision in UCO Bank v. CIT [1999] 237 ITR 889(SC); CIT v. Pondicherry Industrial Promotion Development Investment Corpn. Ltd. [2002] 254 ITR 748(Mad), no substantial question of law arose from the Tribunal's order. CASE REVIEW CIT v. Pondicherry Industrial Promotion Development Investment Corpn. Ltd. [2002] 254 ITR 748 (Mad.) and UCO Bank v. CIT[1999] 237 ITR 889 (SC) followed & relied upon. T. Ravi Kumar for the Appellant. JUDGMENT P. D. Dinakaran, J.- The above tax case appeal is directed against the order of the Income-tax Appellate Tribunal dated June 30, 2005, made in I.T.A. No. 494/Mds/2000 for the assessment year 1993-94, setting aside the orders of the authorities below. The facts in a nutshell are that the assessee, a company wholly owned by the State Government, filed its return of income for the assessment year 1993-94 admitting an income of Rs. 49,40,823, and the assessment was completed under section 143(3) of the Income-tax Act on a total income of Rs. 56,19,300. On noticing that some income escaped assessment, a notice under section 148 of the Act was issued to the assessee, who filed a revised return admitting the income as per the original return, viz., Rs. 49,40,823. The Assessing Officer, finding that though the assessee followed mercantile system of accounting, only with…

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