Section 35AD deduction allowed where Form 10CCB was filed before completion of fresh assessment after section 263 remand.

Section 35AD deduction cannot be denied merely because Form 10CCB was not filed with the return if the audit report is furnished before completion of the fresh assessment. The text states that, where an assessment is set aside under section 263 and remanded, the proceedings are treated as a fresh assessment and materials produced before its completion must be considered. It also notes that the claim was disclosed in the return and tax audit report, depreciation on the same assets was foregone, and no contrary material disproved the claim's bona fides. The deduction was therefore held allowable and income recomputation under section 115JC was to follow.

---

---

Issues: (i) Whether an assessee is entitled to claim deduction under Section 35AD of the Income-tax Act, 1961 when the audit report in Form No. 10CCB was not filed with the return but was furnished during the course of fresh assessment proceedings conducted pursuant to an order under section 263, provided the Form 10CCB was filed before completion of that fresh assessment.

Analysis: The statutory framework requires production of the audit report in the prescribed form as a precondition for claiming deduction under Section 35AD, read with Section 80-IA and the relevant rules (Rule 18BBB and proviso to Rule 12(2)). Judicial precedents accept that where the prescribed certificate/report is furnished before completion of assessment, the deduction cannot be denied merely on the ground that it was not filed with the return. When an assessment is set aside under section 263 and remitted for fresh examination, the ensuing proceedings constitute a fresh assessment; material furnished to the Assessing Officer before completion of that fresh assessment must be considered for allowability of the deduction. The assessee had disclosed the claim in the return and in the tax audit report (Form 3CD), had foregone depreciation for the same assets, and furnished Form 10CCB during the fresh assessment before its completion. No contrary material was placed on record to rebut the bona fides of the claim.

Conclusion: The deduction under Section 35AD is allowable because the audit report in Form No. 10CCB was furnished before completion of the fresh assessment proceedings; therefore the revenue's appeal is dismissed and the CIT(A)'s direction to allow the deduction and recompute income under section 115JC is upheld in favour of the assessee.

---