TaxTMI 
TaxTMI 
2016 (7) TMI 400
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....assed under section 263 holding that the order dated 12th September, 2007 passed under section 143(3) of the Income Tax Act was erroneous and prejudicial to the interest of the revenue. The assessing officer was directed by the Commissioner of Income Tax to reassess the income of the assessee in the light of the discussions made 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 m....
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....dvance receipts of Rs. 2,90,98,283/- from clients. The same has not been taken as income of the assessee 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, following the decision of the Apex Court in the case of ED Sassoon and Company Ltd. Vs. CiT 26 hR 27 (SC) the assessment order u/s.143(3) dated 12....
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....ate 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" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time [income computation and disclosure standards] to be followed by any class of assessees or i....
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....e subsequent years when expenses were incurred both out of pocket and on account of his fees the liability has been adjusted. In this regard, the finding of the learned Tribunal is relevant which is as follows:- "However, the undisputed facts of this case are that the AO, while passing the consequential order to 263 order in the immediately preceding assessment year, whether warranted or not, he has given a finding that "Thus, I find that the total sum of Rs. 58,20,174/- appearing as Advances from Parties/Clients as on 31.3.2004 has already been appropriated towards fee in the subsequent years. Thus, in fact there is no loss of revenue as the amount has been considered as the income of the assessee in the subsequent years, when it so mat....
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....rk of the principal entrusted to the agent. We have already seen that the balance of the money was refundable by the agent to the principal. Since the money was impressed with the character of somebody else's money, namely, clients' money, it did not become the income of the assessee. It may be, in the absence of a rule like the Solicitors' Account Rules in this country, the assessee mixed up this money with its own money and may have deposited the money in its own bank account; it may be that this money remained part of the general assets of the assessee for a long time; but this mixing up did not have the result of converting the money into the assessee's money or trading receipt or income. That being the position, we do not think that th....