Judgment :- 1. The Kerala Agricultural Income Tax Appellate Tribunal has referred the following questions of law under S.60 (1) of the Agricultural Income Tax Act, 1950: "(1) Having regard to the fact that the Appellate Assistant Commissioner of Agricultural Income-tax and Sales-tax, Kozhikode, has upheld the estimate of income independently of the system of accounting followed by the assessee, whether on the facts and in the circumstances of the case the Tribunal has been correct in finding that the Appellate Assistant Commissioner went wrong in holding that it was not open to the Agricultural Income Tax Officer to include the value of the 1,484 Jbs. of pepper alleged to have been carried over to the subsequent year in the assessable income for the year in question. (2) Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that the decisions of the Supreme Court reported in 53 ITR.122 applied to the facts of the case on all fours ?" 2. The assessee filed returns for the assessment year 1961-62 declaring a net income of Rs. 6,780.51. The Agricultural Income Tax Officer on a perusal of the accounts found .that there were defects and therefore rejected the accounts and finalised the assessment on the best of judgment basis. 3. In appeal before the Appellate Assistant Commissioner, one of the contentions raised by the assessee was that 1484 Ibs. of pepper which had been obtained by him from his gardens had not been sold that year, that the stock of pepper was carried over to the subsequent year and that therefore the price of 1,484 Ibs. of pepper should not have been included in the income for the previous year ended 31-3-1967. The Appellate Assistant Commissioner accepted this contention and directed the Income Tax Officer to exclude the value of 1,484 Ibs. of pepper. 4. In an appeal filed by the Department, the Tribunal reversed the decision of the Appellate Assistant Commissioner and held that the price of 1,484 Ibs. of pepper should be included in the income of the assessment year irrespective of the fact whether it had been sold or not in that year. The Tribunal at the instance of the assessee referred the questions of law already mentioned to this Court for decision. 5. of pepper should be included in the income of the assessment year irrespective of the fact whether it had been sold or not in that year. The Tribunal at the instance of the assessee referred the questions of law already mentioned to this Court for decision. 5. The learned counsel for the assessee brought to our notice the decision of the Supreme Court in Rajalinga Raja v. State of Madras AIR. 1967 SC. 814, which was a case arising under the Madras Agricultural Income Tax Act, 1955. The question that directly arose in that case was as to whether the agricultural produce itself is income and becomes charged to tax under the Madras Agricultural Income Tax Act, 1955, when he has received the produce and not when he has sold, used or consumed it. Shah J. (as he then was) speaking for the Court said: "The expression'income' in its normal conntotation does not mean mere production or receipt of a commodity which maybe converted into money. Income arises when the commodity is disposed of by sale, consumption or use in the manufacture or other processes carried on by the assessee qua that commodity. There is no reason to think that the expression'income' in the Act has any other connotation. A tax on income whether agricultural or non-agricultural is unless the Act provides otherwise, a tax on monetary return actual or notional." It is admitted in this case that the subject-matter of dispute, namely, 1,484 !bs. of pepper was the produce obtained by the assessee during the previous year relevant to the assessment year. It had not been sold, consumed or used, so that it is clear that the assessee had not derived any income so far as the produce is concerned. The produce received by the assessee, who is carrying on agricultural operations, is not income in his hands. It would become income only when there is a sale of the commodity or consumption or use of the commodity in the business of the assessee. Merely because the produce from his lands was received by the assessee it does not mean that he has derived any income chargeable to agricultural income-tax. Therefore, the question whether the assessee follows the cash system of accounting or the mercantile system of accounting is not really germane, in this discussion. Merely because the produce from his lands was received by the assessee it does not mean that he has derived any income chargeable to agricultural income-tax. Therefore, the question whether the assessee follows the cash system of accounting or the mercantile system of accounting is not really germane, in this discussion. Even if it is assumed for the purposes of argument, but not conceding it, that the assessee was following the cash system of accounting as stated by the Tribunal, the pepper obtained by the assessee from his gardens will not automatically become income capable of being charged to tax. 6. The observations of the Tribunal that the decision of the Supreme Court in Commissioner of Income tax v. A. Krishnaswami Mudaliar 53 ITR.122 applies to the facts of this case in all respects is not correct in the light of our above observations. That decision deals with the question as to the assessability of income in the case of a person following cash system of accounting. In this case, as we have already held, no income has been derived by the assessee during the previous year relevant to the assessment year and therefore no question of assessability of income in a particular year arises. The produce received by the assessee would become income only when it is sold, consumed or used for the purpose of business. Therefore, the ratio of the decision in Commissioner of Income-tax V. A. Krishnaswami Mudaliar 53 ITR. 122 is not'applicable to the facts of this case. 7. Our answer to the first question referred to us is in the negative, that is, that the Tribunal is not correct in finding that the Appellate Assistant Commissioner went wrong in holding that it is not open to the Agricultural Income Tax Officer to include the value of 1,484 Ibs. of pepper alleged to have been carried over to the subsequent year, in the assessable income of the assessee for the year in question. On the second question also, our answer is in the negative, and in favour of the assessee. The assessee is entitled to his costs in this case. A copy of the judgment under the seal of the High Court and the signature of the Registrar will be sent to the Appellate Tribunal as required by sub-section (6) of S.60 of the Agricultural Income Tax Act, 1950.