TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 698
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....ry details and therefore there was no error in the impugned assessment order so as to justify action u/s 263 of the Act. In the case of Appellant, the very assumption of power u/s 263 of the Act is unjustified and bad in law and therefore, order u/s 263 of the Act deserves to be quashed. 2. In law and in facts and circumstances of the Appellant's case, the ld. PCIT erred in passing revisional order dated 23-02-2024 under section 263 of the Act only on the surmises, conjecture and whims that ld. Assessing Officer has not take the cognizance of material filed during the course of Assessment proceeding which is bad in law. 3. In law and in facts and circumstances of the Appellant's case, the finding of ld. PCIT that ld. Assessing Officer has passed the order u/s 143(3) of the Act on 06- 04-2021 without making necessary inquiry and without carrying out due diligence in regard deduction claimed under section 35(2AB) of the Act is set aside and ld. PCIT has exceeded her jurisdiction to examine the issue. Thus, the order passed is void and bad in law. 4. In law and in facts and circumstances of the Appellant's case, the ld. PCIT has failed to appreciate that ame....
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....hereas the Assessing Officer had allowed Rs.1,80,11,055/- thus resulting in an excess allowance of Rs.11,73,555/-. The Pr. CIT noted that the Assessing Officer had failed to verify the claim of deduction in light of the amended provisions of Rule 6(7A) and the quantification by DSIR, and therefore allowed excess deduction in contravention of law. Referring to the twin conditions laid down by the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) that for invoking section 263, the order must be both erroneous and prejudicial to the interests of the Revenue the Pr. CIT held that both conditions stood satisfied in this case. The Assessing Officer's omission to restrict the deduction to the DSIR-approved amount rendered the order erroneous and prejudicial to revenue. 5. In response to the show cause notice issued under section 263, the assessee contended that (i) the Assessing Officer had verified the claim in detail, (ii) section 35(2AB) of the Act did not mandate DSIR quantification for deduction, (iii) in case of any discrepancy, unapproved R&D expenses were allowable under section 37, and (iv) since two views were possible, revision under section ....
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....sidering the DSIR's quantified expenditure in Form 3CL, thereby causing prejudice to the interests of the Revenue. Accordingly, invoking powers under section 263 of the Act, and following judicial precedents including Malabar Industrial Co. Ltd. (supra) and CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom.), the Pr. CIT held that the assessment order dated 16.04.2021 was erroneous and prejudicial to the interest of the Revenue. 6. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. 7. Before us, the ld. counsel for the assessee primarily reiterated the submissions made before Principal CIT(Appeals). In response, Ld. DR placed reliance on the observations made by Principal CIT in the 263 order. 8. We have heard the rival contentions and perused the material on record. It would be useful to refer to some recent case laws on the subject. In the case of FDC Ltd. vs. Principal Commissioner of Income-tax [2023] 157 taxmann.com 387 (Mumbai - Trib.)[02-08-2023], ITAT held that Assessment order passed by Assessing Officer allowing deduction under section 35(2AB) of the Act without obtaining Form 3CL was erroneous and ....
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....endment has been made only in the Rules and not in the substantive provisions and hence, the said amendment in the Rules cannot disentitle the assessee from claiming deduction for want of Form 3CL. We notice that the provisions of sec.35(2AB)(3) of the Act was amended with effect from 1-4-2016 by Finance Act, 2015, wherein it is stated that the assessee should fulfill such conditions with regard to maintenance of accounts and audit thereof and furnishing of reports in such manner as may be prescribed. We notice Rule 6(7A) was amended w.e.f 1-7-2016, i.e., after the amendment made in Sec. 35(2AB)(3) of the Act. Further, Form 3CL is one of the forms prescribed in Rule 6(7A)(b) of the Rules for quantifying scientific research expenditure by the prescribed authority. Since the rules prescribe for examination of the above said form, it is the duty of the AO to verify the same before allowing the deduction u/s 35(2AB) of the Act. Admittedly, the AO has not examined this aspect, even though it is not a fault upon the assessee. 10. Hence, we agree with the view taken by Ld PCIT on this issue that the AO has not carried out due enquiries or verification with regard to this issue. A....
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....he Finance Act, 2015, effective from 01.04.2016, and the corresponding amendment in Rule 6(7A) of the Income-tax Rules, 1962, effective from 01.07.2016, the quantification of eligible R&D expenditure by DSIR in Part B of Form 3CL has become a mandatory precondition for the purpose of claiming weighted deduction under section 35(2AB). Thus, the Assessing Officer is duty-bound to restrict the deduction to the extent of expenditure approved and quantified by DSIR. Failure to do so renders the assessment order erroneous and prejudicial to the interests of the Revenue within the meaning of section 263 of the Act. The reliance placed by the assessee on the decision of the Hon'ble Supreme Court in CIT v. Max India Ltd. [2007] 295 ITR 282 (SC) is misplaced since the statutory amendments made post 01.04.2016 have removed any ambiguity and there is no longer any scope for two possible views on this issue. Similarly, the decision of the Hon'ble Supreme Court in NDTV v. ACIT, Civil Appeal No. 1008 of 2020, has no application to the facts of the present case where the legal position stands settled and the Assessing Officer has failed to make the necessary verification mandated by law. In this r....