Commissioner Of Income Tax v. Panacea Biotec Ltd

$~R-1 *IN THE HIGH COURT OF DELHI AT NEW DELHI+ITA No.75/2009 COMMISSIONER OF INCOME TAX..... AppellantThrough:Mr. Ashok Manchanda, Sr. StandingCounsel. versus PANACEA BIOTEC LTD. ..... RespondentThrough:Mr.SalilAggarwal,Adv.withMr.Madhur Aggarwal, Adv. CORAM:HON'BLE MR. JUSTICE SANJIV KHANNAHON'BLE MR. JUSTICE ANUP JAIRAM BHAMBHANIO R D E R%10.01.2019 This appeal by the Revenue under Section 260A of the Income TaxAct, 1961 (‘Act’, for short) in the case of Panacea Biotech Limited(‘respondent-assessee’, for short) relates to assessment year 2003-2004 andarises from the order passed by the Income Tax Appellate Tribunal(‘Tribunal’, for short) on 30.06.2008. 2.The appeal was admitted for hearing vide order dated 15.12.2009 onthe following substantial question of law: “Whether on a correct interpretation of the relevant statutoryprovisions, the Tribunal was justified in law in deleting thedisallowance of Rs.7,72,25,725/- made by the Assessing Authoritybeing the weighted deduction claimed by the assessee underSection 35(2AB) of the Act?” 3.However, the substantial question of law was re-framed vide orderdated 13.09.2018 for reasons recorded in paragraphs 2 to 10 of the said order which reads as under: “2. The respondent-assessee had filed the return of income for theAssessment Year 2003-04 on 28th November, 2003, declaringincome of Rs.33,70,62,290/-. This return was revised on 31stMarch, 2005, declaring income of Rs.33,73,12,760/-. 3. In the original return and the revised return, the respondent-assessee had claimed deduction of Rs.7,72,25,723/- under Section35 (2AB) of the Income Tax Act, 1961 being 150% of theexpenditure incurred on in-house research and development ofRs.5,14,83,816/-. 4.The Assessing Officer disallowed the said claim as therespondent-assessee had not been able to furnish approval fromthe Secretary, Department of Scientific and Industrial Research(DSIR) on or before passing of the assessment order on 30thMarch, 2006. 5.The respondent-assessee had thereupon filed an appeal withan application for adducing additional evidence under Rule 46Aof the Income Tax Rules, 1962 (Rules, for short) enclosingtherewith report of the DSIR dated 20th July, 2006. For clarity,we may record that the respondent-assessee had applied forapproval to the Secretary, DSIR on 9th January, 2006. 6.Commissioner of Income Tax (Appeals) for detailed reasonsset out in paragraph 4.2 to 4.3.2 allowed the application underRule 46A of the Rules for taking on record the approval grantedby the DSIR dated 20th July, 2006. He has also held that therespondent-assessee was entitled to the said deduction. 7.Aggrieved, the Revenue preferred an appeal before theTribunal on two grounds including deduction allowed underSection 35 (2AB) of the Act. 8.The Tribunal has rejected the appeal preferred by theRevenue in respect of deduction under Section 35 (2AB), interalia, recording “From the grounds of appeal we find that theRevenue has not objected to admission of the additional evidenceby CIT (A).” 9.Counsel for the Revenue has drawn our attention to thegrounds of Revenue’s appeal recorded by the Tribunal inparagraph 13 of the impugned order. It is submitted that theRevenue had filed an application dated 11th April, 2008 for 7.Aggrieved, the Revenue preferred an appeal before theTribunal on two grounds including deduction allowed underSection 35 (2AB) of the Act. 8.The Tribunal has rejected the appeal preferred by theRevenue in respect of deduction under Section 35 (2AB), interalia, recording “From the grounds of appeal we find that theRevenue has not objected to admission of the additional evidenceby CIT (A).” 9.Counsel for the Revenue has drawn our attention to thegrounds of Revenue’s appeal recorded by the Tribunal inparagraph 13 of the impugned order. It is submitted that theRevenue had filed an application dated 11th April, 2008 for amendment of the grounds of appeal along with authorizationdated 2nd April, 2007, raising several grounds including theground that the Commissioner of Income Tax (Appeals) had erredin law and in facts and circumstances of the case in admittingadditional evidence under Rule 46A of the Rules. The aforesaidapplication under authorization has been enclosed as an annexureto the appeal paper book. This fact is also mentioned in groundNo.10 of the grounds of appeal, which states that the Tribunal’sorder was vitiated by perversity on account of apparent non-application of mind to the specific grounds raised by the Revenue.The observations of the Tribunal, it is alleged, are totally contraryto the record. Specific challenge is made to the admission ofadditional evidence by Commissioner of Income Tax (Appeals)under Rule 46A. 10.We may note that the respondent-assessee has not file anyaffidavit controverting or denying that the Revenue has raised thesaid additional ground of appeal.” 4.The substantial question of law as re-framed vide order dated 13.09.2018 reads as under: “Whether the order of the Income Tax Appellate Tribunal dated 30[th]June, 2008, dismissing the appeal of the Revenue on the ground thatthey had not preferred an appeal against the direction allowing theapplication under Section 46A of the Income Tax Rules, 1962, isperverse and contrary to facts?” 5.The respondent-assessee was also given liberty to file an affidavitmeeting the assertions made by the Revenue that they had filed and raisedadditional grounds of appeal challenging admission of additional documentsby the Commissioner of Income Tax (Appeals) under Rule 46A of theIncome Tax Rules, 1962. 6.The respondent-assessee has filed affidavit of the counsel who hadappeared before the Tribunal in the appeal preferred by the Revenue.Another affidavit of Mr. Sunil Kapoor, Advocate, who had appeared for respondent-assessee in the matter was also filed. As per the said affidavits,the Revenue has not filed alleged amended grounds of appeal before theTribunal.Copy of the alleged memo of grounds of appeal was also notserved on the counsel for the respondent-assessee.During the course ofarguments also, the departmental representative for Revenue had neitherraised the issue nor stated that they have filed additional grounds of appealchallenging the order of Commissioner of Income Tax (Appeals) admittingadditional documents. 7.The affidavits filed by the respondent-assessee state that the relevantfiles of the Tribunal have been weeded out and are no longer available. Thisis accepted and admitted by the counsel for the Revenue. 8.In the given circumstances, we find it impossible to answer thesubstantial question of law as re-framed. Presumption in law would be thatthe facts relating to the file/grounds of appeal are correct. It would havebeen better and more convenient for the Revenue to have raised the issue byfiling an application under Section 254(2) of the Act in view of the allegederror made in the impugned order, recording that the Revenue had notchallenged admission of additional evidence i.e. the approval granted by theDepartment of Scientific and Industrial Research (‘DSIR’, for short) on20.07.2006. 7.The affidavits filed by the respondent-assessee state that the relevantfiles of the Tribunal have been weeded out and are no longer available. Thisis accepted and admitted by the counsel for the Revenue. 8.In the given circumstances, we find it impossible to answer thesubstantial question of law as re-framed. Presumption in law would be thatthe facts relating to the file/grounds of appeal are correct. It would havebeen better and more convenient for the Revenue to have raised the issue byfiling an application under Section 254(2) of the Act in view of the allegederror made in the impugned order, recording that the Revenue had notchallenged admission of additional evidence i.e. the approval granted by theDepartment of Scientific and Industrial Research (‘DSIR’, for short) on20.07.2006. 9.Revenue does not deny or dispute that DSIR had granted approval tothe respondent-assessee on 20.07.2006. The issue and ground raised by theRevenue is that this approval was not available when the assessment orderwas passed, and the approval should not have been taken on record by theCommissioner of Income Tax (Appeals). 10.Learned counsel for the respondent-assessee has stated that they have been allowed and granted benefit under Section 35(2AB) of the Act inearlier and subsequent years on the strength of approvals granted by DSIR.11.Recording the aforesaid, we uphold the order passed by the Tribunalgranting benefit under Section 35(2AB) of the Act to the respondent-assessee and thereby, answer the question of law raised by the Revenueagainst them and in favour of the respondent-assessee. There would be noorder as to costs. SANJIV KHANNA, J. JANUARY 10, 2019/uj ANUP JAIRAM BHAMBHANI, J.