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TMI Blog2023 (12) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding reassessment beyond four years from the end of the relevant assessment year/s, in view whereof the other grounds do not arise for consideration, and which in fact explains the assessee s COs, seeking, in case of an adverse decision, upholding the assessment/s on the jurisdictional aspect, direction to the first appellate authority for a decision on merits on the quantum assessment/s. 3. We begin by reproducing the operative part of the impugned order which, applicable for both the years under reference, reads as under: I have gone through the above mentioned decisions. The main contention is whether non-submission of Form 3CL by the assessee would amount to non-disclosure of all material facts, fully and truly, during the course of assessment proceedings. There is no dispute that Form No. 3CM containing details of all expenses incurred for R D was submitted by the appellant before the AO . The scheme of Rule 6(7A), regarding Form 3CL is that, the appellant has to submit the Form to the Competent Authority at DSIR, and DSIR shall send the report in Form No. 3CL referred to in clause (b) to Principal Chief Commissioner of Income Tax or Chief Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year) for AY 2011-12, his decision is clearly invalid for that year, even as fairly conceded by Shri Markose, the ld. counsel for the assessee, during hearing. The Revenue accordingly succeeds for this year and, consequently, vacating his adjudication for AY 2011-12, we restore the appeal for that year to the file of the ld. CIT(A) for deciding it on quantum on merits in accordance with law after hearing both the parties before him. 5.1 This leaves us with assessment for AY 2009-10. We shall proceed by delineating the law in the matter, reproducing s.147in its relevant part to start with: Income escaping assessment 147. Income escaping assessment-If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the end of the relevant assessment year), qua returns which have been subject to regular assessment, i.e., under section 143(3) or 144 of the Act, as in the instant case, with the assumption of jurisdiction u/s.147 being hinged by a further condition of the income escaping assessment being so due to failure, inter alia , on the part of the assessee to disclose fully and truly all material facts necessary for assessment of his income for the relevant year. Per contra, a true and full disclosure of all material facts necessary for assessment by the assessee who has furnished return of income only would save initiation of reassessment proceedings beyond 4 years where the AO has reason to believe income having escaped assessment. The same, again, a part of well-settled law, is clarified to be in respect of only primary facts [ Calcutta Discount Co. Ltd. vs. ITO [1961] 41 ITR 191 (SC); Phool Chand Bajrang Lal vs. ITO [1993] 203 ITR 456 (SC)]. This is as it is not the assessee s duty, and it can be nobody s case that the assessee is to guide the AO about the possible enquiry or verification that may be carried out or the inference that may be drawn from the primary facts. Aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed in this regard requires so. The same is to be sent directly by the competent authority to inter alia , the DGIT, which authority is to communicate the same to the concerned AO. Sure, a copy thereof is marked to the assessee as well, but then how is the assessee to know that the same is not available with the AO for it to furnish copy thereto? This also explains the absence of any requirement in law for submission of Form 3CL by the assessee to, or otherwise inform the AO about it, which, being dated 30.11.2011, was not available with the assessee on the date of filing of the return for the year. Form 3CM, conveying the approval, being available, along with the CA certificate (i.e., toward the relevant expenditure figures), duly obtained, were duly furnished along with the return of income. There has thus been true and full disclosure of all material facts by the assessee, i.e., as mandated by law, which cannot possibly cast an impossible burden. Reliance was placed on the order by the Tribunal in Century Seeds Pvt. Ltd. vs. Dy. CIT (in ITA No. 942/Hyd/2017 dated 20.07.2018, APB pgs. 11 to 15) Discussion 6.1 We may at this stage reproduce the deduction provision a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (2AB) of section 35 shall be in Form No. 3CK. (5A) The prescribed authority shall, if he is satisfied that the conditions provided in this rule and in sub-section (2AB) of section 35 of the Act are fulfilled, pass an order in writing in Form No. 3CM: Provided that a reasonable opportunity of being heard shall be granted to the company before rejecting an application. (7) Approval of a programme under sub-section (2AA) shall be subject to the following conditions: (a) to (h) (7A) Approval of expenditure incurred on in-house research and development facility by a company under sub-section (2AB) of section 35 shall be subject to the following conditions, namely : (a) The facility should not relate purely to market research, sales promotion, quality control, testing, commercial production, style changes, routine data collection or activities of a like nature; (b) The prescribed authority shall submit its report in relation to the approval of inhouse Research and Development facility in Form No.3CL to the Director General (Income tax Exemptions) within sixty days of its granting approval; (c) The company shall maintain a separate account for each approve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance of deduction u/s.35(2AB) of the Act is concerned; no prejudice being caused to the Revenue. Rather, in such a case it is difficult to say if the AO can be said to form a belief as to escapement of income . However, as afore-noted, Form 3CM is sans any reference to any expenditure, which is the subject matter of Form 3CL, upon the assessee furnishing the audited statement of qualifying expenditure (in Form 3CL(A) for the approval by the prescribed authority, which is in Form 3CL. This itself is sufficient to dislodge the assessee s case, which found acceptance by the ld. CIT(A) on that basis, and the resultant acceptance of the Revenue s appeal before us. So, however, inasmuch as the said finding by the ld. CIT(A) is not based on any submission by the assessee before him, which would, where so, qualify to be regarded as misleading, and who therefore ought not to be prejudiced on that count, as indeed the vehement arguments raised before us in the matter by the assessee, who is definitely entitled to defend the impugned order on any aspect decided against it, we proceed further to adjudicate in the matter de hors the said finding, which is unfortunate inasmuch as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it wanted to be heard, where Form 3CL certified a different figure of the qualifying expenditure, resulting in a lower deduction u/s.35(2AB), it could state so as well, adding words to that effect. Further, what, again, one may ask, prevented the assessee to, on receipt of Form 3CL, furnish a copy of the same in the assessment proceedings, reiterating it s stand where so, of deduction u/s.35(2AB), as having been, nevertheless, rightly claimed, stating reasons for the same ? These, and such-like actions would have, without doubt, qualified the assessee s disclosure as full and true, as required by law. This is particularly so in view of the huge variation (rs. 1298.56 lacs) between it s claim u/s. 35(2AB) and that quantified by the prescribed authority through Form 3CL. Our answer to the question posed, in view of the fore-going, is an emphatic No . The assessee cannot, in our clear view, under the given facts and circumstances, be said to have met the requirement of a true and full disclosure of all the material facts necessary for assessment. Reference herein may also be made to Explanation 1 to section 147 of the Act, which clarifies that even production of relevant doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of Form 3CL with the AO would not absolve the assessee from, in view of the variation in the deduction claimed per the return and that later approved by the prescribed authority, to state reasons in support of it s claim as made, or otherwise, where in agreement with the revision, revise it s return, or otherwise bring this to the fore, so that deduction is allowed thereto in assessment on a consideration of it s case. In fact, even if the AO still ignores the same, no fault, in terms of disclosure, can be attributed to the assessee. 6.5 Reference to the provision of s. 35(2AB) and r. 6 for the purpose, is again not apposite. The reason is not far to seek and, in fact, self-evident. The same, as aforenoted, provide the frame work for grant of deduction u/s. 35(2AB), i.e., the eligibility criterion; the approval, including the authority and manner in which the same is to be sought; and the quantification of deduction thereby. It is the last limb which is under consideration, and qua which the assessee s conduct is being examined with reference to the requirement of true and full disclosure , which pre-empts any reassessment where the same is sought to be initiated beyon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstant or absolute. 6.6 We may next consider the case law relied upon by the parties, making the same as a part of their respective paper-books, and through which we were taken (in part) during hearing. We shall proceed in seriatim, i.e., in the same order in which the same were referred to during hearing. The first is by the Tribunal in Century Seeds Pvt. Ltd. (supra) wherein; the impugned order being u/s.263 of the Act, the Tribunal took the view that the AO in allowing deduction u/s. 35(2AB) of the Act, claimed in excess of that specified in Form 3CL, had taken a possible view. Inasmuch as revision may be on a full disclosure of facts; the assessee relying on due consideration thereof by the AO in assessment, how we wonder does the same assist the assessee s case ? If anything, it supports the Revenue s case inasmuch as there had been due consideration of Form 3CL in assessment, not made disregarding or de hors the same, as in the instant case. It is again well-settled that the revisionary authority is not bound to make enquiry or record final conclusion in the matter. The Tribunal s opinion that once the research facility has been approved, the entire expenditure claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which concerns true and full disclosure per se , is by the Hon'ble Apex Court in New Delhi Television Ltd. vs. Dy. CIT (CA No. 1008 of 2020, dated 03.04.2020). The same, in ratio, which alone is binding ( The Mavilayi Service Co-operative Bank Ltd. Ltd. Ors. v. CIT [2021] 431 ITR 1 (SC); Sree Bhagavathi Textiles Ltd. v. CIT [2000] 244 ITR 496 (Ker)),again validates the view taken by us. We shall, nevertheless, begin by reproducing the only part (of the decision) through which we were taken during hearing: - 31. The revenue now has come up with the plea that certain documents were not supplied but according to us all these documents cannot be said to be documents which the assessee was bound to disclose at the time of assessment . The main ground raised by the revenue is that the assessee did not disclose as to who had subscribed what amount and what was its relationship with the assessee. As far as the first part is concerned it does not appear to be correct. There is material on record to show that on 08.04.2011 NNPLC had sent a communication to the Deputy Director of Income Tax (Investigation), wherein it had not only disclosed the names of all the bond holders bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. He, accordingly, inferred issue of guarantee by the assessee, and imputed a fees of 4.68% in its respect, assessing the same as the assessee s income on 03.08.2012, the same date on which he passed orders in the case of other group companies, viz., NDTV Lab Ltd. and NDTV Lifestyle Ltd. In the assessment proceedings for AY 2009-10, DRP found that the monies raised by the assessee s subsidiaries, including NNPLC, by the issue of bonds, were not genuine transactions, and represented the assessee s own monies. Reassessment proceedings were initiated for AY 2008-09 vide notice dated 31.03.2015. NNPLC being a non-functional company, nobody would invest therein and, further, get back only 74% of the capital invested. The money invested in NNPLC, which went into liquidation on 28.3.2011, finally came back in a circuitous manner to the assessee. The funds raised during the year were inferred as the assessee s money, proposing to add the same, at Rs.405.09 crores, as the assessee s income. This was contested by the assessee, who remained unsuccessful up to the stage of Hon'ble High Court, on three grounds: (a) absence of reasons to believe; (b) proper disclosure of all material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion by the AO who could, on the basis of the material before him, invoke the charge of round tripping, i.e., as by the DRP. There was, however, no whisper of the transaction being not genuine, and the money raised being the assessee s money, which came about only in view of the findings by the DRP for the subsequent year. The AO, on the contrary, regarding the same as genuine, considered it proper to, treating it on an arm s length basis, apply the extant guarantee fee rate thereon. In fact, up to the Hon'ble High Court, case of the Revenue, as observed by the Hon'ble Apex Court in the succeeding paras (paras 34 35), was with reference to the second proviso to section 147 of the Act; it rather having filed an affidavit before the said Court averring that it was not relying on non-disclosure. The reference to the documents (in para 31), which the Revenue contends for the first time as not supplied, was thus a volte face by it, who had been successful before the Hon'ble High Court on the basis of the second proviso to section 147 of the Act. Though not relevant for our purpose, we may yet state that the charge of improper disclosure did not find favour with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailable 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] 130 ITR 1 (SC), 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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