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TMI Blog2006 (8) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made by the Assessing Officer by adopting certain percentage of additional/enhanced compensation as professional income of the assessees has been enhanced by Ld. CIT (Appeals) and the Ld. CIT (Appeals) has affirmed taxation of additional/enhanced compensation, disallowance of expenditure and taxation of interest in the hands of the assessees. A year-wise chart showing income estimated by the Assessing Officer and upheld by Ld. CIT (Appeals) in both the cases is summarized hereunder:- ------------------------------------------------------- Assessment Professional Additional/enhanced Year Income estimated compensation & by Assessing interest accrued on Officer @ 10 per SB/FD assessed cent of additional/ @ 50 per cent each in enhanced case of appellants by compensation Assessing Officer & in both the cases CIT(A) ------------------------------------------------------- 1986-87 Rs. 1,57,128 Rs. 15,71,285 ------------------------------------------------------- 1989-90 Rs. 10,923 Rs. 2,94,639 ------------------------------------------------------- 1990-91 Rs. 7,05,445 Rs. 5,20,445 (G.Mahto) 52,045 (B.N. Dey) -------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT (Appeals) affirmed - - addition of Rs. 2,25,368 in case of B.N. Dey. -------------------------------------------------------------- 3. The assessee's have contested initiation of proceeding under section 147/148 in assessment years 1986-87 and 1992-93 in both the cases. The Ld. CIT (Appeals) has affirmed the initiation of proceeding under section 147/148. The Ld. Counsel for the appellant has not pressed the ground relating to initiation of proceedings under section 147/148 in both the cases in both the years. A written submission and Paper Book containing of 283 pages was filed on 7-8-2006 and gist of case laws have been submitted on 8-8-2006. The assessee's counsel has argued the case on merits and has submitted that the taxation of additional/enhanced compensation, interest earned thereon (Fixed Deposit/Saving Bank Account) and disallowance of expenditure by the Assessing Officer and the Ld. CIT (Appeals) is wholly unjustified as the same is contrary to the provisions of Act. According to ld. A.R., the additional/enhanced compensation has been awarded by designated Court to the land owners in lieu of acquisition of their land by Government/Semi-Government/PSUs and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of compensation. The subordinate Judge-cum-Land Acquisition Judge, Hazaribagh awarded higher compensation. The State of Bihar preferred appeals before Ranchi Bench of this Court. Pursuant to interim order passed by this Court the enhanced amount of compensation was deposited in different bank against bank guarantees in the accounts of the advocates who had represented the land owners." 4. The Ld. A/R submitted that the additional/enhanced compensation has always been taxed by the department in the hands of owner of the land as per section 45(5) read with section 155(16) and the same cannot be held as income of the appellants who are advocates and are rendering professional services. It was submitted that the additional/enhanced compensation, interest accrued thereon has always been subject-matter taxation in the hands of land owner and dispute arises regarding year of taxability of such enhanced amount and interest earned thereon and not in the hands in which it is to be assessed. Our attention was drawn to the decision of CIT v. Hindustan Housing & Land Development Trust Ltd. [1986] 161 ITR 524 (SC), in this regard. The charging sections 4 and 5 do not support the stand of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore it cannot form part of professional income of the appellants. The nature of this receipt is similar to that of additional/enhanced compensation. Our attention was drawn to the reply of Mr. Gupta filed in course of his assessment proceeding before the Assessing Officer wherein Sri Gupta has intimated that Rs. 25,00,000 has been paid to Mr. B.N. Dey and Govind Junglee and Tribhuvan Mahto for keeping the same in Fixed Deposits with condition of refund on adverse decision by higher Court. The A/R submitted that in view of claim of Mr. R.D. Gupta, Advocate Rs. 25,00,000 paid by him cannot assume the character of professional income so as to warrant its addition in the hands of both the appellants. According to Ld. AIR, CIT (Appeals) was therefore not justified in resorting to enhancement and making addition of Rs. 25,00,000 (one half each) that too without giving any notice as required under section 251(2). 5. The Ld. AR has filed paper book containing 283 pages, the details of which are as under:- ------------------------------------------------------------- Sl.No. Description of the Documents Page Nos. ------------------------------------------------------------- 1. Written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Manilal Kher Ambalal & Co. v. A.G. Lulla. 82-86 ------------------------------------------------------------- 14. Copy of judgment of Calcutta High Court reported in 75 ITR, Page-433 in the case of CIT v. Sandarsons & Morgans. 87-95 ------------------------------------------------------------- 15. Copy of CIT (Appeals) order dated 29-11-1996 in the case of B.N. Dey for assessment year 1991-92 to 1993-94. 96-105 ------------------------------------------------------------- 16. Copy (sample) of agreement between the advocates and the client at the time of acceptance of briefcase. 106 ------------------------------------------------------------- 17. Petition filed before Assessing Officer by Ram Dular Gupta, Advocate on 30-8-1994 (in relation to Rs. 25,00,000 assessment year 1992-93). 107-109 ------------------------------------------------------------- 18. Brief Note on facts of each assessment year in the case of B.N. Dey along with evidences: (a) Assessment year 1986-87 - Brief note, Bank Account, demonstrating additional award of 15.71 lakhs, payment to awardee Rs. 3,00,000 & Rs. 2,00,000, receipts from awardee, banks certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... --------------------------------------------- 19. Brief Note on facts of each Assessment Year in the case of Govind Mahto (evidence are common and therefore not enclosed): (h) Assessment year 1986-87 - Brief note and written submission before CIT (Appeals). 257-266 (i) Assessment year 1989-90 - Brief note. 267 (j) Assessment year 1990-91 - Brief note. 268 (k) *Assessment year 1991-92 - Brief note and written submission before CIT (Appeals). 269-270 (l) *Assessment year 1992-93 - Brief note and written submission before CIT (Appeals). 271-281 (m) Assessment year 1993-94 - Brief note and written submission before CIT (Appeals). 282-283 ------------------------------------------------------------- *Common in both the cases and therefore not enclosed (already enclosed with 18(1). ------------------------------------------------------------- Certified that the documents at Sl. 2 to 8, 11 to 13, 15 to 17, 18 & 19 are part of record of authorities below and that at Sl. No. 1, 9 & 10, 14 are submission and copy of judgment of Hon'ble Courts. 6. On the other hand, the Ld. Standing Counsel of the Department, Sri K.K. Jhunjhunwala supported the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re owned by land owners (and not by the appellants) to whom income in form of additional/enhanced compensation has been awarded by the designated Court and therefore the CIT (Appeals) was not justified in confirming the addition on account of a additional/enhanced compensation, interest earned thereon and disallowance of expenditure. 8. We have considered the rival submissions and have gone through the orders of Assessing Officer, CIT (Appeals) and the decision of Hon'ble Calcutta Bench of ITAT (Jamshedpur Camp) and we find that the facts and circumstances of the case in hand are identical to the facts in hand before the Hon'ble Calcutta Bench of ITAT (Jamshedpur Camp) which was presided over by the Vice-President (K.Z.) and the Co-ordinate Bench in the said judgment has held as under:- "We have to accept the contention of the assessee that the amount in question has been deposited with the Bank in the name of the assessee as a custodian. It is not the assessee's amount and it is a settled principle that if the amount of the client is kept in the custody of the advocate in his professional capacity, the amount cannot be said to be the money or income of the assessee and to this p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y following the order of Hon'ble Calcutta Bench of ITAT (Jamshedpur Camp) we hold that the additions sustained by the CIT (Appeals) (indicated in the chart above) in respect of additional/enhanced compensation, interest accrued thereon and disallowance of expense are fit to be deleted. However, it is open to the department to initiate appropriate proceeding in the case of land owners for bringing to tax the amount of additional/enhanced compensation, interest accrued thereon and allowance or otherwise of expenditure incurred in process of litigation by them. As far as addition of Rs. 25,00,000 (50 per cent each) by CIT (Appeals) we find that Mr. Gupta has never claimed that professional fee was paid to the appellants and therefore, the addition of Rs. 25,00,000 is also ordered to be deleted. 10. On an overall consideration of the factual aspect it was observed that the department has proceeded in a wrong line particularly when the advocates are the authorized representatives of the assessees and not the legal heirs. In such circumstances the revenue should have issued notices in the name of the assessees through the advocates or should have collected the details from the advocates ..... X X X X Extracts X X X X X X X X Extracts X X X X
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