Panasonic Energy India Co. Ltd. vs Assistant Commissioner of Income Tax

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Akil Abdul Hamid Kureshi, J.—The assessee is in appeal against the judgment dated November 30, 2012, of the Income-tax Appellate Tribunal ("the Tribunal" for short). The following question has been presented for our consideration:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in disallowing totally section 80-IB claim of the appellant only because Form 10CCB was not submitted during the course of assessment proceedings?"

The appellant-assessee is a company registered under the Companies Act and is engaged in manufacturing activity. For the assessment year 2003-04, the return of the company was taken in scrutiny. The Assessing Officer examined the various claims put forth by the assessee during the course of the assessment proceedings. One such claim pertained to deduction under section 80-IB of the Income-tax Act, 1961 ("the Act" for short). The Assessing Officer passed the order of assessment on March 27, 2006, disallowing such claim making the following observations:

"During the year under consideration, the assessee-company has claimed deduction under section 80-IB of the Income-tax Act at Rs. 1,30,09,683 in respect of its alleged new 3D line unit at Pithampur. It was noted that the assessee-company has failed to file the required mandatory Form No. 10CCB with the return of income. As per provision under section 80-IB(13) read with section 80-IA(7), this audit report is a mandatory criterion for availing of this deduction. This fact was brought to the notice of the assessee-company vide order-sheet noting dated September 16, 2005. Till the passing of this order, the assessee-company has failed to submit Form No. 10CCB. As this is clear violation of the provisions of section 80-IB(13) read with section 80-IA(7), the assessee-company''s claim of deduction amounting to Rs. 1,30,09,683 is disallowed."

The assessee carried the matter in appeal. Before the Commissioner of Income-tax (Appeals), the assessee contended that in the earlier years such claim was granted by the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) accepted the request making the following observations:

"5.3. I have considered the submissions of the counsel and the facts of the case. This ground has two limbs. The first limb is against the disallowance of deduction under section 80-IB, which was held to be allowable by the Commissioner of Income-tax (Appeals) from the assessment year 1998-99 till the assessment year 2002-03. Respectfully following the orders of my learned predecessors for the assessment years 1998-99 to 2002-03, the Assessing Officer is directed to allow the deduction under section 80-IB to the appellant."

The Revenue carried the matter in appeal before the Tribunal. The Tribunal allowed the Revenue''s appeal and reversed the decision of the Commissioner of Income-tax (Appeals) making the following observations:

"This disallowance was deleted by the learned Commissioner of Income-tax (Appeals) as per paragraph 5.1 of his order. We find that there is no decision of the learned Commissioner of Income-tax (Appeals) on this aspect of the matter, i.e., non-filing of mandatory Form No. 10CCB with the return of income. Regarding this argument of the learned authorised representative that this is a procedural lapse, we find that in various cases, it was held by the Tribunal and various High Courts that if such procedural lapse is rectified and made good before completion of assessment proceedings, no adverse inference should be drawn but, in the present case, even before completion of the assessment proceedings, the mandatory Form No. 10CCB was not submitted by the assessee and, hence, in our humble considered opinion, this order of the learned Commissioner of Income-tax (Appeals) cannot be sustained because even if it was a procedural requirement and the assessee could not submit the same along with the return of income for any reason, there could not be any reason for non-submission of the same before the completion of the assessment proceedings and the assessee, in the present case, has not submitted the same even during the assessment proceedings. We are of the considered opinion that disallowance was rightly made by Assessing Officer and the deletion of the disallowance by the learned Commissioner of Income-tax (Appeals) cannot be sustained. We, therefore, reverse the order of the learned Commissioner of Income-tax (Appeals) on this issue and restore that of the Assessing Officer. This ground of the Revenue is allowed."

The assessee is, therefore, in appeal before us. The learned counsel, Mr. J.P. Shah, for the appellant vehemently contended that the Tribunal committed a serious error in allowing the Revenue''s appeal and disallowing the claim of deduction under section 80-IB of the Act on the ground that the audit report in Form No. 10CCB was not filed before completion of the assessment. He submitted that this view is contrary to the decisions of this court as well as the Supreme Court.

Counsel contended that even if the audit report in Form No. 10CCB was furnished at the appellate stage, the same should be seen as sufficient compliance with the requirement of claiming deduction under section 80-IB of the Act since the appeal must be seen as continuation of the assessment proceedings.

In support of his contentions, counsel relied on the following decisions:

(1) In the case of Commissioner of Wealth-tax, Gujarat Vs. Smt. Vimlaben Vadilal Mehta, , in which the Supreme Court observed that rectification of the assessment must be treated on the same basis as an original assessment for the purpose of the claim of deduction of liabilities towards income-tax, wealth-tax or gift-tax.

(2) In the case of Commissioner of Wealth Tax, Gujarat, Ahmedabad Vs. Vadilal Lallubhai and Others, in which the apex court observed that when, in the course of a wealth-tax assessment, the assessee makes a claim for deduction on account of the income-tax, wealth-tax and gift-tax liabilities, owed by him on the valuation date, it is the final quantification of the particular tax which must be taken into account.

(3) In the case of Commissioner of Wealth Tax, Madras Vs. K.S.N. Bhatt, , wherein the apex court observed that in computation of the net wealth of the assessee for wealth-tax liabilities towards, income-tax, wealth-tax and gift-tax, which crystallise on the relevant valuation date as determined in the respective assessment orders as liabilities, are to be deducted even though those assessment orders are finalised after the valuation date.

(4) Reliance was also placed on the decision of the Karnataka High Court in the case of Commissioner of Income Tax and Another Vs. ACE Multitaxes Systems Pvt. Ltd., in which the Karnataka High Court held that section 80-IA(7) does not cast any obligation on the assessee that the return must be accompanied by the audit report. In the said case, the audit report was filed at an appellate stage, which was accepted by the High Court for the purpose of examining the deduction under section 80-IA of the Act.

(5) Heavy reliance was placed on the decision of the Division Bench of this court in the case of Commissioner of Income Tax Vs. Mayur Foundation, in which it was observed that appeal would be continuation of the assessment proceedings. The court approved the decision of the Tribunal where the assessee was held entitled to the benefits under section 11(2) of the Act when necessary support for the claim was presented at the appellate stage before the Tribunal.

(6) Reliance was also placed in the case of Commissioner of Income Tax Vs. Medicaps Ltd., in which the High Court of Madhya Pradesh held that furnishing of audit report for claim of deduction under section 80-IA of the Act was not mandatory and the same can be filed even at the appellate stage.

(7) Reliance was placed in the decision of the apex court in the case of Aurangabad Electricals (P) Ltd. Vs. The Commissioner of Central Excise and Customs, Aurangabad, in which it was observed as under (pages 542 and 543 of 5 GSTR):

"11. . . . Keeping in view the well-settled principles laid down by this court that technicalities should not defeat rendering of complete justice to a litigant, we think it appropriate to remand the matter to the Tribunal to verify and consider whether the certificate which is already placed on record by the appellant, would assist them in support of their defence."

On the other hand, the learned counsel, Mr. Parikh, for the Revenue opposed the appeal contending that since the assessee failed to produce the report in Form No. 10CCB till the completion of the assessment, the same cannot be produced at any stage thereafter. The Tribunal, therefore, committed no error in allowing the Revenue''s appeal.

It is true that the Tribunal has made observations, which may suggest that if the report in Form No. 10CCB is not filed before the Assessing Officer before completion of the assessment, the entire claim under section 80-IB of the Act necessarily has to fail. Had this been the sole factual matrix, we would have certainly examined the question further and as prima facie advised, also would have accepted the assessee''s contention that even at the appellate stage, such report could be furnished if valid grounds are made out for doing so. However, we enquired with the counsel for the appellant whether and at what stage, the report was presented before the Appellate Commissioner or the Tribunal. We may recall that the Commissioner allowed the appeal of the assessee and granted deduction by merely referring to his own orders in the earlier years without commenting on whether at least before him such report was filed by the assessee or not. Likewise, the Tribunal merely proceeded on the footing that such report not having been furnished before the Assessing Officer till the assessment was completed, the claim should be disallowed. It was, therefore, that we had raised the said question to the counsel. Counsel candidly said that there is nothing on record to suggest that any such report was furnished on record either before the Commissioner (Appeals) or before the Tribunal. He, therefore, urged us to examine the question on the admitted premise that no such report was presented till the Tribunal decided the appeal of the Revenue. We have accordingly proceeded on such factual basis.

In the application filed by the appellant for taking the report on record also, the same facts emerge. The applicant has not stated that the report was submitted earlier before the lower authorities. Only request is to take the same on record. Why such report was not filed earlier is not stated. No grounds are made out to permit the applicant to produce the same at third appellate stage.

If this be the question, a serious consideration must be bestowed on whether the assessee, who had not previously furnished the report either before the Assessing Officer before completion of the assessment proceedings, failed to do so before the Appellate Commissioner or before the Tribunal till the second appeal was finally decided, at the appellate stage before the High Court can present a report requesting that the claim be granted. We have serious difficulty in accepting such a situation. Before giving our reasons we must record the opposition of the learned counsel, Mr. Shah, to take this factor into consideration. He urged that the question must be decided as framed in view of the conclusion of the Tribunal. We are afraid we cannot be pinned down to answering the question only as raised by the appellant. Section 260A of the Act itself gives sufficient scope and liberty to the court to frame such question as may be found necessary. Section 260A(1) provides for an appeal before the High Court from an order passed by the Tribunal "if the High Court is satisfied that the case involves a substantial question ''of law". Section 260A(3) provides that where the High Court is satisfied that a substantial question of law is involved in any case, it shall formulate that question. As per section 260A(4), the appeal has to be heard only on the question so formulated, the proviso, however, clarifies that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear the appeal on any other substantial question of law not formulated if the court is satisfied that the case involves such a question. Thus, at all stages the High Court has to judge if any substantial question of law arises at all and if it does arise, decide the same. Further, the admitted fact being that no such report was ever filed till the stage of the Tribunal, it would be futile to decide the question framed by the appellant which completely ignores this factual aspect. The issue can be looked from a slightly different angle. The Tribunal''s order can be supported by the respondent independently of the grounds mentioned by the Tribunal. Therefore, if the report was never filed till the Tribunal decided the appeal, surely, the Revenue had to succeed. Simply because the Tribunal mentioned this for allowing the appeal would not mean that we must also ignore the same.

In that view of the matter, we have considered whether the appellant can claim deduction under section 80-IB of the Act having previously not filed the audit report under Form 10CCB. In the present case, the appellant has not made out any ground why such report could not be filed earlier. In the application filed for taking into account the additional document on record also, no valid grounds are made out. Even before the first appellate stage before the Commissioner, though the rules permit production of additional evidence, the same is hedged with certain conditions. Rule 46A of the Income-tax Rules, 1962, in this regard provides as under:

"46A. (1) The appellant shall not be entitled to produce before the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals), any evidence, whether oral or documentary, other than the evidence produced by him during the course of proceedings before the Assessing Officer, except in the following circumstances, namely:--

(a) where the Assessing Officer has refused to admit evidence which ought to have been admitted; or

(b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or

(c) where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or

(d) where the Assessing Officer has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.

(2) No evidence shall be admitted under sub-rule (1) unless the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission.

(3) The Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the Assessing Officer has been allowed a reasonable opportunity--

(a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or

(b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant.

(4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271."

It can thus be seen that even to be able to produce additional evidence before the appellate Commissioner, the assessee has to satisfy the conditions of sub-rule (1) thereof and further the rule requires the appellate authority to record his reasons in writing for admitting such additional evidence.

Under the circumstance, without any justification and without any indication of reasons why such report could not be presented earlier, the assessee simply cannot for the first time present such document before the High Court and seek benefit of the deduction on the basis of such document. The appellate jurisdiction of the High Court under section 260A of the Act permits taking into account the substantial question of law and not examine the factual disputes. Further, a mere presentation of the report under Form No. 10CCB would not enable the assessee to claim deduction under section 80-IB. The Form and the report would enable the Assessing Officer to examine the claim and different calculations on the basis of which the claim is sought to be substantiated. Such question, surely cannot be gone into in the tax appeal before the High Court under section 260A of the Act.

In the case of The Commissioner of Income Tax, Vidarbha, Nagpur Vs. The Nagpur Hotel Owners'' Association Nagpur, , the apex court observed that it is necessary that the assessing authority must have an information at the time when he completes the assessment in the absence of any information for excluding a particular part of the income from the net taxation under section 11. It will not be possible for the assessing authority to give the assessee the benefit of such exclusion and once the assessment is so completed, it would be futile to find fault with the Assessing Officer for having included such income in the assessable income of such assessee. It is reasonable to presume that the intimation required under section 11 has to be furnished before the Assessing Officer to complete the concerned assessment because such requirement is mandatory and without particulars of this income, the assessing authority cannot entertain the claim under section 11 of the Act. We are conscious that this decision was explained by this court in the case of CIT v. Mayur Foundation (supra) observing that since appeal would be continuation of the assessment proceedings, filing of the material at an appellate stage would satisfy the requirement of presenting the same before completion of the assessment. In the present case, however, as noted above, we are concerned with peculiar facts. We do not see any reason for interference in the order of the Tribunal though for reasons somewhat different from those recorded by the Tribunal. Hence, the tax appeal is dismissed.

Civil Application No. 585 of 2013 in Tax Appeal No. 596 of 2013

In view of the order passed in appeal, civil application is disposed of.