SHASHANK RAKESH AGRAWAL, GUJRAT V. ITO WD 11(3)(3), MUMBAI

ITA 369/MUM/2014

• Counselvise Citation: 36919914 RSA 2014
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 15-01-2014
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR BORA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO . 369 / MUM/20 1 4 ( / ASSESSMENT YEAR : 200 9 - 2010 ) SHASHANK RAKESH AGRAWAL, B - 102, 10 TH FLOOR, ORCHID WOODS, OPP. DIVYA BHASKAR PRESS, PRAHLADNAGAR CORPORATE ROAD, AHMEDABAD, GUJARAT - 380051 VS. ITO WD - 11(3)(3), MUMBAI ./ ./ PAN/GIR NO. : A FWPA 4640 M ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI SATISH R.MOD Y /REVENUE BY : SHRI VIJAY KUMAR BORA / DATE OF HEARING : 22 /0 6 / 2015 / DATE OF PRONOUNCEMENT 19/08 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) , MUMBAI FOR THE ASSESSMENT YEAR 2009 - 10 IN THE MATTER OF IMPOSITION OF PENALTY U/S.271B OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACT S IN BRIEF ARE THAT THE ASSESSEE IS AN ADVOCATE ADVISING HIS CLIENTS ON LEGAL ISSUES AND LAWS TO DO BUSINESS IN INDIA MORE PROMINENTLY IN THE SHIPPING INDUSTRY. IN THE EVENT OF DISPUT E, DURING THE SALE OF SHIPS, THE ASSESSEE APPEARED FOR THE CLIENT BEFORE THE GUJARAT AND BOMBAY HIGH COURT AND ITA NO. 369 /1 4 2 ARRANGED FOR RELEASE OF THE SHIP FROM ARREST DETENTION. THE ASSESSEE ALSO APPEAR ED BEFORE THE DIRECTORATE OF REVENUE INTELLIGENCE (DRI), INTELLIGE NCE BUREAU (IB) AND CUSTOMS & CENTRAL EXCISE FOR ALL SHIP REVENUE RELATED ITEMS. 3. THE ASSESSEE HAS RAISED THE SEPARATE INVOICES ON THE CLIENTS TOWARDS THE PROFESSIONAL RECEIPTS AND THE REIMBURSEMENT OF EXPENSES. THE SAME HAS ALSO BEEN SEPARATELY ACCOUN TED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. THE AO OBSERVED THAT AMOUNT RECEIVED AS REIMBURSEMENT OF EXPENSES ALSO CONSTITUTE ASSESSEES TURN OVER AND AFTER INCLUDING THE SAME, TURNOVER/GROSS RECEIPTS OF THE ASSESSEE EXCEEDS RS. 10 LAKHS WHICH IS LIABLE TO TAX AUDIT U/S. 44AB. AS THE ASSESSEE HAS NOT GOT ITS ACCOUNT AUDITED THE AO LEVIED PENALTY U/S. 271B OF RS. 62,280/ - . BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE ASSESSEE IS AN ADVOCATE WHO WAS IN RECEIPT OF PROFESSIONAL FEES WHICH WAS AMOUNTED TO RS. 8,20,871/ - . DURING THE COURSE OF RENDERING ITS SERV ICES, THE ASSESSEE HAS INCURRED CERTAIN EXPENDITURE ON BEHALF OF CLIENTS WHICH WAS REIMBURSED BY THE CLIENTS. THE AO TAKEN THE AMOUNT OF REIMBURSEMENT OF EXPENSES AS ASSESSEES RECEIPT IN THE NATURE OF INCOME AND OBSERVED THAT AFTER ADDING THE AMOUNT OF EXPENSES REIMBURSED THE TOTAL RECEIPTS EXCEEDS RS. 10 LAKHS, THEREFORE, THE ASSESSEE WAS LIABLE TO GET ITS ACCOUNT AUDITED U/S.44AB. AS PER OUR CONSIDERED VIEW THE GROSS RECEIPTS/INCOME ITA NO. 369 /1 4 3 OF THE ASSESSEE BEING AN ADVOCATE DO NOT INCLUDE THE AMOUNT RECEIVED A S REIMBURSEMENT O F ACTUAL EXPENDITURE INCURRED ON BEHALF OF CLIENTS. T HE RELEVANT PARAGRAPH EXTRACTED FROM THE 'GUIDANCE NO T E ON TAX AUDIT', ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA READS AS UNDER : - 'IN THE CASE OF A PROFESSIONAL, THE EX PRESSION 'GROSS RECEIPTS' IN PROFESSION WOULD INCLUDE ALL RECEIPTS ARISING FROM CARRYING ON OF THE PROFESSION. A QUESTION MAY, HOWEVER, ARISE AS TO WHETHER THE OUT OF POCKET EXPENSES RECEIVED BY HIM SHOULD FORM PART OF HIS GROSS RECEIPTS FOR PURPOSE OF THI S SECTION. NORMALLY, IN THE CASE OF SOLICITORS, ADVOCATES OR CHARTERED ACCOUNTANTS, SUCH OUT OF POCKET EXPENSES RECEIVED IN ADVANCE ARE CREDITED IN A SEPARATE CLIENT'S ACCOUNT AND UTILIZED FOR MAKING PAYMENTS FOR STAMP DUTIES, REGISTRATION FEES, COUNSEL'S. FEES' TRAVELLING EXPENSES ETC. ON BEHALF OF THE CLIENTS. THESE AMOUNTS, IF COLLECTED SEPARATELY EITHER IN ADVANCE OR OTHERWISE, SHOULD NOT FORM PART OF GROSS RECEIPTS.' IF, HOWEVER, SUCH OUT OF POCKET EXPENSES ARE NOT SPECIALLY COLLECT ED BUT ARE INCLUDE/C OLLECTED BY WAY OF A CONSOLIDATED FEE, THE WHOLE OF THE AMOUNT SO COLLECTED SHALL FORM PART OF GROSS RECEIPTS AND NO ADJUSTMENT SHOULD BE MADE IN RESPECT OF ACTUAL EXPENSES PAID BY THE PROFESSIONAL PERSON FOR AND/OR ON BEHALF OF HIS CLIENTS OUT OF THE GROS S FEES SO COLLECTED. HOWEVER, THE AMOUNT RECEIVED BY WAY OF ADVANCE FOR WHICH SERVICE ARE YET TO BE RENDERED WILL NOT FORM PART OF THE RECEIPTS, AS SUCH ADVANCES ARE THE LIABILITIES OF THE ASSESSEE AND CANNOT BE TREATED AS HIS RECEIPTS TILL THE SERVICES AR E RENDERED. LOOKING AT THE NATURE OF PROFESSIONAL ACTIVITY OF THE ASSESSEE, A LOT OF TRAVELLING EXPENSES AND OUT OF POCKET EXPENSES ON SALARIES, PROFESSIONAL ADVICES FROM OTHER ADVOCATES STATIONERY, ETC IS REQUIRED TO BE INCURRED AND TOWARDS THESE EXPENS ES THE ASSESSEE HAS RECEIVED THE AMOUNT IN ADVANCE FOR INCURRING THE EXPENSES. HOWEVER, THIS REIMBURSEMENT DO NOT FORM PART OF ASSESSEES INCOME, THEREFORE, SAME IS NOT LIABLE TO BE ADDED IN THE GROSS INCOME TO FIND OUT ASSESSEES OBLIGATION TO GET ITS ACC OUNT AUDITED U/S.44AB. AS THE GROSS RECEIPTS OF THE ASSESSEE IS ONLY RS. 8,20,871/ - , WE DO NOT FIND ANY MERIT IN THE ACTION OF THE AO FOR ITA NO. 369 /1 4 4 IMPOSING PENALTY U/S.271B OF THE ACT ON THE PLEA THAT REIMBURSEMENT OF THE EXPENSES ALSO CONSTITUTE ASSESSEES INCOME. 5 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 19/08 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 19/08 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6 . / GUARD FILE. //TRUE COPY//