Rejection of Additional Evidence by weighted Deduction u/s 35(2AB): ITAT directs Re-adjudication Admitting Evidences [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) directed the Commissioner of Income Tax (Appeals) to admit the additional evidence to substantiate the claim of weighted deduction under Section 35(2AB) of the Income Tax Act, 1961 and re-adjudicate the matter on merits after verifying the additional evidence.

Lumis Biotech Pvt Ltd, the assessee-company filed its income tax return for the assessment year 2018-19 declaring a total income of Rs.14,02,381, and revised the income tax return declaring the same total income on 31.10.2018.

The Assessing officer (AO) scrutinized the assessment under the E-assessment Scheme, 2019. Eventually, a notice was issued to the assessee including the queries and information supporting the claims made in the income tax return.

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The AO found that the assessee claimed a weighted deduction of Rs. 1,36,40,254 under section 35(2AA) of the Income Tax Act but failed to file Form No. 3CG and Form No. 3CL with required documents to support the claim.

Further, the officer issued a show-cause notice. Due to the assessee’s non-compliance, the AO disallowed Rs. 1,36,40,254, and Rs. 6,03,970 for non-deduction of TDS on certain expenditures. It completed the assessment declaring Rs. 1,56,46,605 as total income and passed the order under section 143(3)  of the Income Tax law.

Aggrieved by the order, the assessee appealed before the CIT(A) with additional evidence under Rule 46A of the Income Tax rules. However, the CIT(A) sustained the disallowance and dismissed the appeal.

The assessee appealed before the ITAT, Mumbai against the CIT(A) order. The main issue was whether CIT(A) erred in refusing the additional evidence submitted by the assessee to support the claim.

Assessee's counsel represented by Hitesh P. Shah submitted that the income tax appellate commissioner did not consider the submissions, and information presented by the assessee to claim the weighted deduction under income tax section 35(2AB).

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The counsel submitted that the information could not be filed before the AO due to the COVID-19 pandemic. The counsel prayed to admit the additional evidence.

On the other side, the income tax department’s counsel represented by Manoj Kumar Sinha supported the CIT(A)’s order.

The two-member bench comprising Pavan Kumar Gadale (Judicial Member) and Girish Agrawal (Accountant Member) observed that the first appellate authority has erred in rejecting the additional evidence filed by the assessee. The Income Tax Appellate Tribunal stated that the assessee should not suffer for not filing the material information as evidence plays an important role in decision making. Thus, the tribunal set aside the CIT(A)’s order and directed to re-adjudicate the matter on merits after examining and verifying the evidence.

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