THE PR. COMMISSIONER OF INCOME TAX-2 V. M/S SUMERU ENTERPRISES

ITA/64/2021

AI Insights

The case involves the Principal Commissioner of Income Tax-2, Jaipur, as the appellant, and M/s Sumeru Enterprises as the respondent. The core issue revolves around the expenditure of Rs.11,59,39,654 claimed by the assessee under Section 36(1)(vii) of the Income Tax Act, despite no business being run by the firm during the year. The Income Tax Appellate Tribunal (ITAT) had remanded the case back to the Assessing Officer for a detailed examination of journal entries and ledger accounts, which purportedly reflected the reversal of outstanding charges. The High Court of Rajasthan, while dismissing the appeal, emphasized the need for a thorough re-scrutiny by the Assessing Officer to ascertain the correctness of the entries and the entitlement of the assessee to any relief.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 719405 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 16-10-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: SANDEEP PATHAK; JAYA PATHAK
• Keywords: Assessment; Expenditure; Income Tax; Journal entries; Ledger accounts; Remand
• Section: 36(1)(vii)

Judgement Text

"[2023:RJ-JP:31023-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 64/2021 The Pr. Commissioner Of Income Tax-2, Jaipur. ----Appellant Versus M/s Sumeru Enterprises, H-1-29, Old Tourist Hotel Building, Subhash Marg, C-Scheme, Jaipur (Aaefs3266L) ----Respondent For Appellant(s) : Mr. Sandeep Pathak, Adv. With Mrs. Jaya Pathak, Adv. HON'BLE MR. JUSTICE MANINDRA MOHAN SHRIVASTAVA HON'BLE MR. JUSTICE PRAVEER BHATNAGAR Order 16/10/2023 1. Heard on admission. 2. This appeal has been filed proposing/raising following proposed substantial question of law:- “i). Whether on the facts and in the circumstances of the case and in law the ITAT was justified in setting aside the issue of expenditure of Rs.11,59,39,654/- claimed by assessee under Section 36(1)(vii) while no business was being run by the firm during the year.” 3. Learned counsel appearing for the Revenue Board submitted that learned Tribunal while remanding the case for consideration afresh has made certain observations, which may affect re-scrutiny by the Assessing Officer after consideration of entire material on record. [2023:RJ-JP:31023-DB] (2 of 3) [ITA-64/2021] 4. From the order passed by the Tribunal, we find that the main operative reason for the Tribunal to set aside the order of assessment and remanding the case back for consideration is the journal entries in respective ledger account of the parties, which according to the assessee, reflect the reversal of outstanding charges during the previous year relevant to impugned assessment year and such charges according to the assessee were duly offered in the earlier years and all these details in terms of journal vouchers, ledgers and entries in the books of accounts, copies of return of income for past asessment years though submitted not examined. 5. The findings recorded by the Tribunal in paragraph 33 of the order under challenge read as below:- “…….we are constrained to remand the matter to the file of the AO. Therefore, for the limited purposes of verifying these two aspects, the matter is set aise to the file of the AO and where the same is found to be in order, the AO is directed to allow the necessary relief to the assessee. In the result, the ground of appeal is partly allowed for statistical purposes.” 6. We find that the Tribunal while remanding the case of remaining assessment for rescrutiny for reconsideration by Assessing Officer has made observations as below:- “To our mind, all the AO has to examine is whether the amount of aforesaid charges so recoverable have been actually reversed in respective ledger accounts of individual allottees/debtors and written off in the books of accounts of the assessee during the previous year relevant to impugned assessment year or not.” 7. The other observations made in the aforesaid paragraph read as under:- [2023:RJ-JP:31023-DB] (3 of 3) [ITA-64/2021] “The AO is directed to allow the necessary relief to the assessee.” 8. The observations, which have been made by the Tribunal do not decide the issue pending consideration, the issue on which the case has been remanded to the Assessing Officer for reconsideration. 9. At the first place, the Assessing Officer has been directed to examine whether the amount of aforesaid charges, so recoverable, have been actually reversed in respective ledger accounts of individual allottees/debtors and written off in the books of accounts of the assessee during the previous year relevant to impugned assessment year or not. 10. It is not a finding of fact that charges have been actually reversed. This would be a matter of examination by the Assessing Officer. 11. Further the observation, directing the Assessing Officer to allow the necessary relief to the assessee, it goes without saying that nature of charges would depend upon examination of material on record and not a mechanical exercise for granting or allowing any relief. 12. In other words, the assessee would be entitled for relief, for which, he may held entitled only after scrutiny of material on record after exercising the demand. 13. Accordingly, the present appeal stands dismissed. (PRAVEER BHATNAGAR),J (MANINDRA MOHAN SHRIVASTAVA),J Monika/33 "