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COMMISSIONER OF INCOME TAX, KOL-XIX, KOL. Versus BIJOY KUMAR JAIN

2016 (7) TMI 400 - CALCUTTA HIGH COURT

Addition on account of cessation of liability - Advance receipts from client - system of accounting - the deposits received by the assessee were treated by him as his liability - Held that:- There is no iota of doubt that the deposits were treated by the assessee as a capital receipt and the deposits were adjusted in the subsequent years against the expenditure incurred for or on behalf of the client from whom the deposit was received. Such expenditure also included the fees of the assessee hims .....

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Act. See KOHINOOR MILLS CO. LTD. Versus COMMISSIONER OF INCOME-TAX, BOMBAY CITY I. [1962 (10) TMI 58 - BOMBAY HIGH COURT] - Decided in favour of assessee. - ITAT NO. 110 OF 2011, GA NO. 1185 OF 2011 - Dated:- 10-6-2016 - GIRISH CHANDRA GUPTA AND ASHA ARORA, JJ. FOR THE APPELLANT : MR.M.P.AGARWAL, MR.S.B.SARAF, ADVOCATE FOR THE RESPONDENT : MR.P.BAG,ADVOCATE The Court : The subject matter of challenge in the appeal is a judgment and order dated 29th October, 2010 passed in ITA No.1018/Kol/2010 p .....

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e by him. Aggrieved by the order of the learned Tribunal, the reveue has come up in appeal. The following questions have been suggested. i) WHETHER in view of the facts of the instant case the Tribunal was justified in quashing the order dated 29th October, 2010 passed by the said Commissioner ignoring the fact that on and from 01.04.1997 mixed system of accounting has been prohibited and the assessee should maintain either cash or mercantile system as provided under Section 145 of the Income Ta .....

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d to be received in the previous year is eligible to tax and there is absolutely nothing in the Income Tax Act, 1961 to permit the assessee to treat a part of his income as deferred income ? iv) WHETHER the Learned Tribunal was justified in relying on the following decisions where neither in the Tribunal in the case of R.N.Jhunjhunwala- Vs- ACIT, Circle - 54, Kolkata nor before the High Court at Calcutta in CIT - Vs- R.N. Jhunjhunwala passed in G.A. No.588 of 2008, arising out of I.T.A No. 6.124 .....

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essee despite assessee s following cash system of accounting resulting in the assessment order passed u/s.143(3) being erroneous in so far as it is prejudicial to the interest of revenue. The CIT was also of the opinion that the provisions of Section 145 of the IT Act, after they have been recast with effect from 1.4.1997 permitting only cash or mercantile system of accounting and the decision of the Hon ble ITAT, C Bench, Chennai in the case of MIs. Sterling Holiday Resorts, mentioned above, fo .....

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ay be pointed that the judgment of the Apex Court in the case of E.D.Sassoon & Company Ltd. V. Commissioner of Income-tax reported in (1954) 26 ITR 27 has no manner of application to the facts and circumstances of the case. What had happened in that case was that S company was the managing agent of U company. S company was entitled to receive by way of their remuneration commission of certain percentage of the annual income of U company on 31st March of every calendar year. On 1st December, .....

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money received by way of deposits by the assessee, who is a solicitor by profession, from his clients is taxable. No elaborate reasoning is required to show that in the facts of the case before us, the judgment in the case of E.D.Sassoon & Company Ltd has no manner of application. The only other reason which weighed with the CIT is section 145 of the Income Tax Act as amended with effect from 1st April, 1997. (1) Income chargeable under the head Profits and gains of business or profession o .....

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nts of the assessee, or where the method of accounting provided in sub-section (1) [has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2)], the Assessing Officer may make an assessment in the manner provided in section 144.] All that section 145 provides is that an assessee has the choice to compute his income arising out of profits and gains of business or profession or income form other sources either in .....

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tal receipt nor does it favour the proposition that deposit should be treated as a revenue receipt where the assessee follows cash system. Whether the receipt is a revenue receipt or a capital receipt would depend essentially on the nature of the receipt. In the case before us the deposits received by the assessee were treated by him as his liability. In the subsequent years when expenses were incurred both out of pocket and on account of his fees the liability has been adjusted. In this regard, .....

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enue as the amount has been considered as the income of the assessee in the subsequent years, when it so materialized . Similarly, for the impugned assessment year in our considered opinion, as the assessee has established that all the advances as on 31.03.05 have been subsequently adjusted in the subsequent assessment years, copies of which have been placed at page nos.19A and 19B of the paper book and the Ld. D.R. could not contradict the submissions of the Ld. Counsel for the Assessee, we fin .....

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the assessee himself. It is at that stage that the money was earned by him. Before that, he was holding the money as an agent or as a fiduciary of his client. There is a judgment of this Court where this point was lucidly explained which has been brought to our notice by Mr. Bag appearing for the assessee. In the case of CIT -vs- Sandersons & Morgans, reported in (1970) 75 ITR 433(Cal), the Division Bench held as follows: In the instant case, we have already observed , the money received wa .....

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