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2023 (12) TMI 407 - AT - Income TaxMaintainability of the reassessment proceedings - deduction u/s. 35(2AB) - non furnishing Form 3CL quantifying eligible expenditure u/s. 35(2AB) regarded in law as non-disclosure within the meaning of proviso to section 147 r/w Explanation 1 thereto - Notice issued beyond 4 years - HELD THAT - The procedure of communication of Form 3CL direct by the prescribed authority to the Revenue giving rise to the presumption that the same would stand communicated to the AO, is, as afore-noted, not supported by the rule. The presumption, nevertheless, fails on facts, i.e., on the assessee receiving Form 3CL approving a reduced deduction u/s. 35(2AB) (w.r.t. that claimed) on which the assessee is not questioned during assessment. And which ought to have impelled the assessee to, in discharge of it s primary obligation, furnishing Form 3CL, either revise it s claim downward, or state it s reasons for persisting with it s claim, or both, i.e., in case of partial scaling down of it s claim. Why, in a given case, the AO may himself question the assessee on it s higher claim, implying knowledge of Form 3CL with the AO, validating the presumption afore-said, which would entitle the assessee to proceed accordingly. The assessee s disclosure obligation undergoes a qualitative change in light of this fact. Again, could the assessee s conduct be faulted where Form 3CL reports deduction in the same sum as claimed by the assessee? We say so to emphasizes the need to calibrate the conduct toward true and full disclosure with the facts circumstances of the case, which cannot be held as a constant or absolute. Tribunal in assessee s own case for AY 2012-13 2017 (8) TMI 841 - ITAT COCHIN being in fact undisputed, particularly considering that the claim for deduction made was much higher than that on the basis of expenditure approved thus by the prescribed authority. It is this variance, and not F/3CL per se , that is the undisclosed primary, material fact. The plea of presumption of the said Form being in the knowledge of the AOis not supported by the rule, i.e., not available legally and, besides, falls flat on facts, i.e.,in view of a complete absence of any enquiry or reference thereto in the original assessment and, therefore, a false plea by the assessee, who is obliged by law to disclose, fully and truly, all material facts necessary for assessment to the AO. Why, the knowledge of Form 3CL being at a variance with the assessee s claim with the AO, i.e., at the time of original assessment, may, where so , eschew reassessment proceedings even for AY 2011-12, rendering the same as a change of opinion. The two aspects are inter-related, with there being decisions, as in Ganga Saran Sons P. Ltd. v. ITO 1981 (4) TMI 5 - SUPREME COURT wherein the Hon'ble Apex Court found no failure on the part of the assessee to disclose material facts, holding, on that basis, the AO could not have a reason to believe that any part of income had escaped assessment. The matter is to be examined from the stand-point of the obligation on the assessee to disclose all material facts necessary for assessment, fully and truly, i.e. as mandated by law, and which, a positive requirement, we have, giving our reasons, found as not discharged. We are supported in our view by the decisions cited here-in-above, as well as that relied upon by the parties before us. The matter, as for AY 2011-12, shall travel to the file of the ld. CIT(A) for adjudicating the quantum adjustments in assessment under appeal before him after hearing the parties per a speaking order.
Issues Involved:
1. Maintainability of reassessment proceedings under section 147 of the Income Tax Act, 1961. 2. Obligation of the assessee to disclose Form 3CL during assessment proceedings. Summary of Judgment: 1. Maintainability of Reassessment Proceedings: The primary issue in the appeals was the maintainability of reassessment proceedings under section 147 read with sections 143(3) and 144C of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals)-1, Kochi (CIT(A)) found the reassessment proceedings to be not maintainable due to the assessee's true and full disclosure of all material facts necessary for assessment, precluding reassessment beyond four years from the end of the relevant assessment year. 2. Obligation to Disclose Form 3CL: The CIT(A) held that the non-submission of Form 3CL by the assessee did not amount to non-disclosure of all material facts during the assessment proceedings. The assessee had submitted Form 3CM containing details of all expenses incurred for R&D to the Assessing Officer (AO). The scheme of Rule 6(7A) regarding Form 3CL is such that the appellant submits the form to the Competent Authority at DSIR, which then sends the report in Form 3CL to the Principal Chief Commissioner of Income Tax or other relevant authorities. The CIT(A) opined that it was not the duty or responsibility of the appellant to file Form 3CL before the AO during assessment proceedings. Since DSIR forwarded Form 3CL on 30.11.2011, before the date of reopening of assessment under section 147, it was the AO's duty to obtain the same from the competent authority. 3. Reassessment Beyond Four Years: For AY 2009-10, the reassessment was beyond four years from the end of the relevant assessment year. The CIT(A) found that the disclosure by the assessee was true and full, thus rendering the reassessment proceedings invalid. However, for AY 2011-12, the reassessment was within four years, and the CIT(A)'s decision was found invalid for that year. The Revenue succeeded for AY 2011-12, and the matter was restored to the CIT(A) for deciding it on quantum on merits. 4. Legal Framework and Obligations: The judgment emphasized that the power under section 147 is wide but not plenary. Assumption of jurisdiction under section 147 must be based on materials justifying the inference of income escapement. The law becomes stringent for reassessment beyond four years, requiring a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The judgment highlighted that the assessee's obligation is to disclose primary facts, not to guide the AO on possible inquiries or verifications. 5. Factual Analysis: The Tribunal found an incorrect assumption of facts by the CIT(A) for AY 2009-10, as Form 3CM does not contain details of expenditure, which is the subject matter of Form 3CL. The non-furnishing of Form 3CL quantifying eligible expenditure was regarded as non-disclosure within the meaning of the proviso to section 147. The Tribunal held that the assessee did not meet the requirement of a true and full disclosure of all material facts necessary for assessment. 6. Case Law Consideration: The Tribunal considered various case laws, including the assessee's own case for AY 2012-13, and found that each item of expenditure claimed under section 35(2AB) is to be examined by the AO during assessment. The Tribunal concluded that the assessee's conduct did not meet the requirement of true and full disclosure, and the reassessment for AY 2009-10 was justified. 7. Conclusion: The Tribunal allowed the Revenue's appeals and the assessee's cross objections, directing the CIT(A) to adjudicate the quantum adjustments in assessment after hearing the parties. The judgment was pronounced on November 30, 2023.
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