M/S DHEERAJ KUMAR CONTRACTOR vs. A.C.I.T.CIRCLE-SRIGANGANAGAR

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ITA/62/2009HC RajasthanRJHC01040410200923 January 20183 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the Income Tax Appellate Tribunal (ITAT) had wrongly relied upon the High Court's previous judgment in Shri Ram Jhanwar Lal v. IT (D.B. Income Tax Appeal No.10/2006). The Court observed that the cited judgment did not even refer to Section 145(3) of the Income Tax Act, 1961, which was a crucial provision in the present appeals concerning the rejection of books of accounts and subsequent deductions. Therefore, the ITAT's reliance on that judgment was deemed erroneous. The High Court found that the matter required remittance back to the Tribunal for a fresh consideration. It was open for both parties to raise all their contentions before the ITAT. The Court directed the ITAT to expedite the hearing of the matter. No specific finding was given on the deductibility of interest or bank commission.

What were the facts?

These are three appeals filed by the Revenue challenging the order of the Income Tax Appellate Tribunal (ITAT). The ITAT had partly allowed the appeals of the assessees and reversed the findings of the Commissioner of Income Tax (Appeals) [CIT(A)]. The core of the dispute revolves around the deductibility of interest paid to third-party creditors and bank commission after the assessment of net profit rate, particularly when the books of accounts were rejected under Section 145(3) of the Income Tax Act, 1961. The Revenue contended that a previous judgment of the High Court, Shri Ram Jhanwar Lal v. IT (D.B. Income Tax Appeal No.10/2006), was wrongly relied upon by the ITAT. The High Court admitted the appeals and framed substantial questions of law.

What were the issues?

The questions before the Tribunal were: 1. Whether the assessee is entitled to claim deduction of interest paid to 3rd party creditors after assessment of net profit rate in cases where resort has been taken to the provisions of Section 145(3) by rejecting the books of accounts? 2. Whether the assessee is entitled to claim deduction of interest paid to third party creditors and bank commission after assessment of net profit rate in cases where resort has been taken to the provisions of Section 145 by rejecting the books of accounts? Assessee's Contentions: The judgment does not record any specific contentions made by the assessees. However, the ITAT had partly allowed their appeals, implying they had argued for the deductibility of interest and bank commission. Revenue's Contentions: The Revenue argued that the ITAT had wrongly relied upon the High Court's judgment in Shri Ram Jhanwar Lal v. IT (D.B. Income Tax Appeal No.10/2006), as this judgment did not refer to Section 145(3) of the Income Tax Act, 1961, which was central to the present appeals.

Which sections of the Income-tax Act were involved?

Section 145(3)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 59 / 2009 M/s Mohta Construction Company 25-B, Sadul Ganj Bikaner. Through its Power of Attorney Holder Shri Vijay Mohta S/o Shri Jai Kishan Ji Mohta Aged 36 Years Resident of 25-B, Sadul Ganj Bikaner. ----Appellant Versus Assistant Commissioner of Income Tax Circle-II, Bikaner. ----Respondent D.B. Income Tax Appeal No. 62 / 2009 M/s Dheeraj Kumar Contractor 1-F-12, Jawahar Nagar, Sri Ganganagar. Through its Partner Shri Jetha Nand ji Adhalkha s/o Shri Bodh Raj Ji Aged 70 Years Resident of 402, Ravi Chowk, Purani Abadi, Sri Ganganagar. ----Appellant Versus Assistant Commissioner of Income Tax Circle-Sri Ganganagar, Sri Ganganagar. ----Respondent D.B. Income Tax Appeal No. 58 / 2009 M/s Maheshwari Builders, 25-B, Sadul Ganj, Bikaner. Through its Power of Attorney Holder Shri Vijay Mohta, s/o Shri Jai Kishan Ji Mohta, Aged 36 Years, Resident of 25-B, Sadul Ganj, Bikaner. ----Appellant Versus Assistant Commissioner of Income Tax Circle-II, Bikaner. ----Respondent _____________________________________________________ For Appellant(s) : Mr.Sharad Kothari. For Respondent(s) : Mr.KK Bissa. _____________________________________________________ HON'BLE MR. JUSTICE K. S. JHAVERI HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI

Judgment / Order 23/01/2018

(2 of 3)

1.

By way of these appeals, the appellant department has challenged the judgment and order of the Income Tax Appellate Tribunal whereby, the Tribunal partly allowed the appeal of the department and reversed the finding given by the CIT(A) holding that the judgment of this Court in Shri Ram Jhanwar Lal v. IT (D.B. Income Tax Appeal No.10/2006) which is sought to be relied upon has no relevance on the issue which is involved.

2.

This Court while admitting the appeals framed following substantial question of law :- DB ITA No.59/2009 "Whether the assessee is entitled to claim deduction of interest paid to 3rd party creditors after assessment of net profit rate in cases where resort has been taken to the provisions of Section 145(3) by rejecting the books of accounts ?" DB ITA No.62/2009 "Whether the assessee is entitled to claim deduction of interest paid to third party creditors and bank commission after assessment of net profit rate in cases where resort has been taken to the provisions of Section 145 by rejecting the books of accounts ?" DB ITA No.58/2009 "Whether the assessee is entitled to claim deduction of interest paid to 3rd party creditors after assessment of net profit rate in cases where resort has been taken to the provisions of Section 145(3) by rejecting the books of accounts ?"

3.

We have heard the learned counsel for the parties.

4.

It is true that the issue which this Court in the reported decision has not even referred to Section 145(3) in the judgment. Therefore, the Tribunal has wrongly relied upon the said judgment of this Court.

(3 of 3)

5.

The matter requires to be remitted back. It will be open for the parties to raise all the contentions before the Tribunal. The Tribunal may expedite the hearing.

6.

Accordingly, the appeals stand disposed of. (DR. PUSHPENDRA SINGH BHATI)J. (K. S. JHAVERI)J. S.Phophaliya/-33-35

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