R&D tax deduction claim u/s35(2AB) despite delayed Form 3CL, s.263 revision for disallowance quashed

The dominant issue was whether the PCIT validly assumed revisionary jurisdiction under s.263 to disallow deduction under s.35(2AB) for want of Form 3CL. The HC held that the assessee had produced auditor certification of eligible R&D expenditure during assessment, and Form 3CL was ultimately issued by the prescribed authority after the s.143(3) order and was also furnished by the assessee during the assessment proceedings; mere delay or non-communication by the authority could not render the assessment order erroneous. Consequently, the assessment allowing s.35(2AB) deduction was neither "erroneous" nor "prejudicial to the interests of revenue," and the s.263 revision was set aside; the revenue's challenge failed.

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Issues involved:
The issues involved in the judgment are related to the deduction claimed under section 35(2AB) of the Income Tax Act, 1961 for a Research and Development (R&D) facility. The main contention is whether the order passed by the Assessing Officer was erroneous and prejudicial to the interest of Revenue, leading to subsequent appeals and challenges.

Summary of Judgment:

Issue 1: Revisionary Jurisdiction under Section 263 of the Act

The case involved an appeal by the Revenue challenging the order passed by the Income Tax Appellate Tribunal (ITAT) quashing the order of the Principal Commissioner of Income Tax (PCIT) under section 263. The PCIT had held that the deduction claimed under section 35(2AB) was not allowable due to the absence of necessary documentary evidence. However, the ITAT observed that the assessee had submitted relevant documents during the assessment process, including Form 3CM and auditor certificates. The ITAT concluded that the Assessing Officer had made due inquiry regarding the claim of deduction, and therefore, the order was not erroneous or prejudicial to the interest of Revenue.

Issue 2: Question of Law Proposed by the Revenue

The Revenue filed an appeal proposing a question of law regarding the jurisdiction exercised by the PCIT under section 263 of the Income Tax Act. The Senior Standing Counsel for the appellant argued that the PCIT rightly invoked his jurisdiction due to the non-submission of Form 3CLA by the prescribed authority. However, the Tribunal noted that the assessee had submitted necessary documents, including Form 3CM and auditor certificates, during the assessment process. The Tribunal held that the failure of the authority to send intimation in Form 3CL did not justify denying the claim of deduction under section 35(2AB) of the Act. Therefore, the Tribunal dismissed the order passed by the PCIT under section 263.

Conclusion:

The High Court upheld the decision of the ITAT, stating that the order of the Assessing Officer was not erroneous or prejudicial to the interest of Revenue. The Court emphasized that the assessee had provided the required documents during the assessment process, and the failure of the prescribed authority to send intimation in Form 3CL did not invalidate the claim for deduction under section 35(2AB) of the Act. As no substantial question of law was found, the Tax Appeal was dismissed.

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