A. Kalyanasundharam, A.M:— The assessees have moved these petitions seeking rectification of the orders passed by the Tribunal dt. 28th Feb., 1989, and 20th April, 1989. The assessee had brought out in the initial pages 1 to 7, the facts as were submitted before the Tribunal at the time of hearing of the appeal and in the remaining pages, concentration had been made to point out the various arguments as were made at the time of hearing, which were omitted to be brought out in the order, resulting in mistakes in the order, which according to the assessee are of the nature of apparent from record and, therefore, the order could be rectified. On perusal of these petitions, since there appeared that there were certain omissions/mistakes, which required the assistance of both the parties and it was accordingly fixed for hearing for 1st Sept., 1989 and the parties' extensive arguments as regards the mistakes as brought out in the ptitions from paragraphs 11 onwards have been given our very careful considerations.

2. The assessee has summarised the arguments as were raised before the Tribunal at the time of hearing of the appeal in respect of (a) the method of accounting followed; (b) the observations of the Delhi High Court wherein direction was given or arriving at an independent conclusion, allowing the assessee to adduce all evidence in support of its contentions before the authorities; (c) existence of sufficient material like the Profit & Loss a/c which clearly depicted uniformly the various incomes, copies of which were placed at pages 47 to 49, 52 to 55 & 56-57 of the paper book from which it could be deduced the method of accounting followed by it; (d) observation made by the ITO regarding the gross receipts of commission from which he had allowed the deductions of expenses clearly; and (e) the computation of income starting with the net profit as per profit & loss a/c, all showed that he was aware of the hybrid system of accounting. The further pleading was that the system of accounting of the assessee had been given a detailed scrutiny in the case of Eastern Bulk Services by the special bench of the Tribunal reported in Eastern Bulk Services v. ITO, (1983) 5 ITD 471 Del (SB) to which reference was made at the time of the argument of the appeal and this was so made for the purpose that the re-opening though may have been valid otherwise but the system having the sanction of the Tribunal, there is no income which could have remained un assessed for these years, therefore on merits, the re-assessment proceedings must be quashed. It was also pleaded that the assessee's system of accounting has been accepted to be proper by the ITO himself, for the subsequent assessment years. The assessee had also raised the point of two of the assessment years, viz., 1971–72 & 1972–73 becoming barred by time for the purposes of s. 148 of the Act, on which there had been no finding given by the Tribunal. In the petition the assessee further had pleaded that the order of the Tribunal contained reference to the form of return of income prescribed by the rules in which the system of accounting as adopted by the assessee was required to be shown by way of a note, which was not put to the assessee at the time of appeal and had it been so put, the assessee would have brought out the irrelevance of the note and would have brought to the attention of the Tribunal the Bombay High Court ruling in D.R Dhanwate v. CIT, (1961) 42 ITR 253 (Bom), that a mere note to be appended to in the return of income form could not be held to mean that the assessee had not provided the required particulars. The learned counsel Sh. Dastur had drawn our attention to the ruling of the Supreme Court in Omar Salay Mohamed Sait v. Commissioner Of Income Tax, Madras , (1959) 37 ITR 151 (SC) and specifically to the observations contained in page 170 of the report, for the proposition that the Tribunal is duty bound to consider all the facts while coming to its conclusion and any conclusion that has been arrived at by improperly rejecting the evidence, the order is bound to be set aside by the Courts. He also drew our attention to the ruling of the Supreme Court in Gemini Leather Stores v. CIT, (1975) CTR (SC) 127 : (1975) 100 ITR 1 (SC), for the proposition that when an Assessing Officer fails to draw his inference from the materials on record by oversight, it cannot be said that there was any failure on the part of the assessee to disclose the material facts. For the same proposition the assessee had also placed his reliance on the ruling of the Punjab & Haryana High Court in S.P Mohan Singh v. CIT, (1983) 34 CTR (P&H) 277 : (1983) 141 ITR 440 (P&H). He also drew out attention to the various materials that had been placed in the paper book during the hearing of the appeal. He therefore pleaded that the order should either be rectified to the extent of incorporating of the fact as pleaded, and consequently the conclusion would need to be amended in the light of these facts, or that the order may be recalled for hearing it afresh.

3. The argument of the learned Sr. Deptl. Representative Sh. Subash Kumar, was that the assessee's entire petition is intended for review of the order passed by the Tribunal which is outside the scope of s. 254(2) of the Act. He pleaded that the facts of each case had to be appreciated in itself before proceeding to apply any ruling and merely for the reason that there exists a particular ruling, it does not become an automatic application, for it requires the facts and the circumstances to be identical to the one as was before the courts. His plea was that the assessee's emphasis is that the disclosure was full as it had shown the income from commission in its profit & loss a/c but it is not so disputed that he had not mentioned anywhere about the system of accounting followed either in the computation of income filed or having brought to the notice of the ITO during the course of the regular assessment proceeding. The Delhi High Court had rightly observed that the ITO could not have examined the correctness or otherwise of the system of accounting followed, since he never went into the question and the reason of he not going into that question is obviously the absence of the material as regards the method of accounting followed by the assessee. He also pleaded that from the examination of the profit & loss account showing a particular income, as is in the instant case the commission receipts, it is impossible to deduce or infer the method of accounting followed by the assessee. He accordingly pleaded that the petition is bereft of any substance and deserves only to be rejected.

4. After carefully considering the rival contentions, the petition as such and also the main order of the Tribunal dt. 28th Feb., 1989, we would add the following lines to para 4 of the order after line 6, ending with the words ‘assessment orders’:

“Referring to the order of the ITO for the asst. yr. 1984–85, it was pleaded that the department had knowledge of the fact that it had followed the mixed system of accounting, i.e, the receipts being accounted for on receipt while the expenses were accounted for on accrual. The assessee had also drawn our attention to the profit & loss account placed at pages 51 & 57 of the paper book, which showed on the income side ‘commission receipts’.

4.1 The undisputed facts are (a) the ITO never went into the question of the method of accounting followed by the assessee and (b) the assessee on his part never brought speifically to the notice of the ITO regarding the method of accounting of commission on receipt basis. The entire effort of the counsel had been that the ITO having the profit & loss a/c on his records, it should be deemed that he was aware of the system of accounting followed by the assessee and that he had examined the same and it was not at all fatal to the assessee's case for not having brought to the ITO's notice specifically about the system of accounting for the duty of the assessee is limited to put the primary and material facts and not lead the ITO, as to how to draw his conclusions. This argument is similar to a sword which has sharp edges on its either side and therefore cuts both ways. The ITO had not raised any objection at the time of the original assessment regarding the system of accounting followed is not in dispute but to claim that he had examined it and found to be proper cannot also be so inferred from his order, The assessee all through maintained that since there was no requirement under the Act to mention about the method of accounting followed by him, till the asst. yr. 1972–73. he had not brought to the notice of the ITO about the system of accounting. The ordinary dictionary meaning of the term ‘Fact’ is occurrence of event, things certainly known to have occurred or to be true, reality, true or existent”. Thus it can be concluded that the fact of the system of accounting followed not brought to ITO's notice and not so examined by him, could not be said to have known to him and since this fact was not specifically brought to the notice of the ITO, the assessee cannot be said to have made full and true disclosure of the primary facts.

4.2 The assessee had vehemently objected to the observation made of the form of the return of income considered by the Tribunal in para 8 of the order without allowing the assessee an opportunity and also that the ruling of the Bombay High Court in Dhanwate's (supra) a mere note cannot be made the basis of for coming to the conclusion that there was non-disclosure on the part of the assessee. The assessee in fact was not questioned with reference to the return form requiring the assessee to specify the method of accounting followed in a note during the course of the arguments, but this alone was not the singular factor for drawing of the conclusion that there was failure on the part of the assessee for making full and true disclosure of the primary facts. The purpose of bring out the return of income form in the body of the order was limited to highlight the wrong claim made by the assessee that there was no requirement at all to disclose the method of accounting followed by him which has been clearly so brought out in the paras 9.1 & 9.2 of the order. The Supreme Court's ratio in Omar Salay Mohamed Sait (supra) is clearly a guide to the proposition that the Tribunal must come to its conclusion based on facts on record and in the instant case the Tribunal has come to its conclusion that there was failure of true and full disclosure of the primary facts which is based on the undisputed fact that the assessee never specifically disclosed about its method of accounting and that there was no whisper in the order of the regular assessment about the method of accounting followed by the assessee. In Gemini Leather's case (supra), the Supreme Court had observed that when the ITO makes some enquiry about a fact, but by overight omits to add the same to the assessed income, he cannot resort to s. 147(a) or (b). In the present case, the situation is that there was never any enquiry made by the ITO, with which fact the assessee has no dispute and, therefore, it cannot be said that he had omitted to add any income on that account by oversight. Therefore even as per these two Supreme Court rulings, on the facts and circumstances of the case, there being failure on the part of the assessee to disclose fully and truly all the material facts, the conclusion that could be drawn is that the re-opening was justified. Thus there is no. mistake as regards the appreciation of the facts and the conclusion drawn based on those facts.

4.3 The assessee's arguments on merits that the system of accounting having the sanction of the spcial bench of the Tribunal in the assessee's case for the subsequent assessment year, there would be no useful purpose served by remanding the issue back to the ITO is without any substance. The reason being (a) the method of accounting followed for these assessment years is yet to be determined and (b) and then only the next step of comparison of the system of accounting as adopted and followed for these assessment years with the one decided by the special bench would arise. There can be no short-cut method for the comparison of the two methods without analysing the methods as such.

4.4 The asst. yrs. 1971–72 & 1972-7??? becoming time-barred have not been given a finding by the authorities and the same had been so directed in para 11 of the order.

4.5 The miscellaneous application is allowed in part as above.