THE ACIT 11(2), MUMBAI V. M/S. GEORGE A. REBELLO, MUMBAI

ITA 1743/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7201 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 12-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 11-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: W HASAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI. BEFORE SHRI J. SUDHAKAR REDDY,A.M. AND SMT.P.MADHA VI DEVI, J.M. I.T.A. NO. 17 43 /MUM/2008. ASSESSMENT YEAR : 2003-04. ASSTT. COMMISSIONER OF SHRI GEORGE A. REBELLO, INCOME TAX -11(2), VS. THROUGH LEGAL HEIR, SMT. SHIRLEY MUMBAI. ANN DMELLO REBELLO, FLAT NO. 67, SUNITA CO-OP. HSG. SOC., COLABA, MUMBAI 400 005. PANAABPR3657F APPELLANT RESPONDENT C.O. NO. 131/MUM/2008 (IN ITA NO. 1 743/MUM/2008) ASSESSMEN T YEAR : 2003-04. SHRI GEORGE A. REBELLO, ASSTT. COMMISSIONER OF THROUGH LEGAL HEIR, SMT. SHIRLEY VS. INCO ME TAX-11(2), ANN DMELLO REBELLO, MUMBAI. MUMBAI. CROSS OBJECTOR. RESPONDENT. DEPARTMENT BY : SHRI MOHD. USMAN. ASSESS EE BY : SHRI W. HASAN. O R D E R PER J. SUDHAKAR REDDY, A.M. THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGA INST THE ORDER OF THE CIT(APPEALS)-XI, MUMBAI DATED 28-12-20 07 FOR THE ASSESSMENT YEAR 2003-04 ON THE FOLLOWING EFFECTIVE GROUND : 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)-XI, MUMBAI, ERRED IN DELETING T HE ADDITION MADE U/S 41(1) AMOUNTING TO RS.19,10,907/- RELATING TO M/S MARITIME SERVICE INTERNATIONAL ON T HE GROUND THAT IT IS NOT PERTAINING TO TRADING TRANSACTION. 2. THE ASSESSEE FILED CROSS OBJECTION ON THE FOLLO WING GROUNDS 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED CIT(A)-XI, MUMBAI ERRED IN CONFIRMING THE ADDITION OF RS.1,41,840/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF M/S HIND SHIPPING. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED CIT(A)-XI, MUMBAI ERRED IN HOLDING THAT THE APPELLA NT HAS NOT EXPLAINED WHY THIS AMOUNT OF RS.1,41,840/- REMAINED UNPAID WHEN THE APPELLANT HAD CLEARLY BROUGHT TO THE NOTICE OF THE CIT(A) IN THE WRITTEN SUBMISSION FILED DURING THE COURSE OF THE H EARING THAT THE SAID AMOUNT WAS ALREADY PAID BACK TO M/S HIND SHIPPING A ND THE NECESSARY EVIDENCE IN THIS REGARD WERE ALSO FILED B EFORE HIM. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE ADDITION OF RS.1,4 1,840/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF M/S HIND SHIPPI NG AS THE SAID AMOUNT WAS RECEIVED IN THE ESROW ACCOUNT AND IT WAS PAID BACK TO M/S HIND SHIPPING. 3. WE HAVE HEARD MR. MOHD. USMAN, LEARNED DR, ON B EHALF OF THE REVENUE AND SHRI W. HASAN, LEARNED COUNSEL FOR THE ASSESSEE. 4. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIR CUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORDS AND THE ORDERS OF THE AUTHORITIES BELOW, WE HOLD AS FOLLOWS. 5. THE FACTS ARE BROUGHT OUT AT PAR 3 AND 4 OF THE CIT(APPEALS) ORDER WHICH ARE EXTRACTED FOR READY REFERENCE. 3 THE A.O. NOTED FROM THE BALANCE-SHEET OF THE APPE LLANT THAT THERE WERE ADVANCES SHOWN AT RS.91,83,486/- UNDER T HE HEAD CLIENTS ACCOUNT. OUT OF THE DETAILS OF THE CLIENT S ACCOUNT, THE A.O. FURTHER NOTED THAT IN TWO CASES I.E. M/S HIND SHIPP ING AND M/S MARITIME SERVICES INTERNATIONAL, THE APPELLANT HAS MADE THE REPAYMENTS. THE A.O. THEREFORE, DESIRED TO KNOW WHY SECTION 41(1) SHOULD NOT BE INVOKED BECAUSE THE AMOUNTS HAVE NOT BEEN REFUNDED TO THE SAID PARTIES ESPECIALLY AS THE APPELLANT, IN THE MEANTIME, HAD PASSED AWAY. IT WAS EXPLAINED ON BEHALF OF THE APPE LLANT THAT THESE AMOUNTS WERE RECEIVED UNDER ESCROW ACCOUNT PAYABLE TO THE CLIENTS UNDER DISPUTE IN CASE OF M/S HIND SHIPPING RS.1,41,840/- WAS KEPT IN FIXED DEPOSIT ACCOUNT FROM THE BEGINNIN G. RS.19,10,907/- RELATING TO M/S MARTIME SERVICE INTE RNATIONAL WAS KEPT IN CURRENT ACCOUNT AND THEN IN FIXED DEPOSIT A CCOUNT. REGARDING M/S MARTIME SERVICE INTERNATIONAL, IT WAS STATED THAT THE MONEY WAS RECEIVED ON BEHALF OF AVERAGE ADJUSTERS P ENDING DETERMINATION BY M/S MANLEY HOPKINS SON & COOKES LT D, AVERAGE ADJUSTERS, LONDON. IT WAS IN RESPECT OF A V ESSEL WHICH CAUGHT FIRE RESULTING IN DAMAGE TO CARGO. THE DAMAG ED CARGO WAS SOLD AND THE SALE PROCEEDS WERE HANDED OVER TO THE APPELLANT TO BE KEPT IN THE ESCROW ACCOUNT PENDING DETERMINATION OF AVERAGE ADJUSTMENT. THIS MONEY WAS TO BE REMITTED TO THE PA RTIES CONCERNED AFTER COMPLYING WITH THE RBI REQUIREMENTS. APPLICAT ION WAS MADE TO RBI THROUGH SBI, NARIMAN POINT, IN THIS REGARD. SUCH ARGUMENT DID NOT FIND FAVOUR WITH THE A.O. THE A.O. HAS NOTED THAT ALL AMOUNTS RECEIVED FROM CLIENTS IN FINANCIAL YEAR 2003-04 WERE REFUNDED OR REMITTED TO THE CLIENTS. H OWEVER, ONLY IN THESE TWO CASES SUCH REPAYMENT/REFUND WAS NOT MADE. THERE WERE TWO OTHER ACCOUNTS WHICH WERE SETTLED IN FINANCIAL YEAR 2004-05. THE APPELLANT DID NOT HAVE AN HEIR OTHER THAN HIS W IFE. THE APPELLANTS JUNIOR AND HIS WIFE WERE CARRYING ON WI TH THE LEGAL PRACTICE BUT THEY WERE NOT BOUND BY THE PERSONAL CO NTRACT THAT THE APPELLANT HAD ENTERED INTO WITH REGARD TO THE SAID TWO CLIENTS. HENCE SECTION 41(1) WAS APPLICABLE. 6. THE FIRST APPELLATE AUTHORITY AT PARA 5 HELD AS FOLLOWS : IN THE WRITTEN SUBMISSION MADE BEFORE THE A.O. WH ICH HAS BEEN QUOTED IN THE ASSESSMENT ORDER, THE APPELLANT HAD PROPERLY EXPLAINED THE POSITION WITH REGARD TO M/S MARTIME S ERVICE INTERNATIONAL. I FIND THAT THE APPELLANT HAD MADE C OMMUNICATION WITH THE RBI THROUGH THE SBI FOR REMITTANCE OF THE SAID AMOUNT. AS 4 FAR AS APPLICATION OF SECTION 41(1) IS CONCERNED, T HE APPLICATION OF LAW BY THE A.O. IS NOT CORRECT. THE CASE LAW CITED BY THE A.O. IN RELATION TO RAJASTHAN GOLDEN TRANSPORT CO. (P) LTD. 249 ITR 723 (DEL) SPEAKS OF AMOUNT RECEIVED IN COURSE OF A TRA DING TRANSACTION. IT IS CLEARLY NOT A TRADING TRANSACTI ON AND WAS RECEIVED IN AN ESCROW ACCOUNT AND HENCE, COULD NOT BE CONSID ERED U/S 41(1). ADDITION WITH REGARD TO M/S MARTIME SERVICE INTERNATIONAL IS DELETED. 7. WE FULLY AGREE WITH THESE FINDINGS. EVEN OTHERW ISE THE ASSESSEE HAS NEVER CLAIMED THIS AMOUNT AS AN EXPENS E IN THE EARLIER YEARS AND HENCE THE QUESTION OF ADDITION U/S 41(1) DOES N OT ARISE. 8. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. 9. COMING TO THE CROSS OBJECTION, THE ASSESSEE HAS PRODUCED EVIDENCE THAT THE AMOUNT HAS BEEN REPAID TO M/S HIN D SHIPPING AGENCIES ON 29 TH AUGUST, 2006. THIS AMOUNT WAS ALSO HELD IN ESCROW ACCOUNT. THIS SUBMISSION HAS BEEN IGNORED BY THE CIT(APPEALS ). THIS AMOUNT WAS NEVER SHOWN EARLIER AS AN EXPENSE. THUS FOR ALL THE SE REASONS, THE ADDITION U/S 41(1) IS BAD IN LAW. ACCORDINGLY, WE ALLOW THE CROSS OBJECTION OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF MARCH, 2010. SD/- SD/- (P.MADHAVI DEVI) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI, DATED : 30 TH MARCH, 2010. WAKODE 5 COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, G-BENCH. (TRUE COPY) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI BENCHES, MUMBAI.