Late Sh. Rajendra Mehta Th. L/H, JODHPUR V. DCIT, JODHPUR

ITA 42/JODH/2011

• Counselvise Citation: 4223314 RSA 2011
• Duration Of Justice: 3 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 15-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Principle of natural justice; Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA , JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 42 / JU/ 20 1 1 ASSESSMENT YEAR: 200 7 - 0 8 LATE SHRI RAJENDRA MEHTA VS. THE DY. C.I.T THROUGH L/H SMT RITA MEHTA RANGE - 3 LAMBIA HOUSE, MAKRANA MOHALLA JODHPUR JODHPUR PAN NO. A AVPM 3306 Q (APPELLANT) (RESPONDENT) A SSESSEE B Y : SHRI AMIT KOTHARI DEPARTMENT B Y : SHRI N.A. JOSHI , DR DATE OF H EARING : 04 . 0 8 .201 4 DA TE OF PRONOUNCEMENT : 28 . 0 8 . 201 4 ORDER PER HARI OM MARATHA , J .M. TH IS APPEAL HAS BEEN FILED BY THE ASSESSEE FOR A.Y 200 7 - 200 8 A GAINST THE ORDER OF THE CIT (A) , JODHPUR DATED 2 4 . 12 .20 1 0 . 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSES SEE WAS AN ADVOCATE AND RETURN OF INCOME [ROI] HAS BEEN FILED BY HIS LEGAL HEIR FOR A.Y. 200 7 - 0 8 DISCLOSING TOTAL PROFESSIONAL RECEIPTS AT RS. 59,56,617 / - . THE ASSESSEE WAS ALSO IN RECEIPT OF RENTAL INCOME, BANK INTEREST, DIVIDEND ON SHARES AND INTEREST O N FDRS/NSC ETC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. OBSERVED THAT I N THE DEPRECIATION CHART THE ASSESSEE HAS SHOWN ADDITION DURING THE YEAR ON ACCOUNT OF VACUUM CLEANER AT RS.10,200/ - . IN THIS REGARD THE ASSESSEE COULD PRODUCE DOCUME NTARY EVIDENCE ONLY FOR A SUM OF RS.8,200/ - . THEREFORE, THE A.O. DID NOT ALLOW DEPR ECIATION ON BALANCE SUM OF RS.2000/ - @ 15% AT RS.300/ - . THUS A SUM OF RS.300/ - WA S DISALLOWED OUT OF DEPRECIATION ON VACUUM CLEANER AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 2.1 FURTHER, THE A.O. NOTICED THAT I N THE I NCOME AND EXPENDITURE ACCOUNT THE ASSESSEE HAS DEBITED A SUM OF RS.2,16,782/ - UNDER THE HEAD INTEREST ON HOUSE LOAN . T HE ASSESSEE HAD TAKEN A LOAN FROM IDBI BANK TO THE TUNE OF RS.25 ,90,355/ - . THIS LOAN WAS TAKEN ON A PLOT FOR CONSTRUCTION OF HOUSE, BUT THE HOUSE HAS NOT BEEN 3 CONSTRUCTED DURING THE YEAR UNDER CONSIDERATION. THE A.O. OBSERVED THAT A S THE LOAN TAKEN BY THE ASSESSEE WAS NOT RELATED TO ITS PROFESSION/BUSINESS, THEREFORE PAYMENT OF INTEREST EXPENDITURE THEREON IS NOT ALLOWABLE FROM THE INCOME OF PROFESSION. FURTHER AS THE CONSTRUCTION OF HOUSE HAS NOT BEEN COMPLETED DURING THE RELEVANT FINANCIAL YEAR, THEREFORE, BENEFIT OF INTEREST PAYMENT ON HOUSING LOAN WA S ALSO NOT AL LOWABLE TO THE ASSESSEE. THEREFORE, THE A.O. DISALLOWED INTEREST PAYMENT OF RS.2,16, 782/ - ADDED IN THE TOTAL INCOME OF THE ASSESSEE. 2.2 THE A.O. FURTHER NOTICED THAT FRO M THE P&L ACCOUNT THE ASSESSEE HAS DEBITED MOBILE EXPENSES AT RS.75,305 / - AND P ETROL AND REPAIR EXPENSES OF RS. 1,05,103 / - . THE A.O. OBSERVED THAT THE EXPENSES CLAIMED UNDER THE H EAD PETROL AND REPAIR EXPENSES WERE PARTLY VOUCHED AND OUT OF THE AVAILABLE VOUCHERS MOST OF THE M WERE SELF - MADE AND HENCE WERE NOT VERIFIABLE. FURTHER, INVOLV EMENT OF ELEMENT OF PERSONAL NATURE IN THESE EXPENSES C OULD NOT BE DENIED. HENCE, IN ORDER TO COVER UP ELEMENT OF UNVERIFIABLE AND PERSONAL NATURE, A DISALLOW ANCE OF RS.15,000/ - OUT OF MOBILE EXPENSES, AN D RS.20,000/ - OUT OF PETROL AND REPAIR EXPENSES WAS MADE. THUS, 4 TOTAL DISALLOWANCE OF RS.35,000/ - WAS MADE AND ADDED TO THE INCOME OF THE ASSESSEE. THE A.O. FURTHER NOTICED THAT THE ASSESSEE HAD RECEIVED A INCOME - TAX REFUND OF RS.43 , 586/ - FOR THE A.Y. 2006 - 07 WHICH WAS INCLUD ED INTEREST OF RS.1, 676/ - . T HE ASSESSEE HA D NOT SHOWN THIS INTEREST INCOME IN HIS RELEVANT INCOME - TAX RETURN. THEREFORE, THE A.O. ADDED THE SUM OF RS. 1, 676/ - IN THE TOTAL INCOME OF THE ASSESSEE. 2.3 FURTHER , WHILE GOING THROUGH THE CAPITAL ACCOUNT OF THE ASSESSEE IT WAS NOT ICED BY THE A.O. THAT THERE WAS A RECEIPT OF RS.6,74,275/ - UNDER THE HEAD AOP ACCOUNT . T HE ASSESSEE HA D NOT SHOWN THIS RECEIPT IN ITS COMPUTATION FOR THE PURPOSE OF TAXATION. ON BEING ASKED THE AR OF THE ASSESSEE EXPLAINED THAT THIS RECEIPT RELAT ED TO W ORK/ PROFESSIONAL SERVICES PROVIDED BY THE ASSESSEE BEFORE HIS DEATH AND THE REMUNERATION/ CONSULTATION CHARGES/ FEES RECEIVED BY HIS FAMILY AFTER HIS DEATH. THE ID. AR VIDE HIS LETTER DATED 14.12.2009 HAS FURTHER ARGUED AS UNDER: ''THE ASSESSEE HAD EXPIR ED DURING THE YEAR UNDER CONSIDERATION ON 201'1 FEBRUARY, 2007, AND THEREFORE ALL 5 COLLECTIONS IN HIS ACCOUNT AFTER THE SAID DATE HAD BEEN RECORDED AS RAJENDRA MEHTA AOP, AND CREDITED IN THE SEPARATE ACCOUNT. YOUR KIND ATTENTION IS INVITED TOWARDS DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. JUSTICE R.M. DUTTA (1989) 180 ITR 86 (CAL) IN WHICH IT WAS HELD THAT WHERE THE FEES IS RECEIVED BY THE ASSESSEE AFTER BEING ELEVATED TO THE HIGH COURT, THE SAME CANNOT BE TAXED AS BUSINESS INCOME OF THE ASSESSEE. APPLYING THE CALCUTTA HIGH COURT DECISION IN CIT V. JUSTICE R.M. DU T TA (1989; 180 ITR 86; CAL), THE INCOME - TAX APPELLATE TRIBUNAL BENCH, KOLKATA, HAS DECIDED IN DEPUTY CIT V. JUSTICE O.K. SETH (2006;98 ITD 241; KOL) THAT PROFESSIONAL RECEIPTS O F A PRACTICING ADVOCATE FOLLOWING THE CASH SYSTEM OF ACCOUNTING CANNOT BE TAXED AS INCOME UNDER THE CHARGING SECTIONS OF THE INCOME - TAX ACT - 28 OR 56 OR EVEN UNDER 176(4) - AFTER HIS ELEVATION AS A JUDGE. ON THE ISSUE OF TAXABILITY, THE TRIBUNAL HELD TH AT THE MONEY WAS NOT TAXABLE UNDER SECTIONS 28,56 OR 176(4) IN VIEW OF THE CALCUTTA HIGH COURT'S DECISION IN THE R.M. DUTTA CASE (SUPRA). THE HIGH COURT HAD RELIED ON TWO SUPREME COURT DECISIONS. ONE, THE NALINIKANT AMBALAL MODY CASE (1966; 61 ITR 428; SC) , WHERE IN THE CONTEXT OF THE PROVISIONS IN THE IT ACT 1922, IT WAS HELD THAT AN INCOME RECEIVED BY AN ASSESSEE, WHO KEPT HIS ACCOUNTS ON CASH BASIS, IN ACCOUNTING YEAR IN WHICH THE PROFESSION HAD NOT BEEN CARRIED ON AT ALL WAS NOT CHARGEABLE TO TAX. NOR C OULD THE RECEIPTS BE BROUGHT TO LAX UNDER SECTION 12 AS 'INCOME FROM 6 OTHER SOURCES.' AS THE HEADS OF INCOME WERE MUTUALLY EXCLUSIVE AND THE RECEIPTS COULD BE BROUGHT UNDER THE FOURTH HEAD THEY COULD NOT BE BROUGHT UNDER THE RESIDUAL HEAD ' INCOME FROM OTHE R SOURCES'. TWO, THE D.P. SANDHU BROS CHEMBUR (P) LTD CASE (2005;273 ITR - 1;SC) WHEREIN IT WAS HELD THAT IF A PARTICULARS INCOME COULD NOT BE TAXED UNDER SECTION 45 THEN IT COULD NOT OTHERWISE BE TAXED UNDER SECTION 56 OR IT COULD NOT BE TAXED AT ALL. ' 2. 4 AFTER CONSIDERING THE SUBMISSIONS OF THE LD. A.R., THE A.O. HAS COME TO THE CONCLUSION AS UNDER: I HAVE GONE THROUGH THE ARGUMENTS PUT FORTH BY THE AR AND FOUND THAT THE SAME ARE NOT ACCEPTABLE. THE ID. AR HAS ALSO QUOTED VARIOUS DECISIONS IN HIS S UPPORT, BUT IT IS FOUND THAT THE SAME ARE NOT QUITE IDENTICAL AND FACTS AND CIRCUMSTANCES ARE DIFFERENT FROM THIS CASE AND THEREFORE NOT APPLICABLE IN THIS CASE. IN THIS REGARD IT WILL NOT OUT OF PLACE TO MENTION THAT THE AOP OF ANY FAMILY CANNOT CONSTITUT E AUTOMATICALLY, FOR CREATING AN AOP CERTAIN FORMALITIES ARE REQUIRED. REGARDING THE FORMATION OF AOP THE AR OF THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT IS NOTICED THAT THE ASSESSEE/ H IS LEGAL HEIR HAS NOT FILED ANY RETURN OF ALLEGED AOP SO AS TO SHOWN SAID RECEIPT IN THAT RETURN. THEREFORE, THE 7 RECEIPTS SHOWN IN THE CAPITAL ACCOUNT OF THE ASSESSEE WHICH STATED TO BE RECEIVED ON ACCOUNT OF AOP HAS NEITHER BEEN ASSESSED TO TAX IN THE HAN DS OF THE ASSESSEE NOR IN THE CAPACITY OF AOP. THUS, KEEPING IN VIEW THE ABOVE FACTS AND CIRCUMSTANCES THE RECEIPT SHOWN IN CAPITAL ACCOUNT OF ASSES SEE UNDER THE HEAD AOP AT RS.6, 74,275 / - IS ADDED IN THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSES SEE FILED APPEAL AND THE LD. CIT(A) HAS NOT FOUND FAVOUR WITH HIM AND HAS SUSTAINED THE IMPU GNED ADDITIONS . 2.5 AGAINST THIS CONFIRMATION, THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE APPELLATE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS: 1. THE ID. CIT (A) HAS ERRED IN SUSTAINING THE ORDER U/S 143(3) MADE BY ID. A.O . THE ORDER SO PASSED IS BAD IN LAW AND BAD ON FACTS. THE IMPUGNED A SSESSMENT ORDER PASSED BY ID. ACIT IS PATENTLY INVALID, UNJUSTIFIED AND IS CONTRARY TO THE PROVISIONS OF LAW, CONTRARY TO AL L CANNONS OF NATURAL JUSTICE AND CONTRARY TO FACTS, MATERIAL AND EVIDENCE EXISTING ON RECORDS. 2. THE ID. CIT(A) HAS ERRED IN NOT ALLOWING THE DEDUCTION IN RESPECT OF INTEREST EXPENDITURE OF RS. 8 2,16,782 / - PAID TO IDBI BANK. THE SAID DISALLOWANCE IS ALSO CONTRARY TO THE PROVISIONS OF LAW AND IS MOST UNJUSTIFIED. 3. THE ID. CIT(A) HAS ALSO ERRED IN SUSTAINING DISALLOWA NCE OF EXPENSES FOR RS. 15000/ - OUT OF MOBILE EXPENSES, RS. 20000 / - OUT OF PETROL EXPENDITURES, AND RS. 300 / - OUT OF DEPRECIATIO N CLAIMED BY THE ASSESSEE. 4. THE ID. CIT (A) HAS ALSO UPHOLDING THE ADDITION MADE BY THE ACIT TOWARDS THE AMOUNT OF RS. 1,676 / - FOR INTEREST ON INCOME TAX REFUND. 5. THE ID. CIT (A) HAS ALSO GROSSLY ERRED IN NOT CONSIDERING' AGAINST THE ADDITION OF RS . 6,75,275 / - MADE FOR THE AMOUNT OF FEE FOR PROFESSIONAL SERVICES, RECEIVED BY THE LEGAL HEIR AFTER THE DEATH OF THE ASSESSEE. NO AMOUNT OF INCOME RECEIVED AFTER DEATH CAN BE ASSESSED TO TAX IN T HE HANDS OF THE DECEASED. THE ADDITION OF THE AFORESAID INCOM E IN THE HANDS OF THE DECEASED ASSESSEE IS CONTRARY TO THE PROVISIONS OF LAW, CONTRARY TO ALL CANONS OF NATURAL JUSTICE AND IS ALSO CONTRARY TO CATENA OF JUDGEMENT. 9 6. THE ID. CIT(A) HAS ALSO ERRED IN SUSTAINING CHARGING OF INTEREST U/S 234 B AND234D. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. AFTER CONSIDERING THE FACTUAL MATRIX OF THIS CASE, WE HAVE FOUND THAT THE MAIN ISSUE OF THIS APPEAL WHICH WAS ARGUED AT LENGTH IS THE SUBJECT MATTER OF GROUND NO. 5. THE LD. A.R HAS PRODUCED THE FOLLOWING DETAILED WRITTEN SUBMISSIONS IN THIS REGARD, WHICH READS VERBATIM, THUS: THE APPELLANT RESPECTFULLY FURTHER SUBMITS FOLLOWING FACTS AND DETAILS FOR YOUR HONOUR'S KIND CONSIDERATION IN RELATION TO GR. NO. 5 R AISED IN THE GROUNDS OF APPEAL : GR. NO. 5 : ADDITION OF RS.6,75,275/ - ON ACCOUNT OF FEES RECEIVED AFTER DEATH BY THE LEGAL HEIRS. 1. THE APPELLANT RESPECTFULLY SUBMITS THAT THE APPELLANT EXPIRED 20 TH FEBRUARY, 2007. THEREFORE THE ASSESSMENT IN T HE CASE OF THE APPELLANT WOULD BE MADE TILL THE DATE OF HIS DEATH. THE TAXABLE INCOME IF ANY AFTER THE DATE OF DEATH IS TO BE TAXED IN THE HANDS OF THE LEGAL HEIRS ONLY. 2. IN THE CASE OF THE APPELLANT, THEREFORE THE ASSESSMENT FOR THE PERIOD FROM 1 ST APR IL, 2006 TO 20 TH FEBRUARY, 2007 WILL BE 10 MADE IN HIS HANDS AS AN INDIVIDUAL AND THE LEGAL HEIR WOULD SUBMIT THE RETURN OF INCOME OF THE DECEASED PERSON. 3. THE INCOME FOR THE PERIOD FROM 20 TH FEBRUARY, 2007 TILL 31 ST MARCH, 2007 WILL BE TAXED IN THE HANDS OF EXECUTORS OF THE DECEASED PERSON. 4. YOUR KIND ATTENTION IS INVITED TOWARDS PROVISION OF SECTION 168 WHICH PROVIDES THE MANNER IN WHICH THE INCOME IN THE HANDS OF THE LEGAL HEIR IS TO BE ASSESSED.'168. EXECUTORS. - (1) SUBJECT AS HEREINAFTER PROVIDED, THE INCOME OF THE ESTATE OF A DECEASED PERSON SHALL BE CHARGEABLE TO TAX IN THE HANDS OF THE EXECUTOR, (A) IF THERE IS ONLY ONE EXECUTOR, THEN, AS IF THE EXECUTOR WERE AN INDIVIDUAL; OR (B) IF THERE ARE MORE EXECUTORS THAN ONE, THEN, AS IF THE EXECUTORS WERE AN ASSOCIATION OF PERSONS; AND FOR THE PURPOSES OF THIS ACT, THE EXECUTOR SHALL BE DEEMED TO BE RESIDENT OR NON - RESIDENT ACCORDING AS THE DECEASED PERSON WAS A RESIDENT OR NON - RESIDENT DURING THE PREVIOUS YEAR IN WHICH HIS DEATH TOOK PLACE. (2) THE ASSES SMENT OF AN EXECUTOR UNDER THIS SECTION SHALL BE MADE SEPARATELY FROM ANY ASSESSMENT THAT MAY BE MADE ON HIM IN RESPECT OF HIS OWN INCOME. (3) SEPARATE ASSESSMENTS SHALL BE MADE UNDER THIS SECTION ON THE TOTAL INCOME OF EACH COMPLETED PREVIOUS YEAR OR PART TH EREOF AS IS INCLUDED IN THE PERIOD FROM THE DATE OF THE 11 DEATH TO THE DATE OF COMPLETE DISTRIBUTION TO THE BENEFICIARIES OF THE ESTATE ACCORDING TO THEIR SEVERAL INTERESTS. (4) IN COMPUTING THE TOTAL INCOME OF ANY PREVIOUS YEAR UNDER THIS SECTION, ANY INCOME O F THE ESTATE OF THAT PREVIOUS YEAR DISTRIBUTED TO, OR APPLIED TO THE BENEFIT OF, ANY SPECIFIC LEGATEE OF THE ESTATE DURING THAT PREVIOUS YEAR SHALL BE EXCLUDED; BUT THE INCOME SO EXCLUDED SHALL BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF SUCH S PECIFIC LEGATEE. EXPLANATION. IN THIS SECTION, 'EXECUTOR' INCLUDES AN ADMINISTRATOR OR OTHER PERSON ADMINISTERING THE ESTATE OF A DECEASED PERSON.' 5. YOUR HONOUR WILL APPRECIATE THAT THE SUB - SECTION (3) OF SECTION 168 IN CLEAR TERMS INDICATE THAT FROM THE DATE OF DEATH THE INCOME WILL TAXED IN THE HANDS OF THE EXECUTORS, AND SUCH ASSESSMENTS SHALL BE MADE FOR THE YEARS TILL THE COMPLETE DISTRIBUTION OF THE ESTATE HAS NOT TAKEN PLACE. 6. IN THE CASE OF THE APPELLANT ALSO, TILL THE DATE OF THE DEATH THE INC OME ARISING IN THE HANDS OF THE APPELLANT WILL BE TAXED IN THE HANDS OF THE APPELLANT, AND ANY INCOME ARISING AFTER THE DATE OF DEATH WILL HAVE TO BE CONSIDERED ONLY IN THE HANDS OF THE EXECUTORS. IT IS THEREFORE SUBMITTED THAT THE INCOME IN THE HANDS OF T HE APPELLANT WAS NOT JUSTIFIED. SINCE 12 IN THE CASE OF THE APPELLANT THERE WERE MORE THAN ONE LEGAL HEIRS, THE RECEIPT OF ANY INCOME AFTER DEATH SHOULD BE CONSIDERED IN THE HANDS OF RAJENDRA METHA AOP. 7. ALTERNATIVELY, IT WAS ALSO SUBMITTED THAT AFTER DEAT H OF THE APPELLANT SINCE THE PROFESSION HAD STOOD DISCONTINUED, THE SAID INCOME CANNOT BE TAXED AS INCOME FROM PROFESSION IN THE HANDS OF THE APPELLANT. 8. IT WAS ALSO PLEADED THAT THE INCOME SO RECEIVED ALSO CANNOT BE TAXED IN THE HANDS OF THE EXECUTORS A S THE SAME WAS RECEIVED BY THEM AFTER THE DISCONTINUATION OF BUSINESS OF THE APPELLANT AND IS I N CAPITAL RECEIPT IN THE HANDS OF THE APPELLANT. 9. IN THIS REGARD ALSO YOUR KIND ATTENTION IS INVITED TOWARDS THE DECISION IN THE CASE OF ITO V. JUSTICE RAJI V SHEKDHER, DELHI BY HON'BLE ITAT DELHI BENCH IN WHICH A SIMILAR ISSUE WAS INVOLVED, IN WHICH THE INCOME WAS RECEIVED BY THE APPELLANT WHO WAS AN ADVOCATE AFTER BEING ELEVATED TO THE HIGH COURT. THE HON'BLE BENCH HELD THAT SUCH RECEIPT AFTER DISCONTINUATIO N OF PROFESSION WAS A CAPITAL RECEIPT NOT LIABLE TO TAX. THE COPY OF THE ORDER HAD BEEN SUBMITTED AND THE CONTENTS OF THE ORDER ARE REPRODUCED HEREUNDER FOR YOUR HONOUR'S READY PERUSAL : 13 'THIS IS DEPARTMENT'S APPEAL FOR ASSESSMENT YEAR 2009 - 10 AGAINST T HE ORDER DATED 27.7.2012 PASSED BY THE ID. CIT (A) - XXVIII, NEW DELHI. THE FOLLOWING GROUNDS HAVE BEEN RAISED: - 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF ARREAR OF PROCESSIONAL FE ES OF RS. 67,86,669/ - RECEIVED BY THE ASSESSEE AFTER HE HAD DISCONTINUED HIS LEGAL PROFESSION IN UTTER DISREGARD TO THE PROVISIONS OF SECTION 176(4) OF INCOME - TAX ACT, 1961. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO ON ACCOUNT OF ARREAR OF PROFESSIONAL FEES OF RS. 67,86,669/ - RECEIVED BY THE ASSESSEE AFTER HE HAD DISCONTINUED HIS LEGAL PROFESSION NOT APPRECIATING THE FACT THAT THE HON'BLE SUPREME COURT IN THE CASE OF NALINIKANT AMBALAL MODI L/S. SA L NARAYAN RAO (61 ITR 428) HAD DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE AS PER THE EARLIER INCOME - TAX ACT, 1922 IN WHICH SPECIFIC PROVISION FOR TAXATION OF SUCH RECEIPT 2 ITA NO.5069/DEL/2012 WAS NOT AVAILABLE UNLIKE PROVISION OF SECTION 176(4) OF INCO ME - TAX ACT, 1961, WHERE SUCH RECEIPTS ARE SPECIFICALLY TAXABLE 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF ARREAR OF PROFESSIONAL FEES OF RS. 67,86,669/ - RECEIVED BY THE ASSESSEE AFTER HE HAD DISCONTINUED HIS LEGAL 14 PROFESSION IN UTTER DISREGARD TO THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN CASE OF NALINIKAT AMBALAL MODI VS. SAL NARAYAN RAO STATING THAT THE FRUIT OF PROFESSIONAL ACTIVITY IS TAXABLE IRRESPECTIVE OF THE TIME WHEN IT WAS RECEIVED. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF ARREAR OF PROFESSIONAL FEES OF RS. 67,86,669/ - RECEIVED BY THE ASSESSEE AFTER HE HAD DISCONTINUED HIS LEGAL PR OFESSION NOT APPRECIATING THE FACT THE DEPARTMENTAL REVIEW PETITION IN THE CASE OF DCIT, NEW DELHI \ /S. JUSTICE SWATANTER KUMAR AGNIHOTRI (ITA NO. 160/2000) ON THE SAME ISSUE IS PENDING IN HON'BLE DELHI HIGH COURT. 2. GROUND NOS. 1 TO 4 CHALLENGE THE ACTI ON OF THE CIT (A) IN DELETING THE ADDITION OF RS.67,86,669/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ARREARS OF PROFESSIONAL FEE RECEIVED BY THE ASSESSEE AFTER HE HAD DISCONTINUED HIS LEGAL PROFESSION ON BEING ELEVATED AS A JUDGE OF THE HIGH COURT. 3. AS PER THE ASSESSMENT ORDER, THE ASSESSEE WAS A LAWYER BY PROFESSION, PRACTICING IN THE SUPREME COURT AND THE DELHI HIGH COURT BEFORE HIS ELEVATION AS A JUDGE OF THE HON'BLE DELHI HIGH COURT ON 11.04.2008. DURING THE YEAR UNDER CONSIDERATION, HE DERIVED IN COME FROM SALARY, PROFESSION AND INCOME FROM OTHER SOURCES, MAINTAINING HIS BOOKS OF ACCOUNT ON CASH BASIS. HE CLAIMED AN AMOUNT OF RS. 67,10,362/ - 15 REPRESENTING RECEIPT OF ARREARS OF HIS PROFESSIONAL FEES FOR PROFESSIONAL SERVICES RENDERED IN EARLIER YEARS BEFORE HIS ELEVATION AS JUDGE OF HIGH COURT, AS EXEMPT FROM TAX. AS AN ABUNDANT CAUTION, THOUGH THE ASSESSEE DEPOSITED ADVANCE TAX IN RESPECT THEREOF, IN THE COMPILATION OF INCOME FILED A LUNG WITH THE ASSESSEE'S RETURN OF INCOME, THE FOLLOWING NOTE HAD B EEN APPENDED: - 'THERE ARE VARIOUS LEGAL PRECEDENTS WHICH SUGGEST THAT WHERE BEFORE HIS ELEVATION AS A JUDGE, ASSESSEE WAS CARRYING ON LEGAL PROFESSION AS AN ADVOCATE, ARREARS OF PROFESSIONAL RECEIPTS RECEIVED AFTER DISCONTINUATION OF LEGAL PROFESSION WERE NOT ASSESSABLE IN HI C HNRIC THIS REGARD IS DRAWN TO THE JUDICIAL DECISIONS IN THE CASES OF COMMISSIONER OF INCOME TAX Y. JUSTICE R.M. DATTA (1989) 180 ITR 86 AND JUSTICE KULDIP SINGH V. ITO (1993) 46 ITD 251 (CHAND [AT]). IN JUSTICE KULDIP SINGH CASE (SUP RA) A SPECIAL LEAVE PETITION WAS PREFERRED BY THE REVENUE, WHICH WAS DISMISSED. IN VIEW OF AFORESAID LEGAL PRECEDENTS, THE ASSESSEE IS CLAIMING ARREAR OF PROFESSIONAL RECEIPT AS EXEMPT; THOUGH AS AN ABUNDANT CAUTION, THE ASSESSEE HAS DEPOSITED ADVANCE TAX UNDER PROTEST IN RESPECT OF SUCH INCOME.' 4. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT BY CLAIMING THE EXEMPTION, THE ASSESSEE HAD NEITHER OFFERED THE AMOUNT OF ' 67,10,362/ - FOR TAXATION IN THE YEAR IN WHICH THE PROFESSIONAL ACTIVITY 4 ITA NO.50 69/DEL/2012 WAS CARRIED OUT 16 BY HIM, NOR IN THE YEAR OF RECEIPT, NOR IN ANY OTHER YEAR, AND SO, ALLOWING THE CLAIM OF EXEMPTION WOULD RESULT IN THE RECEIPT NEVER BEING TAXED. REFERRING TO THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN 'CIT \ /S. JUSTICE R.M. DATTA', 180 ITR 86 (CAL) AND THAT OF THE HON'BLE ANDHRA PRADESH HIGH COURT IN V. PARTHASARATHY VS. ADDL. CIT', 103 ITR 508 (AP), THE ASSESSING OFFICER OBSERVED THAT BOTH THESE HIGH COURTS WERE AT VARIANCE, INTER SE, ON THE ISSUE. THE ASSESSING OFFICER NOTED THAT IN 'NALINIKANT AMBALAL MODY', 61 ITR 428 (SC), THE HON'BLE SUPREME COURT HAD HELD SUCH RECEIPTS TO FALL UNDER THE HEAD OF 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. THE ASSESSING OFFICER OBSERVED THAT THOUGH THEREIN, THE HON'BLE SUPREME COU RT HAD HELD SUCH RECEIPTS TO BE NOT CHARGEABLE TO TAX, IT HAD BEEN SO HELD DUE TO THE ABSENCE OF EXPRESS PROVISION TO BRING SUCH RECEIPTS TO TAX UNDER THE IT ACT, 1922, WHICH WAS THE ACT GOVERNING THAT CASE. THE ASSESSING OFFICER STATED THAT HOWEVER, SUCH RECEIPTS ARE CHARGEABLE TO TAX UNDER SECTION 176 OF THE IT ACT, 1961, THE ACT APPLICABLE TO THE PRESENT CASE. 5. BY VIRTUE OF THE IMPUGNED ORDER, WHICH WE SHALL PRESENTLY DISCUSS, THE ID. CIT (A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER, BRINGIN G THE DEPARTMENT IN APPEAL BEFORE US BY WAY OF GROUND NOS. 1 TO 4. 17 6. CHALLENGING THE IMPUGNED ORDER IN THIS REGARD, THE LD. DR HAS SUBMITTED BEFORE US THAT THE ID. CIT(A) HAS ERRED IN DELETING THE ADDITION CORRECTLY MADE BY THE ASSESSING OFFICER; THAT WH ILE DOING SO, THE ID. CIT (A) HAS ERRONEOUSLY DISREGARDED THE PROVISIONS OF SECTION 176(4) OF THE IT ACT, 1961; THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT IN THE CASE OF NALINIKANT AMBALAL MODY VS. SAL NARAYAN RAO 61 ITR 428 [SC] T HE HON'BLE SUPREME COURT HAD LAID DOWN THAT THE FRUITS OF PROFESSIONAL ACTIVITY ARE TAXABLE, IRRESPECTIVE OF THE TIME WHEN THEY 5 ITA NO.5069/DEL/2012 WERE RECEIVED; THAT THE LD. CIT (A) HAS ALSO OVERLOOKED THE FACT THAT IN 'NALINIKANT AMBALAL MODY' (SUPRA), THE HON'BLE SUP REME COURT HAD DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE AS PER THE INCOME TAX ACT OF 1922, WHICH DID NOT CONTAIN ANY SPECIFIC PROVISION FOR THE TAXATION OF SUCH RECEIPTS, WHEREAS IN THE INCOME TAX ACT OF 1961, WHICH IS THE ACT APPLICABLE TO THE PRESENT CASE, THERE DOES EXIST SUCH A SPECIFIC PROVISION IN THE SHAPE OF SECTION 176 (4), WHEREUNDER, SUCH RECEIPTS ARE SPECIFICALLY TAXABLE; AND THAT THE ID. CIT (A) HAS FURTHER ERRED IN FAILING TO TAKE INTO CONSIDERATION THE FACT THAT A REVIEW PETITION IN THE C ASE OF 'DCIT, NEW DELHI VS. JUSTICE SWATANTER KUMAR AGNIHOTRI' IS HITHERTO SUBJUDICE BEFORE THE HON'BLE DELHI HIGH COURT; THAT AS SUCH, THE ORDER PASSED BY THE LD. CIT (A) ON THIS ISSUE IS AN ERRONEOUS ONE, LIABLE TO BE SET ASIDE; AND THAT ACCORDINGLY, THE SAME MAY BE ORDERED TO BE SET ASIDE AND THAT PASSED BY THE ASSESSING OFFICER BE RESTORED 18 ON ACCEPTING GROUND NOS. 1 TO 4 RAISED BY THE DEPARTMENT. 7. ON THE OTHER HAND, THE ID. COUNSEL FOR THE ASSESSEE HAS STRONGLY SUPPORTED THE IMPUGNED ORDER. IT HAS BEE N CONTENDED THAT THE LD. CIT (A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY PASSING A SPEAKING ELABORATE WELL - REASONED ORDER ON THE ISSUE AT HAND, WHICH ORDER REQUIRES NO INTERFERENCE WHATSOEVER AT OUR HANDS; THAT THE ASSESSING OFFICER HAD WRONGLY RELIED ON THE DECISION OF THE HON'BLE A.P. HIGH COURT IN 'V. PARTHASARATHY VS. ADD!. CIT', 103 ITR 508 (AP), THOUGH THE FACTS IN THAT CASE WERE TOTALLY DIFFERENT FROM THE FACTS OF THE ASSESSEE'S CASE; THAT THE ASSESSING OFFICER FAILED TO CONSIDER THAT THE ORDERS IN THE CASE LAWS RELIED ON BY THE ASSESSEE HAD ALL BEEN PASSED AFTER HAVING DULY CONSIDERED 'V. PARTHASARATHY' (SUPRA); THAT THE LD. CIT (A), WHILE RIGHTLY ALLOWING THE ASSESSEE'S CLAIM, HAS DULY TAKEN INTO CONSIDERATION ALL THESE ASPECTS AND HAS RIGHTLY DEL ETED THE ADDITION WRONGLY MADE BY THE ASSESSING OFFICER; THAT THE DEPARTMENT HAS NOT BEEN ABLE TO POINT OUT ANY INFIRMITY WHATSOEVER IN THE ORDER UNDER APPEAL; THAT THE ORDER 6 ITA NO.5069/DEL/2012 UNDER APPEAL IS ON ALL FOURS, HAVING BEEN PASSED PERFECTLY IN ACCORDANCE WITH LAW AND IT IS, THEREFORE, ENTITLED TO BE SUSTAINED, AND THE APPEAL FILED BY THE DEPARTMENT IS LIABLE TO BE DISMISSED, BEING DEVOID OF ANY MERIT AT ALL, WHATSOEVER; AND THAT ACCORDINGLY, THE IMPUGNED ORDER BE CONFIRMED AND THE APPEAL BE ORDERED TO BE DISMISSED. 19 8. WE HAVE HEARD THE PARTIES ON THIS ISSUE AND HAVE PERUSED THE MATERIAL ON RECORD WITH REGARD THERETO. THE QUESTION IS AS TO WHETHER THE ID. CIT (A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE FOR EXEMPTION FROM TAX, THE RECEI PT OF ARREARS OF HIS PROFESSIONAL FEES, SUCH ARREARS HAVING BEEN RECEIVED BY THE ASSESSEE AFTER HIS ELEVATION AS HIGH COURT JUDGE. 9. THE ASSESSING OFFICER BROUGHT TO TAX THESE ARREARS UNDER SECTION 176 (4) OF THE INCOME TAX ACT, 1961. THIS SECTION (RELEVA NT POR T ION) PROVIDES AS UNDER: - '176 (4) WHERE ANY PROFESSION IS DISCONTINUED IN ANY YEAR ON ACCOUNT OF THE CESSATION OF THE PROFESSION BY THE PERSON CARRYING ON THE PROFESSION , ANY SUM RECEIVED AFTER THE DISCONTINUANCE SHALL BE DEEMED TO BE THE INCOME OF THE RECIPIENT AND CHARGED TO TAX ACCORDINGLY IN THE YEAR OF RECEIPT, IF SUCH SUM WOULD HAVE BEEN INCLUDED IN THE TOTAL INCOME OF THE AFORESAID PERSON HAD IT BEEN RECEIVED BEFORE SUCH DISCONTINUANCE.' 10. A BARE READING OF SECTION 176(4) OF THE ACT REVEAL S THAT AS PER THE PROVISIONS THEREOF, IN THE CASE OF CESSATION OF A PROFESSION BY A PROFESSIONAL, THE RECEIPT OF ANY SUM AFTER SUCH CESSATION BY SUCH PROFESSIONAL SHALL BE DEEMED TO BE THE INCOME OF THE RECIPIENT PROFESSIONAL AND IT WILL BE TAXED IN THE YE AR OF RECEIPT, IF, HAD IT BEEN RECEIVED PRIOR TO THE CESSATION 20 OF THE PROFESSION, IT WOULD HAVE FORMED A PART OF THE RECIPIENT PROFESSIONAL'S TOTAL INCOME. SECTION 176 (4) OF THE ACT, AS ALSO NOTED BY THE ASSESSING OFFICER AT PAGE 2 OF HIS ORDER, 7 ITA NO. 5069/DEL/2012 WAS ENACTED IN PURSUANCE OF THE RECOMMENDATION OF THE DIRECT TAXES ADMINISTRATION ENQUIRY COMMITTEE, TO DO AWAY WITH THE ABSENCE OF PROVISION TO ASSESS INCOME RECEIVED AFTER, INTER ALIA, CESSATION OF A PROFESSION. SO, THE ENACTMENT OF SECTION 176 (4) IN THE EXTANT ACT EFFECTIVELY DID AWAY WITH THE LACUNA IN THE ERSTWHILE STATUTE, I.E., THE INCOME TAX ACT, 1922. 11. HOWEVER, SECTION 4 OF THE ACT, WHICH PROVIDES FOR THE CHARGE OF INCOME TAX, LAYS DOWN IN ITS SUB - SECTION (1), THAT INCOME TAX SHAL L BE CHARGED 'IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS ACT IN RESPECT OF THE TOTAL INCOME OF THE PREVIOUS YEAR.' SO, INCOME TAX HAS BEEN PROVIDED BY SECTION 4 (1) TO BE CHARGEABLE SUBJECT TO THE PROVISIONS OF THE INCOME TAX ACT, 1961. NOW, SECTION 14 OF THE ACT MANDATES THAT FOR THE PURPOSES OF CHARGE OF INCOME TAX, ALL INCOME SHALL BE CLASSIFIED UNDER THE FIVE HEADS DELINEATED THEREIN, IF NOT PROVIDED OTHERWISE BY THE ACT. AND IF A PARTICULAR INCOME ACCORDING TO ITS NATURE AND QUALITY FALLS UNDER ANY HEAD', ITS COMPUTATION SHOULD BE MADE IN ACCORDANCE WITH THE DIRECTIONS CONTAINED IN THE GROUP OF SECTIONS RELATING TO THAT HEAD, THAT HEAD ONLY, AND IN ACCORDANCE WITH NO OTHER HEAD. THIS IS WHAT IS THE PURPORT OF SECTION 4, THE CHARGING SECTIO N, WHEN IT MAKES IT MANDATORY FOR CHARGE OF INCOME TAX IN ACCORDANCE WITH AND SUBJECT TO THE 21 PROVISIONS OF THE INCOME TAX ACT, 1961, AS NOTED ABOVE. 12. NOW, IT IS TRITE LAW THAT WHERE THE LANGUAGE EMPLOYED IN A SECTION IS CLEAR, NOTHING OTHER THAN THE WO RDS USED ARE TO BE READ, PERMITTING OF NOTHING ELSE TO BE READ INTO THE SECTION. THIS IS MORE SO IN THE CASE OF A CHARGING PROVISION CONTAINED IN A TAXING STATUTE, AS IS THE CASE WITH SECTION 176 (4) OF THE IT ACT, 1961. AS CONSIDERED IN CIT V S. JUSTICE R.M . DATTA (SUPRA), IN SUCH A CASE, THE RULE OF CONSTRUCTION ADOPTED BY ROWLETT J. IN 'CAPE BRANDY SYNDICATE V. IRC',(1921) 1 KB 64 WOULD BE PROPERLY APPLIED, AS PER WHICH RULE, IN A TAXING ACT, ONE HAS 8 ITA NO.5069/DEL/2012 TO LOOK MERELY AT WHAT IS CLEARLY SAID, NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED, THERE BEING NO ROOM FOR ANY INTENDMENT, ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE USED. 13. AND AS CONSIDERED IN 'CIT VS. AJAX PRODUCTS LTD.', 55 ITR 741 (SC), THE SUBJECT IS NOT TO BE TAXED UNLES S THE CHARGING PROVISION CLEARLY IMPOSES THE OBLIGATION AND IT IS ALSO THE RULE OF CONSTRUCTION THAT IF THE WORDS OF A STATUTE ARE PRECISE AND UNAMBIGUOUS, THEY MUST BE ACCEPTED AS DECLARING THE EXPRESS INTENTION OF THE LEGISLATURE. NOW, IT HAS BEEN ELABOR ATELY CONSIDERED IN 'JUSTICE R.M. DATTA' (SUPRA), THAT THE WORD 'ACCORDINGLY' IN SECTION 176 (4) OF THE ACT CANNOT BE CONSIDERED AS INDICATIVE OF THE HEAD OF CHARGE, I.E., THAT THE INCOME SHOULD BE DEEMED TO BE THE INCOME FALLING UNDER THE HEAD ''PROFITS A ND GAINS OF BUSINESS, PROFESSION OR VOCATION', EVEN IN A CASE WHERE THE PROFESSION IS NOT CARRIED ON 22 DURING ANY PART OF THE RELEVANT PREVIOUS YEAR. IT HAS ALSO BEEN CONSIDERED THEREIN THAT SECTION 1 76 (4) OF THE ACT INTRODUCES A L EGAL FICTION, WHICH SHOULD BE LIMITED ONLY TO THE PURPOSE FOR WHICH IT HAS BEEN CREATED. SECTION 176 (4), THEN, BY VIRTUE OF THE FICTION CONTAINED THEREIN, MERELY TREATS THE RECEIPT AS THE INCOME OF THE RECIPIENT. IN THE ABSENCE OF ANY FURTHER FICTION IN THE SECTION, THE CHARACTER OF SUCH RECEIPT CANNOT BE DETERMINED AND NO FURTHER FICTION CAN BE INTRODUCED SO AS TO DETERMINE THE HEAD OF CHARGE UNDER WHICH SUCH RECEIPT WOULD BE MADE TO FALL. THUS, THE EXPRESS LANGUAGE OF SECTION 176(4) DOES NOT RENDER THE RECEIPT TO BE TREATED AS IN COME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS, PROFESSION OR VOCATION.' NOW, THE RECEIPT IN QUESTION CANNOT BE BROUGHT TO TAX AS INCOME FROM PROFITS AND GAINS OF PROFESSION, AS ABOVE, UNDER THE COMPUTATION PROVISIONS CONTAINED IN SECTIONS 2 8 TO 44 - DB OF THE ACT AND IF THAT BE SO, THE RECEIPTS WOULD NOT BE INCLUDED IN THE TOTAL INCOME, AS DEFINED IN SECTION 2 (45) OF THE ACT (I.E., THE TOTAL AMOUNT OF INCOME REFERRED TO IN SECTION 5, COMPUTED IN THE MANNER LAID DOWN IN 9 ITA NO.5069/DEL/2012 THE ACT), FOR THE PURPOSE OF CHARGEABILITY. THEREFORE, AS HELD IN 'JUSTICE R.M. DATTA 1 (SUPRA), EVEN IN SPITE OF INTRODUCTION OF SECTION 176 (4) IN THE ACT, THE RECEIPTS IN QUESTION CANNOT BE TREATED AS THE ASSESSEE'S INCOME FALLING UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS, PROFESSION OR VOCATION', EVEN THOUGH THEY WERE, BEING THE FRUITS OF THE ASSESSEE'S PROFESSIONAL ACTIVITIES, THE PROFITS AND GAINS OF A PROFESSION, UNDER THE VERY SAME HEAD OF 'PROFITS AND GAINS OF BUSINESS, PROFESSION OR VOCATION.' IT IS DUE TO 23 THE ABSENCE OF ANY LEGISLATIVE PROVISION THAT THESE RECEIPTS CANNOT BE TREATED AS BUSINESS INCOME FALLING UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS, PROFESSION OR VOCATION' CARRIED ON BY THE ASSESSEE DURING THE RELEVANT YEAR. THEY CANNOT B E INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE, EVEN THOUGH THE AMOUNT WAS RECEIVED BY THE ASSESSEE BEFORE THE DISCONTINUANCE OF HIS PROFESSION DUE TO HIS ELEVATION AS HIGH COURT JUDGE. 14. IN 'NALINIKANT AMBALAL MODY VS. SAL NARAYAN RAO' (SUPRA) [AS CONSI DERED IN 'JUSTICE R.M. DATTA' (SUPRA)], WHEN THERE IS A CASE TO WHICH THE COMPUTATION PROVISIONS PERTAINING TO A CHARGING SECTION CANNOT APPLY AT ALL, AS IN THE PRESENT CASE, IT IS EVIDENT THAT SUCH A CASE WAS NOT INTENDED TO FALL WITHIN THE CHARGING SECTI ON, LEST A CONCLUSION BE ARRIVED AT, THAT WHITE A CERTAIN INCOME SEEMS TO FALL WITHIN THE CHARGING SECTION, THERE IS NO SCHEME OF COMPUTATION FOR QUANTIFYING IT, WHICH CONCLUSION IS NOT THE LEGISLATIVE INTENT. IN 'JUSTICE R.M. DATTA' (SUPRA), THEIR LORDSHI PS HELD THAT IN VIEW O F THIS RATIO IN 'NALINIKANT AMBALAL MODY' (SUPRA), DESPITE THE INSERTION OF SECTION 176 (4) IN THE ACT, SINCE THE ASSESSEE DID NOT CARRY ON ANY PROFESSION IN THE RELEVANT PREVIOUS YEAR, THE RECEIPT CANNOT BE TAXED U/S 28 OF THE ACT, S INCE SECTION 176 (4) DOES NOT CONTAIN ANY DEEMING PROVISION TREATING SUCH RECEIPT AS INCOME FALLING UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS, PROFESSION OR VOCATION' AND ALSO, IT CANNOT BE TAXED AS INCOME FROM OTHER SOURCES U/S 56 OF THE ACT. 24 15. THE FACTS HEREIN BEING ENTIRELY IN PARI MATERIA WITH 'JUSTICE R.M. DATTA' (SUPRA), THE SAID DECISION IS SQUARELY APPLICABLE HERE TOO. IT HAS NOT BEEN SHOWN OTHERWISE. FURTHER, NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE. 16. IT HAS BEEN STATED THAT A REVIEW PETITION IN THE CASE OF 'DCIT, NEW DELHI VS. JUSTICE SWATANTER KUMAR AGNIHOTRI' (ITA NO.160/2000), WHEREIN, THE RELIANCE BY THE DELHI BENCH OF THE TRIBUNAL ON 'JUSTICE R.M. DATTA' (SUPRA), UNDER SIMILAR CIRCUMSTANCES, WAS UPHELD BY THE HON'BL E DELHI HIGH COURT, IS PENDING, AS PER THE CONTENTS OF GROUND NO.4. THIS PENDENCY, HOWEVER, HAS NO BEARING ON OUR PRESENT ORDER. 17. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT WHATSOEVER IN GROUND NOS. 1 - 4 RAISED BY THE DEPARTMENT AND THE S AME ARE HEREBY REJECTED, CONFIRMING THE WELL REASONED FINDINGS RECORDED BY THE LD. CIT (A) QUA THIS ISSUE.' 10. THE APPELLANT ALSO FURTHER ONCE AGAIN INVITE YOUR KIND ATTENTION IS INVITED TOWARDS DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT V . JUSTICE R.M. DUTTA (1989) 180 ITR 86 (CAL.) IN WHICH IT WAS HELD THAT WHERE THE FEES IS RECEIVED BY THE ASSESSEE AFTER BEING ELEVATED TO THE HIGH COURT THE SAME CANNOT BE TAXED AS BUSINESS INCOME OF THE ASSESSEE. 11. ON THE ISSUE OF TAXABILITY, THE TRI BUNAL HELD THAT THE MONEY WAS NOT TAXABLE UNDER SECTIONS 28,56 OR 176(4) IN VIEW OF THE CALCUTTA HIGH COURT'S DECISION IN THE R.M. DUTTA CASE. NOR COULD THE RECEIPTS BE BROUGHT TO TAX UNDER SECTION 12 AS 'INCOME FROM OTHER SOURCES.' AS THE 25 HEADS OF INCOME WERE MUTUALLY EXCLUSIVE AND THE RECEIPTS COULD BE BROUGHT UNDER THE FOURTH HEAD, THEY COULD NOT BE BROUGHT UNDER THE RESIDUAL HEAD 'INCOME FROM OTHER SOURCES. TWO, THE D.P. SANDHU BROS CHEMBUR (P) LTD. CASE (2005 ) 273 ITR 1 ( SC) WHEREIN IT WAS HELD THAT IF A PARTICULAR INCOME COULD NOT BE TAXED UNDER SECTION 45 THEN IT COULD NOT OTHERWISE BE TAXED UNDER SECTION 56 OR IT COULD NOT BE TAXED AT ALL. 12. THE SAID RECEIPT IN NO CASE CAN BE REGARDED AS INCOME IN THE HANDS OF THE ASSESSEE AT - LEAST AND IF AT ALL SUCH INCOME IS TO BE CONSIDERED THE SAME CAN BE DONE IN THE HANDS OF RAJENDRA MEHTA AOP ONLY TO WHICH SUCH AMOUNT WAS CREDITED. THE ADDITION THEREFORE MADE IN THE HANDS OF THE APPELLANT DESERVES TO BE DELETED. IN RELATION TO ALL OTHER GROUND OF APPEAL, THE APPELLANT RELIES UPON THE WRITTEN SUBMISSIONS MADE EARLIER, WHICH MAY KINDLY BE CONSIDERED IN SUPPORT OF THE OTHER GROUNDS CHALLENGED IN THE APPEAL . 4. PER CONTRA, THE LD. SR. D.R. HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. HE HAS REPEATED ORAL LY ALL THE REASONS GIVEN BY THE LD. CIT(A) TO DENY THE CLAIM OF THE ASSESSEE. 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE CONVINCED THAT THE ISSUE OF GROUND NO. 5 HAS TO BE DECIDED IN THE FAVOUR OF THE APPELLANT LATE SHRI RAJENDRA MEHTA WHO WAS A P RACTICING LAWYER AND EXPIRED ON 26 20.2.2007. THE TAXABLE INCOME AFTER HIS DEATH IS TO BE TAXED IN THE HANDS OF HIS LEGAL HEIRS. THUS ASSESSMENT FOR THE PERIOD 1.4.2006 TO 20.2.2007 CAN BE MADE IN HIS [DECEASEDS] HANDS AS AN INDIVIDUAL FOR WHICH HIS LEGAL HEIRS HAVE TO FILE RETURN OF HIS INCOME. THE INCOME FROM 20.2.2007 TILL 31.3.2007 WOULD BE TAXED IN THE HANDS OF HIS EXECUTIVES. SECTION 168 OF THE ACT PRESCRIBES THE MANNER IN WHICH THE INCOME IN THE HANDS OF THE LEGAL HEIR OF A DECEASED ASSESSEE IS TO BE ASSESSED. THIS SECTION HAS BEEN EXTRACTED IN THE WRITTEN SUBMISSIONS OF THE LD. A.R. SUB - SECTION (3) OF SECTION 168 CLEARLY SPELLS OUT THAT FROM THE DATE OF THE DEATH INCOME WILL BE TAXED IN THE HANDS OF THE EXECUTORS. THERE BEING MORE THAN ONE LEGAL HEIR , FACTS NOT DISPUTED, THE RECEIPTS OF ANY INCOME AFTER HIS DEATH CAN BE CONSIDERED IN THE HANDS OF SHRI RAJENDRA MEHTA, AOP. HOWEVER, THE DECISIONS RELIED ONLY BY THE LD. A.R ESPECIALLY THE DECISIONS OF THE HONBLE CALCUTTA HIGH COURT [SUPRA] AND THA T OF THE TRIBUNAL IN THE CASE OF R.M. DATTA AND KULDEEP SINGH [SUPRA] OF THE CHANDIGARH BENCH, INTER ALIA, SUPPORT THE CASE OF THE ASSESSEE. ACCORDINGLY, WE ORDER DELETION OF THIS ADDITION AND ALLOW GROUND NO. 5 OF THIS APPEAL. 27 6. GROUND NO. 1 WAS NO T PRESSED, THEREFORE, IT IS DISMISSED AS NOT PRESSED . 7. THE FACTS APROPOS GROUND NO. 2 ARE THAT THE ASSESSEE PURCHASED A PLOT AFTER RAISING A LOAN FROM THE IDBI BANK FOR THE CONSTRUCTION OF A HOUSE AND PAID INTEREST OF RS. 2,16,782/ - . THE CONSTRUCTION O F THE HOUSE HAD NOT BEEN COMMENCED DUE TO ASSESSEES DEATH, THE A.O DISALLOWED THE INTEREST PAID. THE ASSESSEE HAS SHOWN INTEREST INCOME ON FDRS ETC. THE CASE OF THE ASSESSEE IS THAT BY RAISING LOAN, FOR WHICH LESSER RATE OF INTEREST HAS BEEN PAID, THE AS SESSEE HAS SAVED SOME INCOME. THE ASSESSEE ALSO RECEIVED RS. 10,000/ - ON ACCOUNT OF HIRE CHARGES OF THIS PLOT. THIS ADDITION HAS BEEN CONFIRMED BY THE LD. CIT(A), AS WELL. 8. BEFORE US BOTH THE PARTIES HAVE REITERATED THEIR EARLIER ARGUMENTS. AFTER CO NSIDERING THE SAME, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION OF INTEREST PAID BECAUSE HE HAS DISCLOSED INTEREST 28 INCOME FROM FDRS AND ALSO BY RS. 15,000/ - FROM HIRE OF THE PLOT. HAD HE NOT TAKEN LOAN AND UTILIZED THE FDRS DEPOSIT IN THE SHAPE OF FDR, HE WOULD HAVE NOT PAID ANY INTEREST BUT WOULD HAVE NOT EVEN EARNED INTEREST INCOME AS HAS BEEN CLAIMED. HOWEVER, IT WOULD BE FETCHING TOO FAR AN ISSUE. INTEREST INCOME HAS TO BE TAXED AND CANNOT BE NETTED AS HAS BEEN CLA IMED. ACCORDINGLY, WE CANNOT ALLOW GROUND NO. 2 OF THE ASSESSEES APPEAL AND DISMISS THE SAME . 9 . THROUGH GROUND NOS. 3 AND 4 SMALL DISALLOWANCES HAVE BEEN UPHELD. AFTER HEARING BOTH THE SIDES, WE DO NOT WANT TO INTERFERE IN THIS FINDING DUE TO SMALLNES S OF THE AMOUNTS OF DISALLOWANCE. THE DISALLOWANCE OF RS. 15,000/ - OUT OF MOBILE EXPENSES; OF RS. 20,000/ - OUT OF PETROL EXPENSES, RS. 300/ - OUT OF DEPRECIATION AND RS. 1,676/ - BEING INTEREST ON I NCOME - TAX REFUNDS, ARE SUSTAINED. RESULTANTLY, GROUND NOS. 3 AND 4 OF ASSESSEES APPEAL ARE DISMISSED. 29 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 42/JU/2011 FOR A.Y. 2007 - 08 IS PARTLY ALLOWED. ORDER PRON OUNCED IN THE COURT ON 28 TH AUGUST , 2014. SD/ - SD/ - (N.K.SAINI) [HAR I OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEM B ER DATED : 28 TH AUGUST, 201 4 VL/ - COPY TO: THE APPELLANT THE RESPONDENT THE CIT BY ORDER THE CIT(A) THE DR SR. PRIVATE SECRET ARY ITAT, JODHPUR