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2. On perusal of the order of the learned CIT(A), it is found that during the course of assessment the Assessing Officer examined the audit report filed with the return of income, which stated that the assessee was maintaining books of account on cash basis. Therefore, the assessee was requested to explain as to why he was accounting for the receipts in respect of retainership fees on accrual basis. It was explained that the "advance retainership fees" was shown as advance in the books of account. That portion of the advance which was co-related to the services rendered in the year was offered for taxation by debiting it to the advance account. It was further explained that there was no change in the method of accounting in this behalf, which had been followed for more than three decades. The Assessing Officer did not accept the explanation of the assessee. It was pointed out by him that the provisions of Section 145, as applicable to the instant assessment year, permit only cash or mercantile system of accounting and the assessee cannot resort to maintaining the books on hybrid system. Therefore, the whole of the advance was taken as income, leading to an addition of Rs. 4,89,397/-. Before the learned CIT(A), it was submitted that the retainership fees was received in advance for the contract period of the retainership. The fees was determined on monthly, quaterly or yearly basis. What was received initially was an advance and at the end of the year, that portion of the advance for which professional services had been rendered, was transferred to the fees account and the balance amount was shown as liability under the head "advance retainership fees account". It was further submitted that the Assessing Officer erroneously invoked the provisions of Section 145(1) without pointing out any mistake in the system of accounting followed by the assessee. It was also submitted that the issue, which has been settled in the past assessments, should not be raised again. The learned CIT(A) considered the submissions of the assessee and the report of the Assessing Officer thereon. It was pointed out by him that for assessment year 1997-98 and onwards, the assessee cannot adopt hybrid system of accounting. The assessee was admittedly following cash system of accounting. Under this system, the entire amount received, whether arrear or advance, has to be shown as income. Similarly, any amount paid, whether relating to past liability or liabilities to be incurred in future, has to be reckoned as expenditure. The assessee has been following this method in respect of other professional receipts. Therefore, it was held that in respect of retainership fees also, the same system has to be followed. Coming to the issue of consistency of approach by the revenue authorities, it was pointed out that the Assessing Officer had raised a similar query in the proceedings for assessment year 2000-01, but did not make any addition. However, what is to be seen is whether, the revenue gets bound by the decision taken in one year for all times to come. It was further pointed that the principle of res-judicata does not apply to income-tax proceedings. Accordingly, this argument of the assessee was also rejected.

3. Before us, the learned Counsel for the assessee pointed out that the assessee is an advocate, practicing on labour laws side. His income for this year was enhanced by holding that the assessee was not following cash system of accounting but hybrid system of accounting by pointing out that advance retainership fees was not declared as income in full. He referred to the paper book filed by him, which contained 126 pages. Pages 56 to 126 constituted additional evidence consisting of -(i) copies of notices Under Section 148 of the Act issued by the Assessing Officer for assessment years 1998-99 to 2000-01, (ii) replies submitted by the assessee in compliance to the aforesaid notice, (iii) consolidated order passed by the Assessing Officer Under Section 147 dropping the proceedings for these years, (iv) summary balance-sheets for various years ending on 31.3.1997 to 31.3.2006, (v) comparative details of advance retainership fees received in the financial years ending on 31.3.1998 to 31.3.2005, and (vi) copies of assessment orders passed Under Section 143(3) of the Act for assessment years 2003-04 to 2005-06. It was his case that these documents came into the possession of the assessee after the conclusion of appellate proceedings for this year, for which the order was passed on 13.9.2005. The purpose for filing the additional evidence was to show that for all the years covered by the additional evidence, the Assessing Officer had accepted the books of the assessee without making any adjustment to the income on account of advance retainership fees. The learned DR had no objection to admission of these evidences and, therefore, the same was admitted.

5. We have considered the facts of the case and rival submissions. We may refer to the charging Section 4 of the Act to the effect that income-tax shall be charged for any assessment year at the rate or rates provided in any central Act in respect of the total income of the previous year of every person. Section 5 deals with the "scope of total income", which is defined in respect of any previous year in terms of accrual, deemed accrual, receipt and deemed receipt etc. Section 145 deals with the method of accounting in respect of "profits and gains of business or profession" or "income from other sources". Thus, while Sections 4 and 5 deal with the scope of income and its charge to income-tax, Section 145 is a procedural section regarding the method to be followed for recording of income in the books of account. It is no doubt true that for assessment year 1997-98 and onwards, the assessee can follow either cash or mercantile system of accounting and the hybrid system of accounting is prohibited. However, what is to be taxed is income and receipt of an amount is not be the basis for the levy of the tax. In the case of Shoorji Vallabhdas & Co. (supra), the Hon'ble Supreme Court pointed out that the Income-tax Act takes into account two points of time on which the liability to tax is attracted, namely, -(i) accrual of income or (ii) receipt of income. It is further mentioned that the substance of the matter is "income". It may be emphasized that it is accrual of income or receipt of income that can become the subject matter of tax and it is the income which has to be recorded as per system of accounting followed by the assessee in view of Section 145 of the Act, because the substance of the matter is "income". Therefore, there is an infirmity in the order of the learned CIT(A) in paragraph 4.7 where it was stated that the entire amount received, whether arrear or advance, is to be shown as income under cash system of accounting. The correct position would be that the entire income received, whether arrear or advance of income, has to be shown as income under cash system of accounting. Coming to the facts of this case, the assessee received certain amounts for services to be performed over a period of time. The amount relatable to the services rendered in the year under consideration was shown as income, the reason being that the assessee became entitled to receive that amount from the client in respect of the services rendered. In other words, debt to the extent of the amount pertaining to services rendered only got vested in the assessee. The rest of the amount was taken as liability to be adjusted in subsequent year as and when the service was rendered. It is but clear that the excess amount would have to be returned in case the service was not performed in subsequent year and, therefore, in respect of such amount no debt came into existence in favour of the assessee. Therefore, this amount did not become the income. Accordingly, we are of the view that the learned CIT(A) erred in finding that the assessee was following hybrid system of accounting on the ground that the whole of the amount received from the clients as retainership fees was not declared as income in the year of receipt of the amount.