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 secondly, assessee has to incur substantial expenditure for and on behalf of the clients towards fees payable to the Registrar of Companies and other authorities, for purchase of stamp papers, preparation of paper book, hotel and other expenses of the Sr. counsel engaged to handle the cases outside Delhi and, therefore, it requests the clients to remit in advance the estimated expenditure to be incurred for specified purposes; and  lastly, the assessee-firm sends a Memorandum of Fees (invoice) to its foreign clients by electronic mail, which is followed by a hard copy sent by postal mail and in some of the instances by mistake clients have make double payments, i.e., once on receiving the invoice by the electronic mail and again on receiving the hard copy of the postal mail. Immediately on coming to know that the client has made double payment by mistake, it makes a request to the client for remitting the amount through wire transfer which has wrongly paid the extra amount. However, some of the clients instructed that the fees wrongly paid need not to be remitted but should be retained for adjustment against fees for future services.

2. In respect of advance received for expenses: No separate evidence in respect of this category has been filed by the appellant, however this has been dealt with in one above and the appellant has treated specific amount spent against specific expenses as advance.

3. In respect of double payment: The appellant has filed copy of account of , DEG Deutsche Investitions; Genworth Financial Inc.; Global English Corporation; NBC Universal; and Mars Inc as evidence of double payments. The appellant has not filed any correspondence with the above party showing the amount received were on account of payment made twice by the parties. Only an adjustment bill No.053/2008 dated 5th March, 2008 (thus not relating to the relevant period) has been filed showing adjustment of excess amount paid by Genworth.

1.11 The Commissioner (Appeals) has stated that no separate evidence in respect of advance received for expenses has been filed by the appellant and that the "appellant has treated specific amount spent against specific expenses as advance". (Underlining added). These observations are also baseless. The amount spent on expenses is adjusted against the advance received from the client and goes to reduce the amount of the advance received from the client.

1.12 The Commissioner (Appeals) has observed on pages 8 and 9 of the appellate order that the appellant has not filed any correspondence to show that double payment had been made by DEG Deutsche Investitions; Genworth Financial Inc.; Global English Corporation; NBC Universal; and Mars Inc. During the five hearings in the course of assessment proceedings, the Assessing Officer had called for information on a number of points specified by him, but the Assessing Officer never asked the appellant to provide evidence to show that clients had made double payment. During the course of the hearing, the Commissioner (Appeals) also did not ask the appellant to provide any evidence in this regard. The Commissioner (Appeals) is, therefore, not justified in making this observation. As stated in paragraph 1.4 above, on coming to know that a client has made a double payment, the partner who raised the Bill phones the concerned person in the client's office for providing details for returning this amount by wire transfer, but, during the talk on phone, the clients advised that the double payment received may be adjusted against future expenses and services, and the amount has been subsequently so adjusted. To sum up, therefore, the adverse observations made by the Commissioner (Appeals) are not justified.'

10. We have heard the rival submissions and perused the relevant finding given in the impugned order as well as the material referred to before us. The assessee is a law firm, which is rendering services mostly to its foreign clients. The system of accounting adopted by the assessee is that, bills and invoices are raised for advance payment of fees or expenditure from its clients; firstly, which are in the category of making payment of fees to Senior Advocates who are engaged to represent the matters before the Hon'ble High Court and Supreme Court on behalf of such clients; secondly, advance for incurring expenses like court fees, payment to Registrar of Companies and various other litigation expenses; and lastly, there are double payments which in few cases are adjusted against future services or expenditure. After discharging the payments on behalf of the clients, the balance amount is recognized as income which is offered for tax. This system of accounting is being adopted from earlier years which has been stated to be accepted by the Department and in support, scrutiny assessment for assessment year 2009-10 has also been filed before us, wherein similar system of recognizing the income and the accounting practice of the assessee has been accepted. Under all the three categories of payments, which has been discussed hereinabove, it is seen that money received by the assessee was the money of the clients received in the fiduciary capacity. It is a kind of trust money of the client, for which assessee has to discharge certain obligations while representing the case of its clients before various Courts and other legal and arbitration proceedings. From perusal of various 'Memo of fees raised to the clients, we find that the amount which has been raised to the clients are on account of advance payment for filing of proposed petitions, fees for Senior Advocates for various hearings, including fees for junior counsel, Court fees, miscellaneous expenses, etc. In the said memo of fees itself, there is a categorical note below that this is advance money which shall be used by the assessee firm to make payments from time to time, like while making payment to the arbitrators and Senior Advocates for which TDS would be deducted by the assessee and specific request was made by the client not to deduct TDS on such payment. Even in the 'memo fees' for seeking advance money for incurring expenditure also, it is seen that various heads of proposed expenditure are mentioned like photocopy; courier charges; local counsel fees; charges for hotel and taxi charges; clerk, etc. The legal fee of the assessee firm is separately charged by the assessee for which income has been recognized in the year of receipt and has been offered for taxation. Nowhere it is the case of the Assessing Officer or the ld. CIT(A) that the payment received from various clients do not carry any obligation for making payment for Senior Advocates engaged to represent the matters of the clients or for incurring of expenditure on behalf of the clients during the course of litigation proceedings or arbitration proceedings. The Revenue's case is simply that whatever has been received from the clients has to be recognized as income and whatever has been paid is to be treated as expenditure and this has been justified on the ground that under the cash system of accounting, this procedure should be followed.