2023 (10) TMI 920 - HC - Income Tax

Revision u/s 263 - deduction claimed u/s 35(2AB) not allowable - assessee had not submitted necessary documentary evidence i.e. Form 3CL issued by the prescribed authority (DSIR, New Delhi) which is mandatory to be filed on or before the due date of filing of return of income and has submitted only a certificate of recognition for in house R D unit - Tribunal setting aside the exercise of jurisdiction u/s 263 by Ld. PCIT as applying unamended Rule 35AC of the Income Tax Rules - HELD THAT - Assessee filed certificate of the auditor certifying the expenditure during the course of assessment proceedings. With regard to Form 3CL, the same was issued by the prescribed authority on 20.07.2021 which was after passing of the assessment order under section 143(3) of the Act, and therefore, the assessee could not produce the same on or before the assessment order. Further, Form 3CL was duly filed by the assessee during the course of assessment vide letter dated 09.10.2019. Since the assessee has filed Form 3CL certifying his Research and Development (R D) facility approved by the prescribed authority in proper format, merely because the authority failed to send the intimation during the course of assessment proceedings could not be the reason for denying the claim deduction under section 35(2AB) of the Act. ITAT in our opinion is correct in holding that the order of the A.O. is not erroneous and prejudicial to the interest of revenue. Decided in favour of assessee.

Summary

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.