Section 263 revision on research and development deduction failed where DSIR approval and assessment enquiry were already on record.

The section 263 revision was not sustainable where the Assessing Officer had examined the deduction claim, called for approvals and prescribed forms, and allowed the section 35(2AB) deduction after scrutiny of the DSIR recognition documents. Since the prescribed authority under section 35(2AB) is the DSIR, and section 35(3) read with Rule 6(5A) gives finality to that approval on the qualifying research facility, the Principal CIT could not treat the assessment as lacking enquiry or substitute his own view on eligibility. The deduction therefore could not be disturbed on the stated ground.

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Issues: Whether the revision order under section 263 of the Income-tax Act, 1961, disallowing deduction under section 35(2AB) on the ground that the assessee was engaged in manufacture of cosmetic items and that the assessment was made without proper enquiry, was sustainable.

Analysis: The Assessing Officer had called for details regarding the deduction claim, approvals, audit documents and the prescribed forms, and the assessee had furnished the DSIR recognition and approval documents, including Form 3CM and Form 3CL. The deduction was allowed after scrutiny of these materials. The prescribed authority under section 35(2AB) is the DSIR, and section 35(3) read with Rule 6(5A) of the Income-tax Rules, 1962, gives finality to the prescribed authority's decision on the qualifying research facility. In these circumstances, the Assessing Officer could not be said to have passed the assessment order without enquiry, and the Principal CIT could not substitute his view on the eligibility already approved by the prescribed authority.

Conclusion: The revision order under section 263 was not justified, and the assessee's deduction under section 35(2AB) could not be disturbed on the stated ground.

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