PRAJATANTRA PRACHAR SAMITY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN obedience to the order of the Supreme Court, the Tribunal has under S. 256(2) of the IT Act, 1961, referred the following three questions to this Court for opinion :

(2.) THE facts of all the consolidated references in brief are as follows : The Prajatantra Prachar Samity, Cuttack (hereinafter referred to as "the assessee"), a registered society, is a public charitable trust registered as such with the CIT, Orissa, under S. 12A of the IT Act, 1961 (hereinafter referred to as "the Act"). The objective of the assessee -society are to promote literature, science, fine arts and infuse useful knowledge. It is engaged in publication of books, periodicals, journals and newspapers. For the asst. year 1985 -86, it filed return of income on 30th Sept., 1985, declaring loss of Rs. 15,76,888 before the ITO, Ward -A, Circle -II, Cuttack. Notice being issued under S. 142(1) of the Act, the assessee appeared with books of account and submitted that from 1st April, 1984, it changed its method of accounting from mercantile to hybrid system of accounting. The AO on examination of the books of account found that during the previous year the assessee had effected total sale of Rs. 1,21,98,772 on account of advertisement, circulation of papers, printing, etc., out of which it received Rs. 91,07,679 and the balance of Rs. 30,91,093 remains unreceived or receivable on the close of the accounting year, i.e., 31st March, 1985. That means, under the so -called hybrid system of accounting its final account had incorporated only Rs. 91,07,679 on the credit side of the income and expenditure account as against the total turnover of Rs. 1,21,98,772. In other words, the sundry debtors to the extent of Rs. 30,91,093 had been excluded from the gross turnover. The AO did not accept the new method of accounting followed by the assessee and by order dt. 28th Jan., 1998, determined the taxable income on accrual basis under S. 143(3) of the Act. Against the said order of assessment, the assessee filed IT Appeal No. 11/ORS/ORA of 1988 -89 before the CIT(A), Orissa, Cuttack, who by order dt. 28th Nov., 1988, dismissed the appeal. Being dissatisfied with the order of dismissal, it filed appeal before the Tribunal, Cuttack Bench, Cuttack, which by order dt. 19th Jan., 1990, dismissed the appeal. Thereafter, the assessee made an application under S. 254(2) of the Act for rectification of the order dt. 19th Jan., 1990, and the Tribunal by its order dated 13th Dec., 1990, held that "both legal principles and judicial wisdom demand that the entire order should be recalled and the appeal should be heard afresh". It accordingly recalled its earlier order dt. 19th Jan., 1990. The Tribunal thereafter reheard the matter and allowed the appeal by order dt. 10th May, 1991. Contending that the Tribunal exceeded its jurisdiction while deciding the application under S. 254 (2) of the Act, the Revenue filed a writ petition bearing OJC No. 2953 of 1991 in this Court challenging the order dt. 13th Dec., 1990. By judgment dt. 2nd Dec., 1991, CIT vs. ITAT (1992) 101 CTR (Ori) 200 : (1992) 196 ITR 564 (Ori), this Court allowed the writ petition by setting aside the Tribunal's order dt. 13th Dec., 1990, as well as its substantive order dt. 10th May, 1991. The assessee filed special leave petition before the Supreme Court challenging the aforesaid decision of this Court dt. 2nd Dec., 1991. The Supreme Court by its order dt. 24th April, 1996, in Civil Appeal No. 153 of 1993 disposed of the matter with the following observations and directions : "With a view to have a satisfactory decision on all the questions arising herein, we have proposed the following course to which the counsel for both the parties have agreed. The course suggested is that while the assessee shall ask for a reference against the order dt. 19th Jan., 1990, the substantive order of the Tribunal dismissing the appellant's appeal, the Revenue shall ask for reference against the order of rectification dt. 13th Dec., 1990, and the substantive order of the Tribunal dt. 10th May, 1991. If such applications are filed within sixty days from today, the Tribunal shall refer the questions arising therein for consideration of the High Court. The above course is adopted in the particular facts of this case and with a view to overcome the several technical objections put forward by both parties. We make it clear that we intend no reflection upon the merits of the case of either party. All the questions which arise from the orders of the Tribunal aforesaid shall be open in such reference which may be heard together."

(3.) THE expression "mistake apparent from the record" occurring in Sub -S. (2) of S. 254 of the Act also finds mention in S. 154 of the Act, the meaning of which came up for consideration before the Supreme Court in T. S. Balram, ITO vs. Volkart Brothers AIR 1971 SC 2204. It has been explained as follows :