Suhas Chandra Sen, J.
1. The Tribunal has referred the following question of law under Section 256(1) of the Income-tax Act, 1961 ('the Act'), to this court:
'Whether, on the facts and in the circumstances of the case and in view of the provisions of the Companies Act, 1956, relating to the accounts of a company, the Tribunal was right in holding that the change by the assessee of its method of accounting from the mercantile system to the cash system was allowable subject to the conditions laid down by the Tribunal ?'
2. The reference relates to the assessment years 1971-72 and 1972-73, for which the corresponding accounting periods are years ending on June 30, 1970, and June 30, 1971, respectively.
3. The facts found by the Tribunal as stated in the statement of case are as follows :
The assessee was a limited company incorporated under the Companies Act. The assessee claimed that it had changed its method of accounting from the mercantile system to the cash system. The Income-tax Officer, following the earlier order of the Tribunal for the assessment years 1969-70 and 1970-71, did not accept the change in the system of accounting and, therefore, on the basis of the mercantile system of accounting, he taxed the interest receivable at Rs. 58,485 though it was not offered for assessment on the ground that it was not received by the assessee as per the cash system of accounting. The assessee preferred an appeal before the Appellate Assistant Commissioner who noticed that the necessary resolutions by the board of directors as well as the general body of the shareholders had taken place before the relevant accounting years and he did not see any reason to hold that the assessee's change in the method of accounting was mala fide.
4. The Appellate Assistant Commissioner reversed the order of the Income-tax Officer. The Revenue went up in appeal to the Tribunal.
5. The Tribunal came to the conclusion that in view of the judgment of the Bombay High Court in Sarupchand v. CIT : [1936]4ITR420(Bom) , a bonafide change in the method of accounting employed by the assessee should be allowed by the Income-tax Officer and that it was open to him to see that there was no loss of revenue. The Tribunal, therefore, confirmed the order of the Appellate Assistant Commissioner with the observations that there should not be double deduction or double taxation of the same amount as a result of the change in the method of accounting. The Tribunal thereafter restored the case to the file of the Income-tax Officer with the direction to allow the change in the method of accounting by imposing necessary conditions in the light of the observations of the Tribunal.
6. The Tribunal was satisfied about the bona fides of the assessee's change in the accounting system. The assessee was agreeable to reasonable conditions being imposed to ensure that there might not be any loss of revenue.
7. We fail to see how it can be said that the Tribunal had committed any error of law. The assessee will have to maintain accounts in the manner laid down by the Companies Act. It has not been established how any violation of the provisions of the Companies Act has taken place.
8. Under the circumstances, the question is answered in the affirmative and in favour of the assessee.
9. There will be no order as to costs.
Bhagabati Prasad Banerjee, J.
10. I agree.