Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
This appeal is filed by assessee against Revisionary order passed by the Pr. Commissioner of Income-tax, Mumbai-1, [ The Ld PCIT] for A.Y. 2016-17 dated 22nd March, 2022 passed under Section 263 of the Income-tax Act, 1961 (the Act), wherein it has been held that the assessment order passed by the Asst. Commissioner of Income-tax, Circle 9(3)(1), Mumbai [ The Ld AO ] under Section 143(3) read with section 144C of the Act dated 19th February, 2020 is erroneous and prejudicial to the interest of the Revenue.
4. The learned PCIT rejected the contention of the assessee because assessee has claimed deduction under Section 35(2AB) and 35(1)(iv) of the Act which was allowed to the assessee even though assessee has not submitted the certificate to DSIR (form no. 3CL). The learned PCIT also invoked the provisions of explanation 2 to section 263 of the Act and held that any assessment order passed
5. Assessee is aggrieved with that order and has preferred this appeal raising the following grounds of appeal: -
“1. On the facts and circumstances of the case and in law, the Principal Commissioner Income Tax-1, Mumbai (the Pr. CIT) erred in assuming jurisdiction under section 263 and holding the assessment order, under section 143(3) r.w.s 144C(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") dated 19.02.2020 (hereinafter referred to as the assessment order), as erroneous and prejudicial to the interest of the revenue. The reasons given by him for doing so are wrong, contrary to the facts of the case and against the provisions of law;
The Pr. CIT failed to appreciate that the Assessing Officer had made the requisite enquiries and after due application of mind as regard allowability of deduction claimed u/s 35(2AB) and 35(1)(i) framed the assessment order without making any disallowance on the said count;
The Pr. CIT failed to appreciate that, where two views are possible and the Assessing Officer, after
Assuming without admitting that the present case was a case of inadequate enquiry, the Pr. CIT failed to appreciate that the power of revision envisaged under section 263 of the Act and the Explanation 2 thereto can be exercised only where no enquiry as required under the law is done and that it is not open to invoke the said provisions in cases of inadequate enquiry;
The Pr. CIT failed to show that the view taken by the Assessing Officer is wholly unsustainable in law before embarking upon the exercise of revisionary powers;
The Pr. CIT failed to appreciate that (a) in so far as claiming deduction under section 35(1)(i) of the Act of Rs. 1,49,10,044/- (wrongly mentioned by Pr. CIT as Rs. 1,92,82,924/-), there was no requirement of obtaining the certificate from Department of Scientific and Industrial Research (hereinafter referred to as "DSIR") in Form 3CL and (b) in so far as claiming deduction under section 35(2AB) of the Act of Rs. 51,59,59,410/-, the requirement of obtaining such certificate was w.e.f. 01.07.2016 i.e. not applicable for the assessment year under consideration; and therefore, there was no reason to deny the aforesaid claims for deductions;
8. The above grounds/ sub grounds are without prejudice to each other;
9. The appellant craves leave to add, amend or alter all or any of the grounds of appeal.
6. The learned Authorized Representative submitted
a. that assessee has submitted all the details before the learned Assessing Officer for claim of deduction under Section 35(1) and 35(AB) of the Act. He specifically referred to letter dated 5thDecember 2019, wherein the details of expenditure, form no. 3CM and Certificate of auditor was submitted to the learned Assessing Officer. After verification of the same, the claim was allowed. b. Form 3CL was not a requirement for AY 2016-17. It is introduced later on and is required only from AY 2017-18. Therefore, what is not required need not be enquired by ld. AO. It does not make Assessment c. The form no. 3CL was not available with the learned Assessing Officer for the reason that assessee has made an application on 26thOctober 2016 to the Government of India along with the details. Further, form no.3CM issued was already available with the learned Assessing Officer. Based on this, the learned Assessing Officer allowed the claim of the assessee. d. Such allowance of the claim is in consonance with several judicial precedents and mainly of Hon'ble Gujarat High Court in case of Sun Pharmaceutical Industries Ltd. (Supra). The Hon'ble High Court has categorically held that mere absence of form no. 3CL cannot be a reason enough to deprive the claim of the assessee for deduction. He further referred to several judicial precedents. e. assessee has been allowed the deduction under the above section for all earlier years under scrutiny assessment orders passed under Section 143(3) of the Act. f. He further submitted that explanation 2(a) is also wrongly invoked by the learned PCITfor the reason that the learned Assessing Officer has carried out the requisite enquiries and further, when the view taken by the learned Assessing Officer is also supported by the orders of the Hon'ble High Court.The order of He therefore submitted that the order of the learned PCIT is not sustainable.
The learned CIT Departmental Representative submitted that form no.3CL is one of the requisite conditions for claim of deduction under Section 35(2AB) and section 35(1)(iv) of the Act. The learned Assessing Officer has not asked or did not verify form no.3CL and therefore, allowing the claim of the assessee under those sections makes the Assessment order erroneous, so far as prejudicial to the interest of the revenue. He, therefore, submitted that explanation 2(a) of Section 263 of the Act is rightly invoked by the learned PCIT. He vehemently supported the order of the learned PCIT.
We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact shows that assessee is engaged in the business of manufacturing of pharmaceutical products. In the return of income assessee claimed deduction of research and development expenditure under Section 35(1) and 35(2AB) of the Act. The return of income was picked up for scrutiny, where one of the reason for selection was for verification of deduction claimed under Section 35(1) and 35(2AB) of the Act. The computation of income placed on page no. 19 of the Paper Book shows that assessee has claimed deduction of Revenue expenditure at the rate of
We also note that assessee argued that that form no.3CL has been introduced with effect from 1stJuly 2016 and therefore, naturally would not be applicable for A.Y. 2016- 17. We find that requirement of submitting Form No 3CL was also prior to 1/7/2016 as under: -
b) The prescribed authority shall submit its report in relation to the approval of in-house Research and Development facility in Form No. 3CL to the Director
This clause was amended with effect from 1/7/2016 providing for electronic filing of details. Therefore, the decision cited by the ld.AR [2021] 124 taxmann.com 73 (Bangalore - Trib.) of Provimi Animal Nutrition India Pvt. Ltd. And [2021] 125 taxmann.com 97 (Kolkata - Trib.) in STP limited ignored the fact only change is submission of Form no 3CL electronically. Earlier that was to be submitted in paper form. Therefore, this argument of ld. AR is incorrect and hence rejected.
In view of this, we do not find any reason to uphold the order of the learned PCIT as we do not find that the assessment order passed by the learned Assessing Officer is erroneous and prejudicial to the interest of the Revenue.
In the result, the order under Section 263 of the Act passed by the learned PCIT on 22ndMarch 2022 for A.Y. 2016-17 is quashed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 12.10.2022.