TaxTMI 
TaxTMI 
2025 (6) TMI 38
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....sessee for deduction u/s 35(2AB) of the Income Tax Act, by making proper enquiry as well as by taking the form 3CL physically. 3. That the Ld. PCIT has erred in law as well on facts by invoking clause (a) of explanation 2 to section 263 of the Act despite the fact that proper enquiry of the matter has been conducted by the Ld. AO as well as without considering the rule of filing form 3CL that this form was to be filed by the department of Scientific and Industrial Research, not the assessee." (B) In this case, the assessment order dated 07.02.2020 was passed under section 143(3) r.w.s. 144C(3) of the Act. Subsequently, the Ld. PCIT passed the impugned order dated 21.03.2022, under section 263 of the Act, whereby the assessment order dated 07.02.2020 was set aside and the Assessing Officer was directed to pass assessment order, considering the issue raised in the notice under section 263 of the Act. The notice issued under section 263 of the Act Ld. PCIT dated 08.03.2022 is reproduced below for the ease of reference :- "The assessment records for the A.Y. 2016-17 have been called and examined by the undersigned. The undersigned considers that the assessment for the A.Y. 2016-17....
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.... Sir, it is humble submitted that during assessment Proceeding, vide notice no. ITBA/AST/F/142(1)/2019-20/1021228949(1) dt. 28.11.2019, the Assessing Officer had already asked to furnish the details of deduction claimed on the account of scientific research along with their documentary evidence (Enclosing the Notice Dt 28.11.2019 for your reference). Assessee Company has already submitted its reply against the above notice on Dated 02.12.2019. We are herewith reproducing the relevant para of our reply for claiming deduction under section 35(2AB): 6, Large deduction claimed u/s 35(2AA), 35(2AB), 35(CCC) & 35(CCD): Please furnish the details of deduction claimed on the account of scientific research along with their documentary evidence. Reply: - The assessee company is having an in house R & D centre which is approved from Department of Scientific and Industrial Research (DSIR). As per Section 35(2AB) of Income Tax Act, 1961, where manufacturing company incurs any expenditure on scientific research (not being expenditure in the nature of cost of land or building) on In-house research and development facility approved by the Department of Science & Industrial Research then dedu....
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....hed electronically have not been submitted by the assessee. (b) As per Rule 6(7A)(c) of the I.T. Rules, 1962, it is mandatory for the assessee to obtain the requisite audit report in form 3CLA and to furnish it electronically before the due date of filing the return of income. In the instance assessment year, report of the assessing officer concludes that such form 3CLA was not furnished either electronically or before the assessing officer during the course of the assessment proceedings. In view of this the assessee was not eligible for deduction under section 35(2AB) read with Rule 6 but the same has been allowed in the assessment order dated 07.02.2020. 7. Thus, during the course of the assessment proceedings, the Assessing Officer while making the assessment has not examined/ enquired into the details of the case and there is a clear error on application of section 35(2AB) of the I.T. Act, 1961 read with Rule 6 of the I.T. Rules, 1962. Therefore, the assessment made is erroneous in so far as it is prejudicial to the interest of the revenue as per the provisions of section 263 of the Income-tax Act, 1961." (B.3) In the course of appellate proceedings in Income Tax Appella....
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....esaid paper book also contained written submissions which are reproduced below for the ease of reference: - "The Pr. CIT, (Central) has set aside the Assessment Order dated 07.02.2020 passed u/s 143(3) by invoking the provision sector 263 and directed to pass fresh order considering the issue raised in the notice u/s 263 of the LT. Act 1961, vide order dated 21.03.2022. The Pr.CIT (Central) has observed as under in para 6 and para 7 of the order u/s 263 at page 6 and 7. [Para 6] As per Rule 6(7A)(c) of the I.T. Rules, 1962, it is mandatory for the assessee to obtain the requisite audit report in form 3CLA and to furnish it electronically before the due date of filing the return of income. In the instance assessment year, report of the assessing officer concludes that such form 3CLA was not furnished either electronically or before the assessing officer during the course of the assessment proceedings. In view of this the assessee was not eligible for deduction under section 35(2AB) read with Rule 6 but the same has been allowed in the assessment order dated 07.02.2020 In view of the section 35 (2AB) read with Rule 6 which is effective from 01.07.2016, my observations a....
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.... he accepted the contention of the assessee its discussion did not find place in the assessment order, as no additions were going to be made or no modifications in the return filed by the assessee were required to be made in that regard. This connection of the assessee appears to be well-founded. It is true that the assessment order does not speak about the examination of goodwill account as such. However, as we have notice above the assessee in his reply to the show-cause notice under section 263 has specially mentioned that the entire matter was scrutinized and accepted while passing the assessment order." ---- "For an order of the Assessing Officer to be interfered with in exercise of revisional powers the Commissioner of Income tax has to find in the Revenue. The conditions are twin conditions as held b the a-ex court and both o them have to be fulfilled before the Commissioner o Income Tax can exercise jurisdiction under section 263 o the Act. In the case of Malabar Industrial Corporation Limited v. CIT [2000] 243 ITR 83 (SC) the apex court has held: "The phrase prejudicial to the interest of the Revenue' has to be read in conjunction with an erroneous order passed by ....
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....avel House Lid. 194 Taxman 324; CIT vs. DLF Power Limited 329 ITR 289 (Del.); CIT vs. Eicher Limited 294 ITR 310 (Del.) CIT vs. Ashish Rajput, 320 ITR 674 (Del.); CIT vs. Rohit Anand, 327 ITR 445 (Del.); CIT vs. Gopal Purohit, 228 CTR 582 (Bom.); and CIT vs. PNB Finance and Industries Limited, 236 CTR 1 (Del.). " ----- (Emphasis supplied) In the present case filed detail reply before AO on 12 December, 2019 clearly stated in point no. 6. The caption in the I.T. Rules 1962 regarding form No. 3CL is as under: Form No. 3 CL Report to be submitted b the prescribed authority to the Income Tax Act Authority specified under sector 35(2AB) of the Income Tax Act, 1961. This is to be signed by Secretary Department of Scientific and Industrial Research. The caution of Form 3CLA in the I.T. Rules is as under Report from an accountant to be furnished under sub sector (2AB) Section 35 o the Act relating to in house scientific research and development facility. The detailed Audit Report was filed on 26.11.2016. This report inter alia mentions about the expenditure relating section 35 (2AB) in para 19 of report. Hence, the details were available to the Assessing Officer and also filed d....
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.... and the writ application filed by the assessee pending for adjudication. Be that as it may, but the undisputed facts are that the DSIR has issued recognition for all units vide its communication dated 15.01.2014 and such recognition was valid up to 31.03.2016, subsequently, the renewal of recognition was also granted up to 31.03.2019. Further, the assessee has claimed deduction u/s 35 (2AB) of the Act, from AY 2002-03 to 2008-09 and such claim has been accepted by the department for those years. In fact there is no dispute with regard to claim for AY 2014-15 onwards. The only dispute is with regard to the intervening period of AY 2009-10 to AY 2013-14, where the department for the reason that necessary approval from the competent authority inform 3CM was not produced before the AO. In light of above factual background, if you examine the claim of the assessee in light of provisions of section 35(2AB) of the Act, one has to be see whether periodical approval/renewal from the competent authority is required to 'clean the benefit of weighted deduction u/s 35 (2AB) of the Act, when the initial recognition from the competent authority was valid for the period under cover. The provi....
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....in accordance with provision of section 35 (2AB) of the IT Act, and relevant Rule 6 and 7A of the IT Rules, 1962. In order to claim the benefit of weighted deduction u/s 35 (2AB) of the Act, the assessee should fulfilled two conditions. First condition is there should in- house research and development. The competent authority for this purpose has been defined as the secretary, DSIR, Ministry of Science and Technology, Govt. of India, there is a prescribed procedure for approval of R&D facility. Rules 6 and 7A of the Income Tax Rules, 1962, provides for mechanism of filing an application and related approval by the competent authority. At the cost of repetition, we note that the assessee has filed its application in from 3CK relevant period which is pending before the competent authority. The competent authority neither rejected the application filed by the assessee nor sent any communication in this regard. The assessee has challenged the action of the competent authority by way of writ petition before the Hon'ble Delhi High Court and such writ petition filed by the assessee is pending for adjudication. Be that as it may, fact remains that its facility has been initially recog....
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....nnot be punished for the bureaucratic delay in given such approval for the year in question, which was in the hands of the department concerned of the Central Govt. itself. On the very fact that for the period anterior period and posterior to the year in question such approval was very well on the record of the Revenue, weighted deduction for the expenditure incurred on the scientific research could not have been disallowed by authority below. The sum and substance of ration laid down by the Hon'ble High Court are that once the assessee has been b the competent authority then subsequent renewal/ communication of such as approval in prescribed form is not relevant and what is relevant to decide the entitlement of deduction is existence of such facility (Emphasis supplied) The Assessing Officer in the online notice u/s 142(1) dated 28.11.2019 asked for the following details Large amount allowable as deduction claimed in schedule BP of return you have claimed appreciation and amortization of Rs. 13,99,09,078/-. Please furnish documentary evidence on this observation along with justification. 2. Delayed payment of tax and return filed after due date Please furnish details on this....
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....al circle filed on 12th December, 2019 filed as under: With reference to your query No. 1, sir, it is humbly submitted that depreciation is a statutory allowance and the working of the same may be verified with schedule of depreciation as per Income Tax Act, attached along with Tax Audit Report of the assessee company. With reference to your query No. 2, sir, in this regard it is submitted that the matter of the company relates to the TPO for which the last date for filing ITR was 30.11.2016 and the ITR of the assessee has been filed on 28.11.2016 vide acknowledgement no. 545253661281116 and there is no delay in filing ITR for the year under consideration. With reference to your query No. 3, sir, it is submitted that the evidence of foreign remittance are being produced herewith for your kind perusal. In reference to your query No. 4, sir, it is submitted that for the same books of accounts alongwith bills and vouchers are being produced here from which all the incomes may be reconciled. In response to your query no. 5, competition of income of the assessee company alongwith all the reports prescribed as well as filed along with the ITR are being furnished here. In resp....
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.... not justified, in passing an order in revision directing the assessing officer to make further enquires. We according set aside the order of learned CIT for assessment year 1996-97" ---- (Emphasis supplied) In the notice under 263 the Pr. CIT, (Central) has mentioned in para 2 that approval of deduction in the prescribed proforma by the competent authority as per the provisions of section 35 (2AB) of IT Act, 1961, read with Rule 6 of IT Rule 1962 is not found on records. 1. It can be seen that proforma not found on records is factually incorrect. 2. Secondly Pr. CIT, (Central) has not talked about new proforma w.e.f. 01.07.2016 in the notice u/s 263. In the entire notice Pr. CIT has not mentioned a single word regarding new proforma but while cancelling the assessment order he based his findings on old format and new format. In the notice u/s 263 Pr. CIT (Central) has However, not discussed the non filing of form 3CLA but while cancelling the assessment order he bases his findings on non availability of form 3CLA. The order of Pr. CIT, (Central) u/s 263 is beyond the domain of notice u/s 263 and such order cannot be legal. He has to state the error on the part of Assessing....
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....te that the assessee had provided all relevant details pertaining to claim u/s 35 of the Act, during assessment proceedings, in response to queries of the Assessing Officer. Therefore, it is not a case of no inquiry by the Assessing Officer. The Ld. PCIT has, however, taken adverse view in impugned order u/s 263 of the Act, taking recourse to amended Rule 6 of Income Tax Rules (amended w.e.f. 01.07.2016), read with section 35(2AB) of the Act. [In operative part of his impugned order u/s 263 of the Act, at para 6 of his impugned order, Ld. PCIT refers to Rule 6, effective from 01.07.2016]. This case pertains to AY. 2016-17 (for which relevant previous year is 2015-16). The Ld. PCIT has, however, failed to discuss whether (and if yes, then why) amended provisions under Rule 6 of Income Tax Rules effective from 01.07.2016 would have any bearing on previous year 2015-16, ending on 31.03.2016. (C.2) Notwithstanding the foregoing, the specific observations of the Ld. PCIT in support of his impugned order u/s 263 of the Act are twofold: firstly, he observed that Form 3CL is in old format instead of new format effective from 01.07.2016; and the same should have been furnished electronical....