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TMI Blog2022 (5) TMI 1381X X X X Extracts X X X X X X X X Extracts X X X X ..... have subsequently been accounted by the assessee in other assessment years on cash basis or not. Our attention was also drawn regarding reply filed by the department in compliance of the direction issued by the Tribunal on 05.05.2008, wherein the department has expressed its inability to verify the voluminous documents; more specifically the verifications of the documents to be made are not in possession of the department. It was also stated by the department in the said letter that verification by the AO regarding the incomes accrued to the assessee cannot be possible to be done by the AO alone. Without going much into the merits of the case and delving into the assessment year under consideration along with the year of appeal, we are of the substantive opinion that when the department itself has expressed its inability to verify the documents as had been directed by the Tribunal vide its order dated 05.05.2008, either on account of voluminous documents or for any other reason whatsoever, hence the contentions of the assessee cannot be rebutted or curtailed by the revenue, therefore, the assessee cannot be kept in abeyance from getting justice which he deserves. Accordingly, we a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the appellant preferred appeal before Ld. CIT (A) who had dismissed the appeal 19.01.1990 Aggrieved by the order of Ld. CIT (A), the appellant was constrained to approach the Hon'ble I TAT, Cuttack Bench, Cuttack. The Hon'ble ITAT upheld the assessment of AO and therefore dismissed the 2nd Appeal. The Hon'ble ITAT however has given finding on issues beyond the pleadings of the case. The Tribunal by giving a finding on the application of section 11(4A} in the matter, held that the appellant is not entitled for the exemption under section 11. The order was passed on the basis 13.12.1990 The application u/s 254(2) of the Act bearing No. M.A. No, 10/(CTK)/1990 was allowed and the Hon'ble ITAT recalled the order dated 19.0l.1990 and the matter was heard afresh. It was held that the application of section 11(4A) by Hon'ble ITAT is clear and apparent error as it has not been pleaded before the Ld. AO or Ld. CIT (A) and Hon'ble ITAT has suo-motu applied the provision in the matter. 10.05.1991 Hon'ble ITAT after hearing the matter afresh, passed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of the case, the Tribune justified in holding that the assessee is not entitled to exempt under section 11 of the Act? 2. Whether on facts and circumstances of the case, the Tribunal justified in rejecting the method of computation of income followed by the assesse? 3. Whether on facts and circumstances of .the case, the Tribunal was right in declining to grant exemption to assessee trust on completely new ground made suo-motu without affording opportunity to the assessee to have its say on the said ground. 15.01.2003 Hon'ble High Court of Orissa observed that ITAT order dated 19.01.1990 suffered from mistakes apparent from record and the aforementioned order was rightly recalled by the I TAT. However, the order dated 10.05.1991 was passed beyond the jurisdiction of the tribunal under section 254(1) and thus Hon'ble High Court set aside the order dated 10.05.1991 of ITAT and further directed ITAT to consider the case on all the points arising out of CIT (A) order dated 28.11.1988 in light of section 11(4.f\) which became effective from 01.04.1984. Hon'ble High court answered Question nO.3 in favour of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,85,565/-on the appellant in respect of AY 1985-86. Similarly, the Ld. ACIT imposed penalty of Rs.16, 34,168/- in respect of AY 1989-90 and a penalty of Rs.13,17,953/- in respect of AY 1993-94 through separate orders. 05.05.2008 The appellant preferred an appeal against: the orders dated 16.10.2008 and 18.10.2008. During the course of proceedings, ITAT passed an interim order and gave a direction to revenue to verify if the 'Receivables' for assessment year' 1985-1986 have been accounted in the subsequent years or not. However, Revenue never complied with this direction and gave a vague excuse of record being voluminous in nature, It is not possible to verify the same 28.11.2008 The appellant challenged the orders dated 31.03.2008 of imposition of penalty before the Ld. CIT (A) which had been wrongfully upheld the order of the Ld. ACIT without paying any heed to the arguments of the appellant and mechanically held that, since the accounting system of the appellant trust is faulty, it has resulted in diminishment of the taxable profits for the year. Moreover, the Ld. CIT (A) wrongly opined that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee .and a note was submitted on behalf of the revenue. The affidavit made the position clear and in the entirety of the process including framing of second question, the challenge with regard to the method of accounting was quite apparent. The submission advanced on behalf of the assessee was therefore required to be dealt with on merits. However, neither the affidavit nor the note referred to by the Tribunal. The conclusions arrived at by the Tribunal were not thus consistent with the order of remand passed by this court or with the direction issued by the Tribunal itself seeking certain information vide its order dated 05.05.2008. The High Court also erred in affirming the view taken by the Tribunal. 17. We therefore, set aside the orders passed by the Tribunal and the High Court and remit the matter back to the Tribunal to consider the matter afresh in the light of the order dated 24.04.1996 passed by this court and in keeping with the direction issued by the Tribunal in its order dated 05.05.2008, ITA Nos. 38- 40 of 2007 and ITA Nos. 78-80 of 2009 are therefore restored to the file of the Tribunal. 18. Since the matter has been pending for a long time, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ground may be allowed as per the decision of the Hon ble Jurisdictional High Court (supra). 7. With regard to ground No.4, ld. AR submitted before us that the notional income computed on mercantile system can never be physically spent by the trust assessee and the consistent refusal to appreciate the same has resulted in gross miscarriage of justice. In this regard, ld. AR has filed his written submission, which was placed before us during the course of hearing, wherein the ld. AR in page 3 has stated as under :- From the Asst. Year 1985-86, the assessee changed the method of accounting from cash system to hybrid system as submitted supra which had been rejected by the Ld. AO, Ld. CIT (A) as well as the Hon'ble ITAT. Presently the question is whether adoption of hybrid system of accounting by the assessee was correct or not to which the assessee submitted the submission as under; Prior to the Asst. Year 1997-98, the hybrid system of accounting was permissible under the Act. The only obligation on the part of the assessee to follow the method of accounting consistently. Moreover the provisions of section 145 is applicable to a person whose income is taxable under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e orders of the authorities below in this regard should be upheld. 11. We have heard rival contentions of the parties and perused the material available on record. At the outset, we consider the submissions of both the parties with regard to the ground Nos.2 3, wherein the issue raised by the assessee has already been decided by the Hon ble Jurisdictional High Court vide order dated 15.01.2003 in favour of the assessee and against the revenue . As observed by Hon ble Apex Court vide its order under Civil Appeal no s 1273-1278 of 2022 dated 10.02.20222, where in it is stated that :- 4. Accordingly, following three questions of law were referred by the Tribuna12 under Section 256(2) of the Income Tax Act, 1961 ( the Act , for short) to the High Court for its opinion: 1. Whether on facts and circumstances of the case, the Tribunal is justified in holding that the assessee is not entitled to exemption under Section 11 of the Act? 2. Whether on facts and circumstances of the case, the Tribunal was right in rejecting the method of computation of income followed by the assessee? 3. Whether on facts and circumstances of the case, the Tribunal was right in declining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t exemption due to change in accounting system by the assessee rejecting the books of accounts of the assessee. The CIT(A) also went with the view taken by the AO. During the course of hearing, ld.AR submitted that from the assessment year 1985-86, the assessee changed the method of accounting from cash system to hybrid system, which had been rejected by the AO and affirmed by the CIT (A) and ITAT in different stage of appeals. Now, the question arises before us is as to whether the adoption of hybrid system of accounting by the assessee was correct or not. In this regard, during the course of hearing, the ld. AR submitted that prior to the A.Y.1997-98, the hybrid system of accounting was permissible under the Act and though the assessee was to follow the method of accounting consistently, however, the assessee is a charitable trust whose income is taxable under the provisions of Section 11, 12 13 of the Act, therefore, the provisions of Section145 is not applicable. The ld. AR drew our attention to page 96 of the assessee s paper book wherein the interim order has been passed by the Tribunal vide order dated 05.05.2008 directing both the parties i.e. assessee as well as the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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