Law:

Section:

JUDGMENT R.N. Misra, J.-At the instance of the Commissioner of Wealth-tax the Appellate Tribunal has made this reference under section 27 of the Wealth-tax Act (27 of 1957), referring the following question to us for the opinion of the court: "Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,50,000 due to the assessee as accrued interest as at the valuation date was includible in the net wealth of the assessee?" The assessee is a Hindu undivided family. The year of assessment is 1962-63, and the relevant date of valuation is March 31, 1962. Admittedly, the assessee is also assessed to income-tax and maintains the cash system of accounting. The assessee did not include a sum of Rs. 1,50,000 which had accrued due by way of interest on money-lending business by the date of valuation, but had not been received by the assessee until then, in its wealth-tax return. The stand taken by the assessee was that the amount having not been received it could not be taken into account for determining the net wealth as defined under section 2(m) of the Act. The Wealth-tax Officer, however, added the amount and computed the net wealth. The assessee's appeal before the Appellate Assistant Commissioner of Wealth-tax on this score failed. It carried a further appeal to the Tribunal which was allowed. The Tribunal directed deletion of this addition by saying: "The department does not dispute the fact that the assessee had filed a 'balance-sheet' which he had kept in the regular course of business. Whether such a document prepared on the basis of the cash system of accounting would at all amount to a 'balance-sheet' as contemplated in section 7(2)(a) is not the point in issue. On the footing that the assessee had filed a balance-sheet and that section 7(2)(a) was applied, the question for consideration would be whether the Wealth-tax Officer could purport to make 'adjustments' so as to change the system of accounting from cash to mercantile. We accept the learned counsel's submission that the power to change the system of accounting is not available to the Wealth-tax Officer under the power to make 'such adjustments therein as the circumstances of the case…

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