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2023 (4) TMI 280 - AT - Income TaxRevision u/s 263 - Allowability of claim u/s. 35(2AB) - PCIT observed that the assessee did not submit the necessary documentary evidences i.e. Form 3CL issued by the prescribed authority (DSIR, New Delhi) - HELD THAT - The assessee had filed copy of recognition of the in house R D facility dated 25-08-2014 during the course of assessment. Assessee had also filed copy of approval of the in house R D facility dated 07-10-2015 in Form 3CM during the course of assessment, with regard to computation of deduction u/s. 35(2AB), the assessee had filed certificate of the auditor certifying the expenditure during the course of assessment. With respect to Form 3CL, we observe that the Form 3CL was issued by prescribed authority on 20-07-2021 after passing of the assessment order u/s. 143(3) of the Act on 17-01-2020. Approval of the R D facility in Form 3CM was duly filed by the assessee during the course of assessment vide letter dated 09-12-2019. Once the assessee files Form 3CM certifying that the research and development facility has been approved by the prescribed authority in proper Format, merely because the said authority failed to send intimation to the Department in form 3CL, would not be reason enough to deprive assessee s claim of deduction u/s. 35(2AB) of the Act. Assessment order was passed by the ld. Assessing Officer after making due inquiry regarding the claim of deduction u/s. 35(2AB) of the Act is, not erroneous and prejudicial to the interest of the Revenue - order passed by ld. PCIT u/s. 263 dismissed. - Decided in favour of assessee.
Issues Involved:
1. Legality of invoking provisions of section 263 by the Principal Commissioner of Income Tax (PCIT). 2. Validity of the PCIT's direction to frame a fresh assessment on an already considered and verified issue. 3. Whether the order passed by the Assessing Officer (AO) under section 143(3) is erroneous and prejudicial to the interest of the revenue. 4. Compliance with the requirements of Form 3CL and Form 3CLA for claiming deduction under section 35(2AB). Summary: 1. Legality of invoking provisions of section 263 by the Principal Commissioner of Income Tax (PCIT): The assessee contested the PCIT's decision to set aside the assessment order passed under section 143(3) by invoking section 263 of the Income-tax Act, 1961. The PCIT observed that the assessee did not submit necessary documentary evidence, including Form 3CL and Form 3CLA, during the assessment proceedings. The PCIT held that the AO had not made adequate verification or inquiry on the issue of deduction claimed under section 35(2AB), rendering the assessment order erroneous and prejudicial to the interest of the revenue. 2. Validity of the PCIT's direction to frame a fresh assessment on an already considered and verified issue: The assessee argued that detailed inquiries were conducted by the AO during the assessment proceedings regarding the allowability of the claim under section 35(2AB). The assessee provided various notices issued by the AO and their responses, including the approval of the in-house R&D facility and the auditor's report. The PCIT, however, rejected these contentions, stating that the facts of the case were different from those in the judicial pronouncements relied upon by the assessee. 3. Whether the order passed by the Assessing Officer (AO) under section 143(3) is erroneous and prejudicial to the interest of the revenue: The Tribunal observed that the AO had made detailed inquiries into the claim of deduction under section 35(2AB) and had considered the replies filed by the assessee. The Tribunal noted that the AO's view was legally tenable and supported by various judicial precedents, including decisions from the ITAT and High Courts, which held that the issuance of Form 3CL is not mandatory for granting deduction under section 35(2AB). Therefore, the Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the interest of the revenue. 4. Compliance with the requirements of Form 3CL and Form 3CLA for claiming deduction under section 35(2AB): The Tribunal noted that the assessee had filed the necessary documents, including the recognition of the in-house R&D facility and the approval in Form 3CM, during the assessment proceedings. The Form 3CL was issued after the assessment order was passed. The Tribunal cited judicial precedents that held that the failure of the prescribed authority to send intimation in Form 3CL should not deprive the assessee of the deduction under section 35(2AB). Consequently, the Tribunal found that the assessment order was passed after due inquiry and was not erroneous or prejudicial to the interest of the revenue. Conclusion: The Tribunal dismissed the order passed by the PCIT under section 263 and allowed the appeal of the assessee. The assessment order passed by the AO was upheld as it was based on detailed inquiries and was legally tenable. The appeal of the assessee was allowed, and the order was pronounced in the open court on 27-03-2023.
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