Shri Ratan Lal Gaggar, Kolkata V. ACIT, Circle - 54, Kolkata, Kolkata

ITA 1786/KOL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75022 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 16-09-2010
• Court: TRIBUNAL
• Department Lawyers: NIRANJAN SATPATI
• Assessee Lawyers: S K TULSIYAN
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () BEFORE , /AND . . . . ' '' ''# '#'# '#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 1758/KOL/2010 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2005-06 ASSISTANT COMMISSIONER OF INCOME-TAX, VS. RATAN LA L GAGGAR CIRCLE-54, KOLKATA. (PAN:ADVPG9476H) (,- /APPELLANT ) (./,-/ RESPONDENT ) & & & & & / I.T.A NO. 1785/KOL/2010 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2004-05 SHRI RATAN LAL GAGGAR VS. ASSISTANT COMMISSIONE R OF INCOME-TAX, (PAN:ADVPG9976H) CIRCLE-54, KOLKATA (,- /APPELLANT ) (./,-/ RESPONDENT ) & & & & & / I.T.A NO. 1786/KOL/2010 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2005-06 SHRI RATAN LAL GAGGAR VS. ASSISTANT COMMISSIONE R OF INCOME-TAX, (PAN:ADVPG9976H) CIRCLE-54, KOLKATA (,- /APPELLANT ) (./,-/ RESPONDENT ) DATE OF HEARING: 06.01.2014 DATE OF PRONOUNCEMENT: 27.01.2014 FOR THE REVENUE: SHRI NIRANJAN SATPATI, JCIT, SR. D R FOR THE ASSESSEE: SHRI S. K. TULSIYAN $0 / ORDER PER SHRI MAHAVIR SINGH, JM: THESE APPEALS, OF REVENUE AND ASSESSEE, FOR AY 2005 -06 ARE ARISING OUT OF ORDER OF CIT(A)-XXXVI, KOLKATA IN APPEAL NO. 166/CIT(A)-XXXV I/KOL/37/ACIT,CIR-54/09-10 AND THE APPEAL OF ASSESSEE FOR AY 2004-05 IS ARISING OU T OF ORDER OF CIT(A)-XXXVI, KOLKATA IN APPEAL NO.130/CIT(A)-XXXVI/KOL/37/ACIT,CIR-54/09-10 BOTH DATED 28.06.2010. ASSESSMENTS FOR AY 2005-06 AND AY 2004-05 WERE FRAM ED BY ACIT, CIRCLE-54, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) VIDE HIS SEPARATE ORDERS DATED 24.12.2007 AND 15.12.2006 RESPECTIVELY . 2 ITA NO. 1758-1785-1786/K/2010 RATAN LAL GAGGAR. , AY:2004-05 & 2005-06 2. FIRST, WE WILL TAKE UP ITA NO. 1785/K/2010. AT THE OUTSET, IT IS TO BE MENTIONED THAT BY WAY OF GROUND NOS. 1 AND 2A THE ASSESSEE HAS RAISED ISSUE OF DISALLOWANCE OF CREDIT OF TDS AND DISALLOWANCE OF CAR MAINTENANCE EXPENSES AND DEPREC IATION. BUT AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSESSEE FAIRLY STATED THAT THE ISS UE OF TDS AND DISALLOWANCE OF CAR MAINTENANCE EXPENSES AND DEPRECIATION, ASSESSEE IS NOT INTEREST ED IN PROSECUTING. ON THE OTHER HAND, LD. SR. DR HAS NOT OBJECTED TO THE SAME. 3. AFTER HEARING BOTH THE SIDES, WE PERMIT THE WITH DRAWAL AND DISMISS THE SAME AS NOT PRESSED. 4. COMING TO GROUND NO. 2B, THE ISSUE IS AS REGARDS TO ALLOWANCE OF DEPRECIATION ON BOOKS AND PERIODICALS FOR AN AMOUNT OF RS.1,07,428/-. BR IEFLY STATED FACTS ARE THAT THE AO DISALLOWED A SUM OF RS.1,42,416/- AS COST OF BOOKS AND PERIODI CALS AND ALLOWED A SUM OF RS.95,617/- AS DEPRECIATION ON SUCH ASSETS. THE RELEVANT COMPUTAT ION IN THE ASSESSMENT ORDER IS AS UNDER: ASSETS WDV AS ON 01.04.2003 AS PER ORDER U/S. 143(3) FOR AY 03- 04 COST OF ASSETS USED FOR MORE THAN 180 DAYS COST OF ASSETS USED FOR LESS THAN 180 DAYS TOTAL COST OF ASSETS DEPRECIATION FOR THE YEAR WDV OF BOOKS RS.31,104 RS.41,133 RS.53,735 RS.94,868 RS.59 ,462 RS.66,510 PERIODICALS RS.3,140 RS.17,913 RS.29,605 RS.47,518 RS.36,155 RS.95,617 RS.14,803 THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE ASSESSMENT ORDER FOR AY 2003-04 DATED 22.03.2006 U/S. 143(3) OF THE ACT WHEREIN THE RE IS ERROR WHILE COMPUTING THE WDV CARRIED FORWARD ON SUCH ASSETS. CLOSING WDV READS AS UNDER: ASSET COST OF ASSETS USED FOR MORE THAN 180 DAYS COST OF ASSETS USED FOR LESS THAN 180 DAYS TOTAL COST OF ASSETS DEPRECIATION FOR THE YEAR WDV OF BOOKS 20,555 33,887 54,442 22,499 31,104 ANNUAL PUBLICATIONS 34,344 29,434 63,778 1,18,220 49,061 71,560 3,410 46,660 THE LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THA T THE ABOVE CLEARLY REVEALS THAT THE WDV ARRIVED AT BY DEDUCTING DEPRECIATION FOR THE YEAR F ROM THE TOTAL COST OF ASSETS HAVE BEEN MISTAKENLY COMPUTED BY THE AO AND HE REFERRED TO CO RRECT FIGURES AS PER HIS WRITTEN SUBMISSION AS UNDER: BOOKS ANNUAL PUBLICATIONS TOTAL COST 54,442 63,778 LESS: DEPRECIATION 22,499 31,943 49,061 14,717 3 ITA NO. 1758-1785-1786/K/2010 RATAN LAL GAGGAR. , AY:2004-05 & 2005-06 FROM THE ABOVE FIGURES AND COMPUTATIONS, IT IS CLEA R THAT THE COMPUTATION OF DEPRECIATION ON BOOKS AND PUBLICATIONS HAS TO BE MADE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT USING THE CORRECT WDV. THE CORRECT WDV AS COMPUTED BY THE AS SESSEE AND PRODUCED BEFORE US IN HIS WRITTEN SUBMISSION READS AS UNDER: ASSET WDV AS ON 1.4.2003 AS PER ORDER US. 143(3) COST OF ASSETS USED FOR MORE THAN 180 DAYS COST OF ASSETS USED FOR LESS THAN 180 DAYS TOTAL COST OF ASSETS DEPRECIATION FOR THE YEAR BOOK 31943 41,133 53,735 94,868 59,966 PERIODICALS 14717 17,943 29,605 47,548 47,462 1,07,428 AS THE ASSESSEE HAS PRODUCED COMPLETE AND CORRECT W DV, WE FIND NO REASON TO DISBELIEVE THE SAME. HOWEVER, FOR VERIFICATION PURPOSE, WE SET AS IDE THIS ISSUE TO THE AO AND AO WILL VERIFY THE SAME AND WILL ALLOW THE CLAIM OF ASSESSEE. ACC ORDINGLY, THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 5. NOW, WE ARE COMING TO ITA NO. 1786/K/2010. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS INTER-CONNECTED WITH CROSS APPEAL I.E. ITA NO.1758/K/2010. FOR THE SAKE OF CONVENIENCE, WE WILL DEAL WITH THE ISSUE ONLY WHEN WE WILL DECIDE REVENUES APPEAL IN ITA NO. 1758/K/2010. 6. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF PAYMENTS MADE TO ADVOCATES BY T HE CLIENTS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON- DEDUCTION OF TDS. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 2A, 2B AND 2C. 2A. THE LD. CIT(A) ERRED IN ADDING RS.19,20,785/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 ON TH E PAYMENT MADE TO THE ADVOCATES BY THE CLIENTS OF THE APPELLAT. 2B. THE LD. AO & CIT(A) FAILED TO APPRECIATE THE F ACT THE IMPUGNED PAYMENT TO THE ADVOCATES BY THE APPELLANT WAS NEITHER MADE FROM HI S OWN INCOME NOR DID HE CLAIM THE SAID AMOUNT AS A DEDUCTION IN THE PROFIT & LOSS ACC OUNT WARRANTING THE INVOCATION OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. 2C. THE LD. CIT(A) ERRED IN ADDING RS.19,20,785/- B Y INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 WHEN THE APPE LLANT HAD MADE THE ALLEGED PAYMENTS ON BEHALF OF HIS CLIENTS IN THE CAPACITY O F AN AGENT. 7. BRIEFLY STATED FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS MADE CERTAIN PAYMENT S DURING THE YEAR TO SHRI ABHRAJIT MITRA, ADVOCATE AND 20 OTHER ADVOCATES FOR THEIR SERVICE C HARGES AGGREGATING TO RS.19,20,785/-. 4 ITA NO. 1758-1785-1786/K/2010 RATAN LAL GAGGAR. , AY:2004-05 & 2005-06 ACCORDING TO AO, THE ASSESSEE IS LIABLE TO DEDUCT T DS U/S. 194J OF THE ACT ON THE ABOVE PAYMENTS. AS THE ASSESSEE FAILED TO DEDUCT TDS, TH E AO DISALLOWED THE SUM OF RS.19,20,785/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER: IN THE INSTANT CASE, THE APPELLANT IS AN ADVOCATE. IN THE COURSE OF HIS PROFESSION, THE APPELLANT RECEIVES ADVANCES FROM HIS CLIENTS AND HI RES ADVOCATES FOR DEALING THE CASES, ASSIGNED TO THE APPELLANT BY HIS CLIENTS. AFTER INC URRING EXPENSES LIKE ADVOCATES FEES, PURCHASE OF STAMPS AND OTHER MISCELLANEOUS EXPENSES , THE BALANCE AMOUNT IS RETAINED BY THE APPELLANT TOWARDS HIS PROFESSIONAL FEES. IN OTHER WORDS, THE APPELLANT UNDERTAKES TO RENDER THE REQUIRED PROFESSIONAL SERVICES TO HS CLIENTS. IN THIS REGARD, HE HIRES CERTAIN ADVOCATES FOR THE PURPOSE OF DEALING HIS CL IENTS CASES. THEREFORE, THE PAYMENT MADE BY THE APPELLANT TO THE ADVOCATES, WAS NOT ON BEHALF OF HIS CLIENTS, BECAUSE ONCE HE HAS TAKEN UP THE CASES, OF HIS CLIENTS, IT IS HIS R ESPONSIBILITY TO ATTEND THOSE CASES. IT IS ENTIRELY UP TO THE APPELLANT AS TO WHETHER HE HIMSE LF ATTENDS TO THOSE CASES OR HE HRES, AT HIS DISCRETON, A PARTICULAR ADVOCATE FOR THIS P URPOSE. IN OTHER WORDS THE CLIENTS DO NOT HAVE ANY ROLE IN THE MATTER OF WHOM THE APPELLA NT WILL HIRE FOR THEIR CASE OR WHAT WOULD BE THEIR FEES ETC. IN NUTSHELL ONCE THE CASE IS ASSIGNED TO THE APPELLANT BY HIS CLIENT, THE APPELLANT DEALS WITH THE MATTER AS HE D EEMS FIT. THEREFORE, IT IS CLEAR THAT THE ADVOCATES HIRED BY THE APPELLANT WORK AS PER THE DI RECTIONS OF THE APPELLANT BUT NOT WORK DIRECTLY UNDER THE CLIENTS. CONSIDERING THE ABOVE, THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT AND PUNJAB & HARIYANA HIGH COURT IN T HE CASES REFERRED TO ABOVE, DO NOT APPLY TO THE APPELLANTS CASE. CONSIDERING THE ABOVE, I AM OF THE VIEW THAT THE APPELLANT WAS REQUIRED TO DEDUCT TDS ON THE PAYMENT S MADE TO SHRI ABHRAJIT MITRA AND 20 OTHERS ADVOCATES AS REQUIRED U/S 194J OF THE I . T ACT. SINCE THE APPELLANT DD NOT COMPLY WTH THE PROVISIONS OF SECTION 194J READ WT H 40(A)(IA) OF THE I. T. ACT, L AM OF THE VIEW, THE ASSESSING OFFICER HAS RIGHTLY DISALLO WED THE ABOVE PAYMENTS AGGREGATING TO RS.19,20,785/-. ACCORDINGLY, THE DISALLOWANCE O F RS.19,20,785/- IS CONFIRMED. AGGRIEVED, ASSESSEE CAME IN APPEAL BEFORE US. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE IS AN ADVOCATE AND IN THE COURSE OF HIS PROFESSION ASSESSEE RECEIVED ADVANCES FROM HIS CLIENTS AND IN TURN HIRED ADVOCAT ES FOR DEALING THE CASES ASSIGNED TO THE ASSESSEE BY HIS CLIENTS. NOW WHETHER THE ASSESSEE IS TO DEDUCT TDS ON THE FEES PAID TO THE ADVOCATES TO WHOM HE HAS ASSIGNED THE CASES FOR HIS CLIENTS U/S. 194J OF THE ACT OR NOT. THIS ISSUE HAS BEEN ANSWERED BY A COORDINATE BENCH OF TH IS TRIBUNAL IN THE CASE OF SHARMA KAJARIA & CO. VS. DCIT (2012) 145 TTJ (KOL) 1, WHEREIN THE BENCH HAS HELD AS UNDER: DISALLOANCE UNDER SECTION 40(A)(IA) CAN BE MADE ON LY IN RESPECT OF AN AMOUNT WHICH IS SOUGHT TO BE DEDUCTED UNDER SECTION 30 TO 38 AND NOT IN RESPECT OF REIMBURSEMENT SIMPLICITOR WHICH IS PROFIT NEUTRAL AND ROUTED THRO UGH THE PROFIT & LOSS ACCOUNT: IN VIEW OF THE AVERMENT OF THE ASSESSEE, A FIRM OF SOL ICITORS AND ADVOCATES, THAT THE AMOUNTS PAID BY IT TO THE LAWYERS WITHOUT DEDUCTING TAX AT SOURCE U/S. 194J WERE REIMBURSED BY ITS CLIENTS AND IN THE ABSENCE OF ANY CATEGORICAL FINDING TO THE EFFECT THAT THE SAID PAYMENTS WERE CLAIMED AS DEDUCTION IN THE COMPUTATION OF PROFITS, MATTER IS REMITTED TO AO FOR ADJUDICATION DE NOVO IN ACCOR DANCE WITH LAW. 5 ITA NO. 1758-1785-1786/K/2010 RATAN LAL GAGGAR. , AY:2004-05 & 2005-06 AS IN THE PRESENT CASE ALSO THE ASSESSEE HAS BEEN R EIMBURSED BY ASSESSEES CLIENTS THE AMOUNTS PAID TO THE VARIOUS LAWYERS AND THE AMOUNTS PAID TO THE LAWYERS WERE NEVER CLAIMED AS DEDUCTION. ONCE THIS IS THE POSITION, WE FEEL THAT THIS ISSUE NEEDS RE-EXAMINATION IN THE LIGHT OF THIS DECISION OF TRIBUNAL IN THE CASE OF SHARMA KAJ ARIA & CO. SUPRA. HENCE, WE SET ASIDE THIS ISSUE TO THE FILE OF AO WITH THE DIRECTION TO DECID E THE ISSUE IN TERMS OF THE ABOVE CITED DECISION. THIS ISSUE OF ASSESSEES APPEAL IS ALLOW ED FOR STATISTICAL PURPOSES. 9. THE NEXT ISSUE IS AS REGARDS TO THE DISALLOWANCE OF TELEPHONE CHARGES AT RS.11,160/- AND FURTHER ISSUE I.E. DISALLOWANCE OF DEPRECIATION OF RS.25,268/- ON ESTIMATE BASIS. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 3 AND 4: 3. THE LD. CIT(A) ERRED IN DISALLOWING TELEPHONE C HARGES OF RS.11,160/- ON AN ESTIMATE BASIS. 4. THE LD. CIT(A) ERRED IN DISALLOWING DEPRECIATION ON MOTOR CAR OF RS.25,268/- ON ESTIMATE BASIS. 10. WE FIND THAT THE AO AS WELL AS CIT(A) HAS CONFI RMED THE DISALLOWANCE AT 10% OF THE TELEPHONE EXPENSES AND DEPRECIATION ON CAR AND ACCO RDING TO US WHICH IS QUITE REASONABLE BECAUSE THERE IS NO DENIAL OF PERSONAL USES. HENCE , WE CONFIRM THE ORDER OF CIT(A) AND THESE TWO ISSUES OF ASSESSEES APPEAL ARE DISMISSED. 11. NOW, COMING TO ITA NO. 1758/K/2010. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) IN RESTRICTING THE ADDI TION AT RS.12,56,200/- BEING ADVANCE RECEIVED IN CASH. FOR THIS, REVENUE HAS RAISED THE FOLLOWIN G GROUND NO.1: LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO THE EXTENT OF RS.12,56,200/- IN PLACE OF RS.1,25,62,006/- BEING ADVANCE RECEIVED IN CASH SYS TEM OF ACCOUNTS. IN CASH SYSTEM OF ACCOUNTING AS IN THE INSTANT CASE NOMENCLATURES SUCH AS ADVANCE/RECEIPTS HAS NO RELEVANCE AND EVERY SUCH ADVANCE/RECEIPT CAN ONLY BE TREATED AS INCOME IN THE HANDS OF SUCH RECIPIENTS (FOLLOWING THE CASH SYSTEM OF ACCOUNTING). AND ALSO THE ASSESSEE IN ITA NO. 1786/K/2010 HAS CH ALLENGED THE RESTRICTION AT 10% VIDE GROUND NO.1 AS UNDER: THE LD. CIT(A) ERRED IN ADDING 10% OF THE ADVANC ES RECEIVED FROM THE CLIENTS TO THE INCOME OF THE APPELLANT ON AN ARBITRARY BASIS WHEN THE APPELLANT ALREADY RECOGNIZES THOSE ADVANCES AS INCOMES IN RESPECT OF MATTERS FINALIZED BY THEM IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. AS THERE IS A CROSS APPEAL ON BOTH THE ISSUE BY ASS ESSEE AND REVENUE, WE WILL DECIDE THIS ISSUE OF BOTH APPEALS TOGETHER. BRIEFLY STATED FACTS LEA DING TO THE ABOVE ISSUE ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT ASSESSEE HAS SHOWN A SUM OF RS.1,25,62,006/- AS ADVANCES (LIABILITY) FROM THE CLIENTS. ACCORDING T O AO, ASSESSEE IS FOLLOWING CASH SYSTEM OF 6 ITA NO. 1758-1785-1786/K/2010 RATAN LAL GAGGAR. , AY:2004-05 & 2005-06 ACCOUNTING, HENCE, THE ADVANCES ARE ALSO IN THE NAT URE OF REVENUE RECEIPT, THEREFORE, HE TREATED THE SAME AS INCOME FOR THE RELEVANT AY 2005-06. AG GRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO RESTRICTED THE INCOME AT 10% OF ADVANCE AS DISCLOSED IN THE BALANCE SHEET AND THEREBY RESTRICTED THE ADDITION AT RS.12,56,200/- A S AGAINST THE ADDITION MADE BY AO AT RS.1,25,62,005/- BY OBSERVING AS UNDER: ON CAREFUL CONSIDERATION OF THE ABOVE, I AM ALSO O F THE VIEW THAT THE RECEIPT OF ADVANCES DOES NOT AUTOMATICALLY BECOME INCOME UNLESS THE REC IPIENT PERFORMS HIS/HER PART OF THE CONTRACT. EVEN IF THE ASSESSEE IS FOLLOWING CASH SY STEM OF ACCOUNTING, IN MY VIEW, THE RECEIPT OF ADVANCES DOES NOT AUTOMATICALLY INCOME. SIMILAR ISSUE, IN THE CASE OF SOLICITORS, (WHERE THE ASSESSEE WAS ENGAGED IN THE LEGAL PROFESSION) CAME FOR CONSIDERATION BEFORE THE HON'BLE HIGH COURT OF KOLK ATA IN THE CASE OF SANDERSONS AND MORGANS REFERRED TO BOVE. THE HONBLE HIGH COURT OF KOLKATA HAS HELD AS UNDER :- SINCE THE MONEY SO RECEIVED WAS IMPRESSED WITH THE CHARACTER OF PRICE, FROM THE INCEPTION, THE CONTINGENCY THAT THE PART OF THE MONEY WAS REFUNDABLE DID NOT CHANGE THE CHARACTER OF THE UNREFUNDED MONEY. T HE RECEIPT THUS CONSTITUTED TRADING RECEIPT. IN THE INSTANT CASE, WE HAVE ALREA DY OBSERVED, THE MONEY RECEIVED WAS MONEY OF THE PRINCIPAL RECEIVED BY THE AGENT IN A FIDUCIARY CAPACITY, FOR BEING EMPLOYED FOR THE WORK OF THE PR INCIPAL ENTRUSTED TO THE AGENT. WE HAVE ALREADY SEEN THAT THE BALANCE OF THE MONEY WAS REFUNDABLE BY THE AGENT TO THE PRINCIPAL. SINCE THE MONEY WAS IMP RESSED WITH THE CHARACTER OF SOMEBODY ELSES MONEY, NAMELY, CLIENTS MONEY, IT DI D NOT BECOME THE INCOME OF THE ASSESSEE. IT MAY BE, N THE ABSENCE OF A RULE L IKE THE SOLICITORS ACCOUNT RULES IN THIS COUNTRY, THE ASSESSEE MIXED UP THIS M ONY WITH ITS OWN MONEY AND MAY HAVE DEPOSITED THE MONEY IN ITS OWN BANK ACCOUN T; IT MAY BE THAT THIS MONY REMAINED PART OF THE GENERAL ASSETS OF THE ASS ESSEE FOR A LONG TIME; BUT THIS MIXING UP DID NOT HAVE THE RESULT OF CONVERTIN G THE MONEY INTO THE ASSESSEES MONEY OR TRADING RECEIPT OR INCOME. AS CAN BE SEEN FROM THE ABOVE, IT IS CLEAR THAT TH E ADVANCES (BALANCES ) SHOWN AS A LIABILITY AS AT 31.03.2005, WAS NOT ENTIRELY RECEV ED DURING THE PREVIOUS YEAR. IN OTHER WORDS THE ADVANCES RECEIVED IN THE EARLIER PREVIOUS YEAR ALSO WERE FORMNG PART OF THE BALANCES AS ON 31.03.2005. CONSIDERING ALL, IN MY V IEW, TREATING ADVANCES RECEIVED FROM THE CLIENTS AS A TRADING RECEIPT IS NOT CORREC T. THUS, THE ONLY ISSUE TO BE EXAMINED IS, WHETHER OR NOT THE APPELLANT (AFTER RENDERING HIS SERVICES) WHILE RECOGNIZING INCOME, OUT OF ADVANCES RECEIVED, HAS POSTPONED TAX LIABILITY TO THE SUBSEQUENT YEAR. BECAUSE IT S POSSIBLE THAT SOME OF THE ASSESSEES AFTER RENDERING SERVICES, MAY RISE BILLS IN THE SUBSEQUENT ACCOUNTI NG YEAR AND THEREBY POSTPONE THEIR TAX LABILITY TO THE NEXT YEAR. HOWEVER, IN THE INSTANT CASE, THE ASSESSING OFFICER HAS NOT MADE OUT ANY CASE THAT THE APPELLANT SOUGHT TO POST PONE THE TAX LIABILITY. HOWEVER, THE AUTHORIZED REPRESENTATIVE OF THE APPEL LANT ALSO DID NOT FURNISH ALL THE DETAILS TO SUBSTANTIATE THAT THE APPELLANT RECOGNIZ ED INCOME, CURRENTLY, OUT OF THE ADVANCES RECEIVED, ONLY IN RESPECT OF THE MATTERS F INALZED BY THEM IN THE PREVIOUS YEAR. IN OTHER WORDS, THE A/R DID NOT FURNISH DETALS TO SUBSTANTIATE THAT THE APPELLANT DID NOT RESORTED TO ANY POSTPONING OF TAX LIABILITY BY RAIS ING BILLS IN THE NEXT PREVIOUS YEAR, IN RESPECT OF THE SERVICES RENDERED DURING THE PREVIOU S YEAR RELEVANT FOR THE ASSESSMENT YEAR 2005-06. CONSIDERING ALL, RESPECTFULLY FOLLOWI NG THE DECISION OF THE HONBLE HIGH COURT OF KOLKATA IN THE CASE OF M/S. SANDERSONS AND MORGANS AND ALSO CONSIDERING THE FACTS THAT THE APPELLANT DID NOT FURNISH THE COMPLE TE DETAILS SUBSTANTIATING THAT NO INCOME ACTUALLY ARISING IN THE PREVIOUS YEAR WAS PO STPONED TO THE NEXT YEAR. I AM OF THE 7 ITA NO. 1758-1785-1786/K/2010 RATAN LAL GAGGAR. , AY:2004-05 & 2005-06 VIEW THAT TREATING 10% OF THE ADVANCES SHOWN AS LIA BILITY IN THE BALANCE SHEET AS ON 31.03.2005 AT RS.1,25,62,005/- AS INCOME ACCRUED IN THE PREVIOUS YEAR RELEVANT FOR THIS ASSESSMENT YEAR WOULD BE FAIR. ACCORDINGLY, THE AO IS DIRECTED TO RESTRICT THE ADDITION TO RS.12,56,200/- IN PLACE OF RS.1,25,62,005/-. AGGRIEVED, BOTH THE ASSESSEE AND REVENUE CAME IN AP PEAL BEFORE US. 12. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. THE ADMITTED FACTS ARE THAT THE ASSESSEE IS AN ADVO CATE WHO MAINTAINS CASH SYSTEM OF ACCOUNTING. FURTHER FACTS ARE THAT ASSESSEE RECEIV ED ADVANCES FROM CLIENTS AND THE SAME IS DECLARED AS LIABILITY IN THE BALANCE SHEET. THE AS SESSEE ALSO MAINTAINS CLIENT DEPOSIT ACCOUNT IN HIS BOOKS OF ACCOUNT, WHERE THE AMOUNT COLLECTED FR OM CLIENTS ARE KEPT AS AN IMPRESSED AND THESE AMOUNTS ARE TO MEET THE EXPENDITURE INCURRED ON BEHALF OF THE CLIENTS. IT IS ALSO A FACT THAT THE ASSESSEE IS MAINTAINING CASH SYSTEM OF ACCOUNTI NG ON ACTUAL RECEIPTS AND PAYMENT BASIS BUT ADVANCES RECEIVED FROM CLIENTS IS A LIABILITY OF TH E ASSESSEE. ACCORDING TO US, ADVANCES RECEIVED FROM CLIENTS DO NOT BECOME HIS INCOME UNLESS ASSESS EE RENDERS HIS PROFESSIONAL SERVICES AND BILLS FOR THE SAME ARE RAISED. MERELY THAT THE ASSE SSEE FOLLOWED CASH SYSTEM OF ACCOUNTING DOES NOT MEAN THAT ANY SUM RECEIVED AS ADVANCE FOR HIS F UTURE USE BECOMES HIS INCOME. THIS VIEW OF OURS IS ALSO SUPPORTED BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. SANDERSONS & MORGANS (1970) 75 ITR 433 (SC), WHEREIN IT IS HELD AS UNDER: WHEN A SOLICITOR RECEIVES MONEY FROM HIS CLIENTS, HE DOES NOT TO DO SO A TRADING RECEIPT BUT HE RECEIVES THE MONEY OF THE PRINCIPAL IN HIS CAPACITY AS AN AGENT AND THAT TOO IN A FIDUCIARY CAPACITY. THE MONEY THUS RECEIV ED DOES NOT HAVE ANY PROFIT MAKING QUALITY ABOUT IT WHEN RECEIVED. IT REMAINS MONEY R ECEIVED BY A SOLICITOR AS CLIENTSS MONEY FOR BEING EMPLOYED IN THE CLIENTS CAUSE. TH E SOLICITOR REMAINS LIABLE TO ACCOUNT FOR THIS MONEY TO HIS CLIENT. THE FACT THA T THE MONEY WAS PAID TO THE SOLICITOR BY A CLIENT WILL NOT MAKE ANY DIFFERENCE, IF INITIA LLY THE MONEY WAS NOT RECEIVED AS A TRADE RECEIPT. IN VIEW OF THE ABOVE, WE FEEL THAT EVEN 10% RESTRIC TED BY CIT(A) AS INCOME IS WITHOUT ANY BASIS AND WE DELETE THE ENTIRE ADDITION. 13. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THAT OF REVENUE IS DISMISSED. 14. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27.01. 2014 SD/- SD/- . . . . ' '' ''# '#'# '# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27TH JANUARY, 2013 12 '3' 4 JD.(SR.P.S.) 8 ITA NO. 1758-1785-1786/K/2010 RATAN LAL GAGGAR. , AY:2004-05 & 2005-06 $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT ACIT, CIRCLE-54, KOLKATA. 2 ./,- / RESPONDENT RATAN LAL GAGGAR, 6, OLD POST OFFICE STREET, KOLKATA- 700 001. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .