above appeals for 1973-74 and 1974-75 by revenue and assessee were heard together and are being disposed of through this common order. IT Appeal Nos. 246 and 247 (Pune) of 1981 are filed by assessee against order of Commissioner (appeals) Bombay dated 31-1-1981 for assessment years 1973-74 and 1974-75 upholding validity of notices under section 148 of Income-tax Act, 1961 ('the Act'). IT Appeal Nos. 268 and 269 (Pune) of 1981 are filed by revenue against these very orders of Commissioner (appeals) challenging decision regarding method of accounting, etc. Actually Commissioner (Appeals) did not decide these aspects on merits but directed ITO to examine issue de novo in light of guidelines provided. ITO followed these guidelines and framed fresh assessments dated 7-4-1983 for 1973-74 and 25-3-1983 for 1974-75. Against these orders of ITO assessee filed appeal to Commissioner (Appeals), Pune who decided same on 26-10-1983. Against this order of Commissioner (Appeals), department has come in appeal in IT Appeal Nos. 956 and 957 (Pune) of 1983. 2. On question of validity of notices under section 148 , Shri Parulekar pointed out that original assessments were completed on 4-1-1974 and 22- 11-1976 respectively. There is nothing to show that there is any under- assessment in these orders. However, as seen from inspection of records, assessing authority recorded reasons as below for issuing notices under section 148 on 31-3-1978 and 10-1-1979 respectively. In consequence of information received from Ministry of Law that interest due on advances is liable to tad on accrual basis whether charged in accounts or not, I have reason to believe that assessee's to income has been under assessed for assessment year 1973-74 within meaning of section 147(b) of Act. Issue notice under section 148. IAC Interest due on some of advances has not been charged and credited to profit and loss account. I have, therefore, reason to believe that assessee's total income has been under assessed within meaning of section 147(b). Issue notices under section 148 for 1973-74. ITO At relevant time, IAC held concurrent jurisdiction with ITO in terms of section 125(A) of Act. Hence, as matter of caution two notices were issued. For 1974-75, noting is as below: "In consequence of information received from Ministry of Law that interest due on advances is liable to tax on accrual basis whether charged in accounts or not. Further as interest due on some of advances has not been charged and credited to profit and loss account, I have reason t believe that Bank of Maharashtra's income for assessment year 1974-75 has been under assessed within meaning of section 147(b) of Income-tax Act, 1961. Issue notice under section 148 for 1974-75." Shri Parulekar submitted that he does not know what is 'information' from Ministry of Law and how authorities came to conclusion that income has escaped assessment. He, however, admitted that in respect of open assessment which IAC was processing, IAC did put across to assessee his proposal for taxing interest on accrual basis though not charged n accounts relying mainly on Kerala High Court judgment in State Bank of Travancore v. CIT [1977] 110 ITR 336. Against this proposal of IAC for purpose of section 144(A) of Act. reasons recorded do not, however, make reference to Kerala High Court judgment. Shri Parulekar also admitted that on occasion of one of earlier hearings before Bench, he was shown telegram dated 31-3-1978 addressed to Commissioner. Shri Parulekar submitted that such telegram d not constitute information for purpose of section 147(b) as its applicability would depend on facts of each bank ad there is nothing to show that IAC or ITO applied his mind to this aspect. He was also shown Circular No. 1186 of CBDT dated 20-6-1978 under which CBDT were advised that in mercantile method of accounting interest is taxable irrespective of whether interest is crafted to suspense account or not. assessee does not keep any such suspense account from 1956-57 and this change in method was accepted by ITO at time after due scrutiny. Besides, CBDT circulars are not retrospective as explained in CIT v. B. M. Edwards, India Sea Foods [1979] 119 ITR 334 (Ker.) (FB). Further as existing circular of CBDT warranted acceptance of contention in view of Dr. T. P. Kapadia v. CIT [1973] 87 ITR 511 (Mys.), different High Court judgment should not be followed. Withdrawal of circular does not affect legal position as explained in Tata Iron & Steel Co. Ltd. v. NC. Upadhyaya [1974] 86 ITR 1 (Bom.). It was further contended, relying on Vimal Chandra Golecha v. ITO [1982] 134 ITR 119 (Raj.) and Ved Parkash Proabhudayal Agarwal v. ITO [1982] 135 ITR 756 (Bom) that failure to give reasons recorded is fatal to assessment. 3. Shri Parulekar then contended that in spite of above legal position, Commissioner (appeals) erred in upholding section 147 action. Para 4 of Commissioner (appeals) order proceeds on wrong basis and does not apply to facts of case. We are not really concerned with source of information but whether 'information' is sufficient to enable assessing authority to assume jurisdiction under section 148. Judicial pronouncements do constitute information as pointed out by Commissioner (Appeals) relying on Indian & Eastern Newspapers Society v. CIT [1979] 119 ITR 996 (SC), but in this case authorities have not referred to such judgments in their recorded reasons. Besides circular should not be thrown overboard when High Court itself has to done so. Accordingly, he sought reversal of decision of Commissioner (Appeals) on this point. 4. In reply Shri Sathe relied on order of Commissioner (appeals) and pointed out that when various facts are put together, clear position emerges. IAC was prepared to test point in open assessment as soon as he read Kerala High Court judgment. IAC, however, did not immediately proceed to assume jurisdiction under section 147. matter was pending under correspondence. IAC was awaiting information resolving apparent conflict between executive circular and High Court decision. matter got resolved in 31-3-1978 when possibly oral communication was received. This is reason why for 1973-74 neither IAC nor ITO is referring either to High Court judgment or telegram or circular. referring either to High Court judgment or telegram or circular. source of information was Ministry's opinion as communicated to him. information threw overboard previous circular and enabled IAC to issue notice. For 1974-75 telegram and CBDT circular constituted additional information. Thus, there are both High Court judgment and information to support section 147/8 action. As to information from Law Ministry, authority is found is Vashist Bharagava c. ITO [1975] 99 ITR 148 (Delhi). Under Article 77(3) of Constitution opinion of Ministry of Law becomes opinion of Government. Besides, impugned notices were issued at time when Supreme Court judgment in Kalyanji Mavji & Co. v. CIT [1976] 102 ITR 287 and Bombay High Court judgment in CIT v. Holck Larsen [1972] 85 ITR 467 held filed. judgment of Indian & Eastern Newspaper Society (supra) does not come in way for two reasons:(i) there is Kerala High Court judgment in State Bank of Trawancore's case (supra) to support view, and (ii) judgment in B. M. Edwards, India Sea Foods' case (supra) was delivered later in August 1979. As explained in Export Enterprises (P.) Ltd. v. ITO [1983] 142 ITR 641 (Cal.), assessment reopened prior to August 1979 are valid as they are to be seen from point of view of law then laid down by Supreme Court. Lastly, Vimal Chandra Golecha's case (supra) and Ved Parkash Prabhudayal Agarwal's case (supra) deal with cases where material was not given even after issue of notice. There is no such thing in this case. Reasons recorded need not be communicated as held by Supreme Court in S. Narayanappa v. CIT [1967] 63 ITR 219. 5. Elaborating point, Shri Sathe contended that all reasons need not be recorded and that all surrounding circumstances should be seen as explained in H. A. Nanji & Co. v. ITO 1973 Tax LR 567 (Cal.) Quoting from H. A. Nanji & Co. v. ITO [1979] 120 ITR 593 (Cal.) (Page 606), Shri Sathe pointed out that, all that is necessary is that facts recorded in reopening should not be inconsistent with facts on record. reasons for reopening do not indicate such position. IAC/ITO did examine records and held that irrespective of accounting method interest is chargeable as income on accrual basis and in fact there were cases of interest chargeable but not charged. Shri Sathe explained above position i light of following case laws: Kalyanji Mavji & Co.'s case (supra), R. K. Malhotra, ITO v. Kastrubhai Lalbhai [1977] 109 ITR 537 (SC), Anandji Aridas & Co. (P.) Ltd. v. S. P. Kastur AIR 1968 SC 566, United Mercantile Co. Ltd. v. CIT [1967] 64 ITR 218 (Ker.) (information on awareness). Glen Leven Estates Ltd. v. ITO [1973] 88 ITR 39 (Ker.) (knowledge from records). ACED v. Awab Sri Mir Osman Ali Khan Bahadur, H. E. H. Nizam of Hyderabad [1969] 72 ITR 376 (SC) (opinion of CBDT). Shri Sathe wound up his arguments by pointing out ratio of New Bank o f India Ltd. v. ITO [1982] 136 ITR 679 (Delhi) where facts were exactly similar to present case. law laid down is correct though judgment was delivered before Indian & Eastern Newspaper Society's case (supra). 6. Regarding argument of there being change in method of accounting in 1956-57, Shri Sathe contended that there is nothing to show that there was proper application of mind. Further, assessee there was banking company which was different from present assessee who is nationalised bank. As there is no opinion formed at time of original assessments, there is o question of change of opinion. S. Narayanappa's case (supra) is clear authority for preposition that assessee is not entitled to know reasons recorded under section 148 but at time of assessment, assessee is only entitled to know material against his. This has been done. 7. On examination of facts and arguments, we upheld 6the decision of Commissioner (appeals). What we have to see is state of mind of authority issuing notice. IAC and ITO were for some time faced with apparent conflict between High Court judgment and executive instructions. When conflict was resolved as above, authorities examined facts of this case and found prima facie case. It is to be remembered that conditions for assuming jurisdiction to issue notice under section 148 are different from those required for sustaining proposed addition. Taking into consideration arguments and case law relied upon by departmental representative which effectively meet arguments of Shri Parulekar, we dismiss appeal on this point. 8. It Appeal Nos. 268 and 269 (Pune) of 1981 filed by revenue are misconceived. We see nothing wrong in Commissioner (Appeals) coming to conclusion that some of points have not received adequate attention and that in interest of justice, matter should be given proper attention. Commissioner (Appeals) has provided requisite guidelines. These appeals are dismissed accordingly. 9. Coming to IT Appeal Nos. 956 and 957 (Pune) of 1983 file by revenue, Shri Sathe's contention is that assessee's method of accounting is mercantile. Such method makes no distinction between recoverable and irrecoverable items at time of charging. issue is decided by test of chargeability in terms of contract for advance and not by prospects of recovery. assessee is not even keeping suspense account and cannot get benefit of CBDT circular of 1952 which deals with suspense account credit of interest on sticky loans. assessee dos keep register for advances where no interest is charged but register has not been produced for scrutiny. CBDT circular says that suspense account credits are not immune from scrutiny of ITO. If as contended there is any departure from pure mercantile method, ITO would be at liberty to apply section 145 of Act. Commissioner (appeals), thus, erred in deciding in favour of assessee. Shri Sathe took us through order of IAC and Commissioner (appeals) and found fault with finding of Commissioner (Appeals) in para 10 that ITO has not given any finding to effect whether certain loans have become sticky or not. According to departmental representative, there is distinction between sticky advances and irrecoverable advances, former being advance not ripe for write-off there being only on actual recovery for preceding few years. Commissioner (appeals) also erred in referring to actual write-off (Para 11) to support his conclusion regarding different item, viz., sticky dues. It is true that case of Federal Bank (IT Appeal No. 450 (Coch.) of 1981] is very similar to present case as mentioned by Commissioner (appeals) in para 11 of his order but there are other cases like Ratnakar Bank case decided by this Bench holding contrary view. Commissioner (Appeals) has again mixed up concept of true of real income with concept of income in accordance with regular system of accounting as provided in section 145. 10. Shri Sathe then contended that absence of objection to method of accounting by auditors or RBI inspection unit on which Commissioner (Appeals) has heavily relied is no ground for holding that method of accounting is scientific and answers all tests for getting out of clutches of section 145 proviso. There is nothing like regular mixed or hybrid method which rests upon subjective decision about actual charging of interest in accounts independent of terms of interest-bearing advances. What is criterion making accounts sticky? How does one keep track of such accounts. Even auditor's report refers to some misclassification. Is there any standard accountancy profession approved method of indentifying and classifying loans? test of no recovery for 3 years is not satisfactory. Mere on-recovery does not ipso facto render amount sticky. Unless it is shown that there is proper application of mind to each individual advance, ITO would be compelled to frame proper estimates of such accused and not accounted interest. Relying on case of CIT v. A. Krishnaswami Modular [1964] 53 ITR 122 (SC.), departmental representative contended that estimate by IAC is justified as so called mixed method of accounting is neither time honored nor custom approved. If at end of 3 years assessed received accumulated interest, it cannot be assessed in one year and has to be related back as held in Addl. CIT v. Ganesh Das [1981] 129 ITR 467 (All.). assessee does not waive interest at any time. When he goes to court of law, interest due is claimed whether charged in accounts or not. Expenses, however, are debited at actual. Shri Sathe then distinguished case of CIT v. E. A. E. T. Sundaraji [1975] 99 ITR 226 (Mad.) on which reliance is placed by Commissioner (appeals) in that it pertained to cash method of accounting for sales tax which is statutory liability on assessee irrespective of collection from buyers. 11. Shri Sathe then referred to case law relied upon by assessee regarding suspense account and submitted that same does not apply to assessee for simple reason that assessee has no suspense account. He further pointed out that if assessee is permitted choose his own year of offering income for assessment, it would create chaos and defeat very offering income for assessment, it would create chaos and defeat very purpose of section 145 which pins assessee to regular method of accounting. Such system which would be conditioned by whims and caprices of persons in charge, if allowed as regular and acceptable method, would open doors for large scale unchecked manipulation and evasion. fact that assessee is nationalised bank subject to Government supervision, should not be allowed to colour issue regarding regular and scientific method of accounting. Further, relying on Reform Flour Mills (P.) Ltd. v. CIT [1981] 132 ITR 184 (Cal.), James Finlay & Co. v. CIT [1982] 137 ITR 698 (Cal.) and CIT v. Confidence Ltd. [1973] 89 ITR 292 (Bom.), departments representative submitted that reliance on State Bank of India v. IAC [1983] 6 ITD 225 (Cal.) would not be appropriate particularly when Tribunal has not examined impact of Bombay High Court judgment in Confinance Ltd.'s case (supra). 12. Regarding specimen items of non-charging Annexure XII given to t h e Commissioner (Appeals), Shri Sathe submitted same has not been examined properly. Putting his accusing finger on one item of Sri B. V. Kulkarni, Shri Sathe wondered why no interest is charged even when there is recovery. As ITO had no occasion to examine this aspect, least that Commissioner (Appeals) could have done is to give chance to ITO t obtain explanation. Accordingly, departmental representative sought restoration of order of ITO. 13. In reply, Shri Parulekar submitted that first assessing authority has not appreciated impact of peculiarities of banking business. Non-recovery or recovery by fits and starts is ordinary incidence of banking business and this is reason why all banks have system of providing guidelines as approved by RBI for not crediting to interest account even though strict principles of accrual and pure mercantile method may warrant such debit and credit. As this is basically case of regular method of accounting from 1956-57, nationalisation in 1969 having maintained continuity of business, does not change position regarding regular method of accounting. other case law relied upon by departmental representative is, thus, not relevant. As to objection of departmental representative regarding scrutiny of registers, Shri Parulekar submitted that these have been scrutiny of registers, Shri Parulekar submitted that these have been scruitinised b auditors and were checked by ITO as may be seen from report dated 26- 2-1981. Sending matter back for scrutiny would, thus, be futile exercise. Shri Parulekar wound up his arguments pointing out that in case of Central Bank, where similar issue was involved, special leave petition has been rejected by Supreme Court. 14. In first order of Commissioner (Appeals), clear directions were given for resolving doubts, if any, regarding registers. report of IAC dated 26-2-1981 indicates that revenue did not doubt bona fides at any time and did not hold that there is any unwarranted or subjective transfer of good debt to sticky register. assessee gave detailed reply dated 24- 2-1981, explaining concept of sticky advance, uniformity in method adopted all along and extent of scrutiny made by auditors and RBI. method of accounting is, thus, time honoured from 1956-57. It is also approved by accounting profession as seen from Cochin Bench judgment in Federal Bank's case (supra) in which impact of various judgments has been explained judgments in American Express International Banking Corpn. v. IAC [1983] ITD 373 (Bom) (SB) and State Bank of India v. IAC [1985] 13 ITD 550 (Cal.) leave no doubt either about method of accounting or about acceptability thereof. Case law referred to therein CIT v. Ferozepur Finance (P.) Ltd. [1980] 124 ITR 619 (Punj. & Har.) and CIT v. Motor Credit Co. (P). Ltd. [1981] 127 ITR 572 (Mad.) though not specifically referring to Confinance Ltd's case (supra) shows that illusory interest has to be ignored. cases of Confinance Ltd. (supra) and James Finlay & Co. (supra) are clearly distinguishable in that in these case assessee did not claim any change in method of accounting adopted in past and did to also give any proper convincing reason for picking up individual debts for special or favoured treatment. Shri Parulekar would his arguments by pointed out that 1981-82 order on point in favour of assessee has become final and wondered what prompts revenue to pursue these matters. 15. In this rejoinder, Shri Sathe Submitted that IAC's report dated 26-2- 1981 did to refer to physical verification of registers. Further rejection of 1981 did to refer to physical verification of registers. Further rejection of special leave petition does not mean approval as explained in Amrut Talkies v. Second ITO [1984] 150 ITR 386 (Kar). In Federal Bank's case (supra) all aspects in proper perspective were not placed before Tribunal. decision of Tribunal should therefore, be taken as confined to facts of that case. 16. We have examined facts and arguments. assessee is nationalised bank where accounts are examined not merely by internal auditors but also by statutory auditors and RBI inspection unit. Although these facts do not give assessee any immunity from scrutiny by revenue, there should be really k grounds for holding that method of accounting calls for application of section 145(1) proviso . treatment given to transaction by assessee in his books of account is admittedly Chunilal V. Mehta & Sons (P.) Ltd. [1971] 82 ITR 54 (SC). Although legal position regarding chargeability of interest does not change, law does permit taxpayer to choose regular method of accounting and even to change same, if necessary. Even if by any change method of accounting lead to reduction or minor distortion of tax liability, this cannot be ground for rejecting method of accounting if such accounting is bona fide consistently followed and is not inconsistent with various methods of accounting as recognised by profession-Indo Commercial Bank Ltd. v. CIT [1962] 44 ITR 22 (Mad.). As rightly pointed out by Shri Parulekar, peculiar factors of banking business and methods adopted what may be called pure mercantile method. Some banks adopt suspense, account method as explained in Central Bank case. Some others, like Federal Bank and assessee-bank do not keep separate suspense account, but maintain register of advances on which interest accrued being illusory is not charged. assessee was up to 1956-57 adopting suspense account method. Even in such method as per executive instructions (1952 circular.) credits (subject to scrutiny if necessary) were not to be taken as income. assessee discontinued this manner of keeping track of advances interest on which is illusory, and adopted method in which such entire are not made at all, because even otherwise such entries would not represent real income. For all practical purpose there is no difference between State Bank method and Federal Bank method and this is reason why in these cases attempt of revenue to rope in illusory interests did not meet with success. case law relied upon by revenue particularly Confinance Ltd's case (supra) and James Finlay & Co's case (supra) are, thus, clearly inapplicable to facts of case. Although strictly speaking CBDT circular applies to entries in suspense account only, as mentioned above, as there is no material distinction between this method and assessee's method, principles should apply with equal force to assessee's method. Commissioner (Appeals) was, thus, right in holding in favour of assessee. It may be that registers were not fully scrutinised but from IAC report, taking into consideration fact that assessee is nationalised bank, it would be futile exercise now to insist on fresh examination of all entries in sticky advances very minutely as to look for some incautious entry here or minor lapse there. CBDT circular regarding non-assessability of interest taken to suspense account would apply to assessee also. 17. Mercantile method which goes largely by principles of accrual, however, does approve of many variations in accounting depending on requirement of each business. In banking, as mentioned above, there is nothing like pure mercantile method where interest entries would conform exactly to accrual. fact that such variations are permissible is writ large in section 145 itself. All that is now charging interest has been approved even by CBDT circular dated 9-1-1984 and by RBI. 'Sticky' is term which has definite connotation in banking circles and is not likely to be misunderstood. Sticky items are there where there is not recovery or where chances of recovery are not bright and advance itself is not considered ripe for final write-off (including interest whether charged or not). As nationalised bank, proper registers of sticky account are kept and these are examined by auditors, RBI, etc. Each branch has official who has been provided with guideline from time to time for entering any item in this register. case of B. V. Kulkarni on which departmental representative has laid his accusing finger was actually case not of recovery but of set off against other claim. This register, thus, serves as and aide memoir and dispenses with need for separate suspense account. As suspense account by its very name refers to cases of transitory items till decision is taken, separate maintenance or otherwise of suspense account does not change method of accounting. Consequently, viewed in this light, we hold that method of accounting adopted by assessee deserves to be accepted as regular method acceptable without calling for resort to section 145 proviso. We, accordingly, uphold decision of Commissioner (Appeals) and dismiss these appeals. 18. All appeals are dismissed. *** BANK OF MAHARASHTRA v. INCOME TAX OFFICER