M/S MOHTA CONSTRUCTION COMPANY vs. A.C.I.T.CIRCLE-2,BIKANER

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ITA/59/2009HC RajasthanRJHC01031153200923 January 20183 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the Income Tax Appellate Tribunal had wrongly relied upon the judgment in Shri Ram Jhanwar Lal v. IT (D.B. Income Tax Appeal No.10/2006). The Court noted that the cited judgment did not even refer to Section 145(3) of the Income Tax Act, rendering it irrelevant to the present appeals where the rejection of books of accounts under Section 145(3) was a crucial factor. Consequently, the High Court found that the matter required remittance back to the Tribunal for fresh adjudication. The parties were granted the liberty to raise all their contentions before the Tribunal, and the Tribunal was directed to expedite the hearing. 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 (Assistant Commissioner of Income Tax) against the order of the Income Tax Appellate Tribunal (ITAT). The ITAT had partly allowed the appeals of the assessees, reversing the findings of the Commissioner of Income Tax (Appeals). The core issue 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. The Revenue contended that a previous judgment of the High Court, relied upon by the ITAT, was not relevant to the present case as it did not consider Section 145(3). The High Court admitted the appeals, framing substantial questions of law.

What were the issues?

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? (Question of law turning on Section 145(3)) 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? (Question of law turning on Section 145) Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The Tribunal wrongly relied upon the judgment in Shri Ram Jhanwar Lal v. IT (D.B. Income Tax Appeal No.10/2006) because that judgment did not refer to Section 145(3) of the Income Tax Act, making it irrelevant to the issue at hand.

Which sections of the Income-tax Act were involved?

Section 145,Section 145(3)

AI-generated summary — verify with the full judgment below

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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