1. These two appeals before us are restored matters resulting from the Tribunal's order dated 13-1-1984 by which the assessee's Misc.
Application No. 115 (All.) of 1982 came to be accepted and the ex parte order dismissing the assessee's appeals for 1974-75 and 1975-76 came to be recalled.
2. To have a clear picture, we must necessarily state some facts and which are that the assessee had filed eight appeals on 29-9-1980, which were consecutively numbered as IT Appeal Nos. 1805 to 1812 (All.) of 1980. The said appeals were fixed for hearing on 30-4-1981 in pursuance to a notice sent to the parties on 13-4-1981, which was served on the assessee on 20-4-1981. On 28-4-1981, the assessee sent a telegram requesting for adjournment of the appeals on the ground that all its trustees had gone out of station. Such telegram was received in the registry of the Tribunal on 30-4-1981, i.e., on the date of the hearing. The Bench on the basis of the said telegraphic request adjourned the appeals to 4-6-1981 and intimation to this effect was sent on 2-5-1981 through ordinary post.
3. When the appeals came up for hearing on 4-6-1981, though for the revenue, the departmental representative was present, there were no arrangements for representation from the assessee. The Tribunal passed two ex parte orders in relation to eight appeals, but we are concerned with only one, i.e., IT Appeal Nos. 1805, 1806, 1811 and 1812 (All.) of 1980 relating to the assessment years 1974-75 and 1975-76 and another one in respect of the other four appeals.
4. On 27-7-1981, the assessee moved a Misc. Application against the order in IT Appeal No. 1805 and others, which was numbered as Misc.
Application No. 103 (All.) of 1981, contending that it had not received any notice from the Tribunal fixing the date of the hearing and, therefore, the order deserved to be cancelled. The hearing on the application took place on 17-12-1982 and vide order dated 30-12-1982, which is being reproduced below, it was rejected : The order in the above appeals was passed by the Tribunal on 26-6-1981, The appeals were decided ex parte as there was no representation from the side of the assessee at the time of hearing.
2. The assessee has now moved a miscellaneous application contending that there was either no service of any notice of hearing or the assessee had actually not received any such notice and, therefore, the order passed by the Tribunal required to be recalled. However, at the time of the hearing of the miscellaneous application, it was stated by the learned Counsel for the assessee that there was proper service of notice of hearing on the assessee. In view of this fact, there is no case of recalling our order.
5. The assessee moved another application on 17-12-1982 which was numbered as Misc. Application No. 115 (All.) of 1982. At the time of hearing of this second application, it was urged by the assessee's counsel that what he had admitted at the time of the hearing of the earlier application [Misc. Application No. 103 (All.) of 1981] on 17-12-1982, was that a notice had been properly served for hearing of the cases on 30-4-1981, but the fact that adjournment had been granted and the cases refixed for hearing on 4-6-1981, was not known to him.
The burden of the submission was that since intimation regarding fixing of the appeals on 4-6-1981 had not been communicated to the assessee, ex parte hearing of the case in IT Appeal Nos. 1805 and others was not justified and the order required to be cancelled and recalled.
6. For the revenue factual aspects of submission for the assessee were not challenged.
7. The Tribunal considering the peculiar facts allowed the assessee's miscellaneous application and recalled the Tribunal's order in IT Appeal Nos. 1805 and others by its order of 13-1-1984, paragraph Nos. 7 and 8 of which we are reproducing below : 7. We have carefully considered the submissions placed before us.
The position now boils down to the fact that the assessee's request for adjournment of the case from 30-4-1981 was accepted by the Tribunal. There is no misunderstanding about it now. There is also no misunderstanding that the Tribunal had adjourned all the appeals to 4-6-1981. An intimation to this effect was also issued from the office of the Tribunal on 2-5-1981. However, there is no evidence that this intimation did reach the assessee. The presumption of the service of a notice, in our opinion, arises only in the case of a registered letter and not in the case of an ordinary post. As the assessee did not receive the intimation regarding the fixation of its appeals on 4-6-1981, it did not make any arrangement for representation before the Tribunal on that date. The question now is whether non-intimation of the date of the adjournment is sufficient ground for us to recall our order passed ex parte against the assessee. We have gone through the decision of the Allahabad High Court in the case of Auto Sales (supra). The legal position is clear that it is the duty of the assessee to find out as to what orders had been passed on the application for adjournment. Strictly legally, therefore, the Tribunal could proceed to dispose of the appeals ex parte against the assessee. However, the practice in the Tribunal has been to send such intimations practically in all the cases unless the assessee or its representative was present in the office of the Tribunal to note the date of adjournment. The Tribunal has also been treating such a non-intimation as a valid cause for recalling its orders. In our opinion, in view of such a prevailing practice of which we are well aware, the assessee should not be made an exception and allowed to suffer. We, therefore, in the interest of justice, are of the opinion that the assessee has made out a valid ground for recalling our order. In the view, we are taking, we do not consider it necessary to decide whether an opportunity of being heard by the Tribunal requires service of a formal notice or a mere intimation to the assessee, with their respective legal modes of service.
8. As regards the alternate contention of the learned departmental representative, the learned Counsel for the assessee, in the application now under consideration, has not made any request for recalling of orders only in any specific appeals. His request is general for the recall of the order passed on 5-6-1981/26-6-1981.
We, therefore, recall the Tribunal's order dated 5-6-1981/26-6-1981 in IT Appeal Nos. 1805, 1806, 1811 and 1812 (All.) of 1980 (originally passed in Hindi) and direct that all these appeals be revised for hearing at an early date.
8. After the recall of the orders the Allahabad Bench decided to refer the case to a Special Bench by making a note on 16-6-1984, paragraph Nos. 2 and 3 of which are reproduced below : 2. We are concerned here with the appeals for the assessment years 1974-75 and 1975-76 in the assessee's own case. In these years also, the ITO brought to tax the interest from Banarsidas Ramgopal on accrual basis rejecting the claim of the assessee that no such interest was taxable as it had been following cash system of accounting. The addition was confirmed by the Appellate Assistant Commissioner following the order of the Tribunal in the assessment year 1973-74.
3. In our view, the view of the Tribunal in the assessment year 1973-74 requires reconsideration. The slender evidence on the basis of which the Tribunal came to the conclusion that the assessee had been following mercantile system of accounting was the conversion of interest from the bank on fixed deposits in fresh deposits. It was claimed before us that issuing of a fresh fixed deposit receipt for the interest amounted to the actual payment of interest to the assessee and, therefore, the conclusion was that the assessee had been following cash system of accounting and had been crediting the interest in its books of account on their receipt. According to the assessee, conversion of interest into a new fixed deposit receipt amounted to its actual payment to the assessee. In our opinion, there is considerable force in this argument requiring reconsideration of the view taken in the assessee's own case in the assessment year 1973-74.
9. The present appeals, therefore, are the result of the abovesaid order of 13-1-1984 and the common contention is that the AAC, Lucknow erred in confirming the addition of Rs. 22,171 and Rs. 25,497 added in the related assessments for the two years. These additions flow from the rejection of the assessee's claim that it was following cash system of accounting in respect of its interest income.
10. It was accepted before us that the question of inclusion of similar interest came up for adjudication before the Tribunal in respect of the assessment year 1973-74 and decided in favour of the revenue vide order dated 20-1-1979 in IT Appeal No. 2163 (All.) of 1977-78. The submission, however, was that the principle of res judicata being not applicable, the Tribunal should have a fresh look on the facts.
11. For the assessment year 1973-74, the Tribunal decided the appeal against the assessee vide its order dated 20-1-1979 in IT Appeal No.2163 (All.) of 1977-78 and paragraph Nos. 14 to 19 of the order may be brought in close focus : 14. In appeal before us the assessee has reiterated the same stand as he took before the authorities below contending that the assessee is following cash system of accounting and not that of mercantile and, as such, the authorities below were erroneous in concluding that the assessee received the impugned interest in the accounting period relevant for the assessment year.
15. So we have to see that whether the system of accounting of the assessee is that of cash and if not so, then whether he received the interest amount in the accounting period relevant for the assessment year under consideration. The finding of the Income-tax Officer is that the assessee has not shown that the trust keeps its account on cash basis. Dr. R.M. Lall tried to rebut these findings on the plea that the system of accounting adopted by the assessee is that of cash basis. Therefore, he contends that in this situation of the matter, the finding of the Income-tax-Officer is erroneous and without any basis.
16. The contention of Shri R.M. Lall is not well founded, as he has not supported by his own documentary evidence which is Annexure-D filed along with his letter dated 6-4-1976. In that Annexure, the interest on fixed deposit has been shown and there is a star mark on the amount of Rs. 4,965.27 and Rs. 5,278.49. Against the star mark, it is stated as under: These F.D.Rs are made for the interest accrued on all the above F.D.Rs. 17. The assessee has filed the revised return showing the interest on fixed deposit at Rs. 10,243.70 as against Rs. 4,965.27 shown in the original return. In Annexure-D the assessee has used the word interest accrued and he had no objection for the amount to be assessed as such. It is clear to us from it that the assessee admitted that the impugned amount accrued and the same is to be assessed on accrual basis, that is, nothing else than mercantile system of accounting.
18. Besides, the, amount of Rs. 10,312 deposited with Banarsi Das Ram Gopal has been excluded by him, stating that the amount had not been received by him. However, for the same source of income (that is from interest) the assessee cannot apply two methods of accountancy, one from the interest accrued from Commercial Bank of India, as per Annexure-D on accrual basis and another on receipt basis for the interest payable on the firm. It also proves that the assessee has not stuck to any regular method of accountancy.
19. On these facts and conduct of the business it can safely be concluded that the assessee is not maintaining the books of account on cash basis ; rather presumption is that the assessee is maintaining the books of account on mercantile basis.
12. Shri Markandey Katju, the revenue's standing counsel, appearing along with Smt. Roli Srivastava, the senior departmental representative, raised preliminary objections in writing which can be divided also in two portions as follows : (I) that the Tribunal is not competent to take a view different than the one taken in the assessee's own case, (II) that the Tribunal having passed a valid order on 30-12-1982 rejecting the assessee's Misc. Application No. 103 (All.) of 1981, the second order in respect of a fresh miscellaneous application in relation to the same order was a nullity.
13. Elaborating his contentions, he submitted that the Tribunal's view taken in the ex parte order being in conformity and consistent with the approach taken for the assessment year 1973-74, there can be no occasion to consider the assessee's case afresh, the facts being admittedly similar. In respect of second objection, he submitted that the Tribunal became functus officio, after passing the order of 30-12-1982 and gravely erred in recalling the order by accepting the second miscellaneous application. Shri Katju also pleaded that the Tribunal should decide the abovesaid preliminary questions before touching the appeals on merits.
14. For the appellant-assessee, Dr. R.M. Lall, chartered accountant, very strongly opposed the stand taken by Shri Katju. He submitted that not only the Tribunal can re-appraise a given situation, the principle of res judicata being not applicable on the merits of the case, but was legally correct in passing the second order in respect of a fresh miscellaneous application on 30-1-1984.
15. After giving our thoughtful moments, we have come to the conclusion that both the preliminary objections must be rejected, which we do. If we are to accept the viewpoint canvassed by Shri Katju, then we also must presume that once a Tribunal commits a mistake or an error of judgment on facts or law in a given year, it is precluded from correcting its viewpoint in appeals for subsequent year, howsoever grave the mistake may be, a presumption which we are not prepared to make. Maybe that on the same facts the Tribunal should not depart from its view taken earlier, unless there is a grave provocation and reasons, but if a prima facie case is made out that the earlier view needs reconsideration, it is only in the fitness of things and judicial propriety that a matter be reconsidered at least by a larger Bench. The question as to what method of accounting was being followed by the assessee in respect of a particular source, though earlier decided by the Tribunal against the assessee, could validly be reappraised if new facts were placed on record in a subsequent year and there can be no legal impediment to such a course. We are stating this a principle.
16. In the present case, however, the first preliminary objection of the revenue may be of academic nature because we are holding that a sufficient case is not made out for departing from the view taken earlier. We shall be giving necessary facts and our reasons later in this order.
17. On the peculiar facts prevailing in this case, Shri Katju's second preliminary objection is considered as wholly wrong. Within a statutory period, as provided under Section 254(2) of the Income-tax Act, 1961 ('the Act'), it is open to the parties in appeal before the Tribunal to move miscellaneous application and it is precisely what happened in the present case. On 17-12-1982 the assessee only accepted that the hearing notice for 30-4-1980 was duly served and, therefore, the contention that it did not receive later intimation of adjournment of the appeals to 4-6-1981, cannot be said to be an inconsistent approach. We have given the related facts and reproduced certain portions of the order of the Tribunal dated 13-1-1984, "with a purpose to show that on a given fact, any other view than the one taken by the Tribunal would have been wrong. It must be stated here that we have believed the assessee's counsel (Dr. Lall's) version that after appraising himself of the fact that the first miscellaneous application was made on wrong basis, he thought it advisable and fit to move a fresh application and that there was no concession of any kind that there was no grievance against ex parte order passed by the Tribunal. It has to be kept in mind and close focus that the second miscellaneous application was filed on 17-12-1982, i.e., on the date of the hearing of the first application.
It might have been advisable for the assessee to have argued in relation to the first application that the intimation regarding the hearing on 4-6-1981 had not been received but such course not having been adopted, certainly did not preclude the assessee/his representative to move a fresh application, if the statute permitted such course. Therefore, there was no question of the Tribunal having become functus officio, because a mistake can be looked into under Section 254(2) and the consequences which follow must be given effect to. Seen in this context the action of the Tribunal in recalling the order is held to be justified.
18. As far as the merits of the case go, Dr. Lall simply did not have the vital facts in his possession, like the agreement between the assessee-trust and the firm. The assessee's counsel was also unable to give dates as to when was the interest actually received from the firm.
Dr. Lall, however, accepted that there was an agreement between the assessee and the firm. On such scanty facts, we are not prepared to take a view different than the one taken in the assessee's own case for the immediately preceding year.
19. While deciding these appeals, we are conscious that the principle of res judicata is not applicable. We do not have to cite any authority to say that each assessment year being independent, if there are additional features, which have not been noticed earlier, the same may be pressed into service to ask the revenue to accept a particular contention and claim, which have been earlier rejected. Therefore, our decision in these years shall not be taken as a precedent and it shall be open to the assessee in future assessment year/years to contest its claim that it followed a particular accounting system.