Income Tax Appellate Tribunal - Mumbai
George A. Rebello, Mumbai vs Department Of Income Tax on 28 December, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'G', MUMBAI.
Before Shri J. Sudhakar Reddy,A.M. and Smt.P.Madhavi Devi, J.M.
I.T.A. No. 1743 /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 D'Mello 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. 1743/Mum/2008)
Assessment Year : 2003-04.
Shri George A. Rebello, Asstt. Commissioner of
Through Legal Heir, Smt. Shirley Vs. Income Tax-11(2),
Ann D'Mello Rebello, Mumbai.
Mumbai.
Cross Objector. Respondent.
Department by : Shri Mohd. Usman.
Assessee by : Shri W. Hasan.
ORDER
Per J. Sudhakar Reddy, A.M.
This is an appeal filed by the Revenue directed against the order of the CIT(Appeals)-XI, Mumbai dated 28-12-2007 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 the addition made u/s 41(1) amounting to Rs.19,10,907/- relating to M/s Maritime Service International on the ground that it is not pertaining to trading transaction."
2. The assessee filed Cross Objection on the following grounds
1. On the facts and circumstances of the case and in law the learned CIT(A)-XI, Mumbai erred in confirming the addition of Rs.1,41,840/- made by the Assessing Officer on account of M/s Hind Shipping.
2. On the facts and circumstances of the case and in law the learned CIT(A)-XI, Mumbai erred in holding that the appellant 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 hearing that the said amount was already paid back to M/s Hind Shipping and the necessary evidence in this regard were also filed before him.
3. On the facts and circumstances of the case and in law the learned CIT(A) ought to have deleted the addition of Rs.1,41,840/- made by the Assessing Officer on account of M/s Hind Shipping 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 behalf of the Revenue and Shri W. Hasan, learned counsel for the assessee.
4. On a careful consideration of the facts and circumstances 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 appellant that there were Advances shown at Rs.91,83,486/- under the head client's account. Out of the details of the client's account, the A.O. further noted that in two cases i.e. M/s Hind Shipping 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 appellant 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 beginning. Rs.19,10,907/- relating to M/s Martime Service International was kept in current account and then in fixed deposit account. Regarding M/s Martime Service International, it was stated that the money was received on behalf of Average Adjusters pending determination by M/s Manley Hopkins Son & Cookes Ltd, Average Adjusters, London. It was in respect of a vessel which caught fire resulting in damage to cargo. The damaged 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 parties concerned after complying with the RBI requirements. Application 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. However, 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 wife. The appellant's junior and his wife were carrying on with the legal practice but they were not bound by the personal contract 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. which has been quoted in the assessment order, the appellant had properly explained the position with regard to M/s Martime Service International. I find that the appellant had made communication with the RBI through the SBI for remittance of the said amount. As 4 far as application of section 41(1) is concerned, the 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 trading transaction". It is clearly not a trading transaction and was received in an Escrow Account and hence, could not be considered u/s 41(1). Addition with regard to M/s Martime Service International is deleted."
7. We fully agree with these findings. Even otherwise the assessee has never claimed this amount as an expense in the earlier years and hence the question of addition u/s 41(1) does not arise.
8. In the result, the Revenue's appeal is dismissed.
9. Coming to the cross objection, the assessee has produced evidence that the amount has been repaid to M/s Hind Shipping Agencies on 29th 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 these 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 dismissed and the cross objection of the assessee is allowed.
Order pronounced on this 30th day of March, 2010.
Sd/- Sd/-
(P.Madhavi Devi) (J. Sudhakar Reddy)
Judicial Member. Accountant Member.
Mumbai,
Dated : 30th 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.