GENUS POWER INFRASTRUCTURES LIMITTED,NOIDA vs. PR. COMMISSIONER OF INCOME TAX(CENTERAL), LUCKNOW

(A) This is an appeal preferred by the assessee against the order of the Ld. Principal Commissioner of Income Tax (Central) [hereinafter referred to as the “PCIT”], Lucknow dated 21.03.2022 for assessment year 2016-17 passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”). The grounds of appeal of the assessee are as under: -

1. That the Ld. PCIT has erred in Jaw as well on facts by setting aside the order dated 07/02/2020 passed u/s 143(3)/144C(3) of the L.T. Act; for passing the order afresh.

2. That the Ld. PCIT has erred in issuing notice u/s 263 of the Act for the reason that he has a different opinion to that of the AO without considering the fact that the Ld. AO has accepted the claim of the assessee for deduction u/s 35(2AB) of the Income Tax Act, by making proper enquiry as well as by taking the form 3CL physically.

3. That the Ld. PCIT has erred in law as well on facts by invoking clause (a) of explanation 2 to section 263 of the Act despite the fact that proper enquiry of the matter has been conducted by the Ld. AO as well as without considering the rule of filing form 3CL that this form was to be filed by the department of Scientific and Industrial Research, not the assessee.”

Page 2 of 16 (B) In this case, the assessment order dated 07.02.2020 was passed under section 143(3) r.w.s. 144C(3) of the Act. Subsequently, the Ld. PCIT passed the impugned order dated 21.03.2022, under section 263 of the Act, whereby the assessment order dated 07.02.2020 was set aside and the Assessing Officer was directed to pass assessment order, considering the issue raised in the notice under section 263 of the Act. The notice issued under section 263 of the Act Ld. PCIT dated 08.03.2022 is reproduced below for the ease of reference:-

“The assessment records for the A.Y. 2016-17 have been called and examined by the undersigned. The undersigned considers that the assessment for the A.Y. 2016-17 , which is completed U/s 143(3) r.w.s. 144C(3) of the Income-tax Act, 1961 on 07.02.2020 at total assessed income of Rs. 50,08,07,363/- is erroneous in so far as it is prejudicial to the interest of the revenue on the following reason: 2. On perusal of the assessment records, it has been noticed that the approval of deduction in the prescribed proforma by the competent authority as per the provisions of Section 35(2AB) of the Income-tax Act, 1961 read with Rule 6 of the Income-tax Rules, 1962 is not found on records. Thus, the requirements of section 35(2AB) of the IT Act, 1961 read with rule 6 of the IT Rules, 1962, which is essential to claim deduction u/s 35(2AB) have not been fulfilled. In view of this, no deduction u/s 35(2AB) of the Income-tax Act, 1961 can be allowed r without the required approval as per the provisions of section 35(2AB) of the Income-tax Act, 1961 read with Rule 6 of the Income-tax Rules, 1962. It is, therefore, a case where a deduction under section 35(2AB) of the Income-tax Act, 1961 read with Rule 6 of the Income tax Rules, 1962 has been allowed without examining the facts of this case by the AO.

In view of the section 35 (2AB) read with Rule 6 which is effective from 01.07.2016, my observations are as under: The form 3CL dated 14.08.2017 so furnished is in old format instead of the new format effective from 01.07.2016. Also form 3CL, in new format, should have been funniest electronically as per Rule 6(7A)(b) of the LT. Rules, 1962. However, required evidence for it being furnished electronically have not been submitted by the assessee. [Para7] Thus, during the course of the assessment proceedings, the Assessing Officer while making assessment has not examined/enquired into the detail of the case and there is a clear error on application of section 35(2AB) of the I.T. Act, 1961 read with Rule 6 of the I.T. Rules, 1962. Therefore, the assessment made is erroneous in so far as it is prejudicial to the interest of the revenue as per the provisions of section 263 of the Income Tax Act, 1961. The Pr. CIT, (Central) mentioned that form 3CL dated 14.08.2017 so furnished in old format instead of new format effective from 01.07.2016. Also form 3CL in new format, should have been furnished electronically as per Rule 6(7A)(b) of I.T. Rules. However, required evidence for it been furnished electronically have not been submitted by the Assessee. Emphasis supplied) Pr. CIT, (Central) further mentions as per Rule 6(A)(C) of IT Rule it is mandate for the assessee to obtain audit re: ort in form 3CLA and to furnish electronically before the due date of filing the return of income. It can be seen that filing of form 3CL and form 3CLA was required to be furnished by assessee. How can be so purported failure on the part of assessee be termed as error on the part of the Assessing Officer. In the case of Gupta Spinning Mills Private Limited vs CIT, Delhi IV A. Y. 2006-7 vide order dated 29.02.2012 Hon’ble ITAT observed as under: As far as absence of discussion in the assessment order is concern, this is what has been la down b_ this court in the case of Rayon Silk Mills v. CIT 1996 221 ITR 155: “In the first instance it was contended by learned Counsel for the assessee that the very premise on which order under section 263 was made against the assessee, namely, that the Income Tax Officer has not at all examined the goodwill account is not existent. According to him, it is apparent from the record that the goodwill account was thoroughly examined by the Income Tax Officer before making the assessment and after examining when he accepted the contention of the assessee its discussion did not find place in the assessment order, as no additions were going to be made or no modifications in the return filed by the assessee were required to be made in that regard. This connection of the assessee appears to be well-founded. It is true that the assessment order does not speak about the examination of goodwill account as such. However, as we have notice above the assessee in his reply to the show-cause notice under section 263 has specially mentioned that the entire matter was scrutinized and accepted while passing the assessment order.”------ “For an order of the Assessing Officer to be interfered with in exercise of revisional powers the Commissioner of Income tax has to find in the Revenue. The conditions are twin conditions as held b the a-ex court and both o them have to be fulfilled before the Commissioner o Income Tax can exercise jurisdiction under section 263 o the Act. In the case of Malabar Industrial Corporation Limited v. CIT [2000] 243 ITR 83 (SC) the apex court has held: “The phrase prejudicial to the interest of the Revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue: or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the Income tax Officer is unsustainable in law.”----- (Emphasis supplied) In the case of Infosys Ltd. Vs JCIT dated 02.06.2005 ~---“However, if necessary enquiry has been made and satisfaction of assessing officer has been arrived at, though not clearly mentioned in the assessment order, such order cannot be raised on the ground that the claim has been allowed without the provision of law. We once again mention that without pointing out error in assessment order, The CIT is not justified, in passing an order in revision directing the assessing officer to make further enquires. We according set aside the order of learned CIT for assessment year 1996-97"----(Emphasis supplied) The Hon’ble Bangalore ITAT further observed as under: -------“The assessee is now in appeal before us against the aforesaid findings of the CIT. At the outset, the Ld. AR on behalf of the assessee while inviting our attention to page 12 of the paper book contended that during the course of assessment proceedings, the AO raised a specific query on the issue of trading in shares and the assessee had filed a detailed reply vide letter dated 16th October, 2008. Since the AO had applied his mind to the facts of the case and had raised a specific query the Ld. CIT was not justified invoking the provisions of section 263 of the Act. The finding of the Ld. CIT that there was lack of enquiry, is factually incorrect, the Ld. AR submitted. Inter alia, the Ld. AR relied upon the decisions in CIT vs. Max India Limited 295 ITR 282 (S.C.); CIT vs. Sunbeam Auto Limited 332 ITR 167 (Del.); CIT vs. Anil Kumar Sharma 335 ITR 83 (Del.); CIT vs. Vikas Polymers 236 CTR 476/194 Taxman 57; Hari Iron Trading Company vs. CIT, 263 ITR437 (P&H); Malabar Industrial Co. Ltd. vs.CIT,243 ITR 83(S.C.); CIT vs. Hindustan Coca-Cola Beverages (P) Ltd. 331 ITR 192 (Del.); CIT vs. International Travel House Lid. 194 Taxman 324; CIT vs. DLF Power Limited 329 ITR 289 (Del.); CIT vs. Eicher Limited 294 ITR 310 (Del.) CIT vs. Ashish Rajput, 320 ITR 674 (Del.); CIT vs. Rohit Anand, 327 ITR 445 (Del.); CIT vs. Gopal Purohit, 228 CTR 582 (Bom.); and CIT vs. PNB Finance and Industries Limited, 236 CTR 1 (Del.). ”-----(Emphasis supplied) In the present case filed detail reply before AO on 12 December, 2019 clearly stated in point no. 6.

The caption in the I.T. Rules 1962 regarding form No. 3CL is as under: Form No. 3 CL Report to be submitted b the prescribed authority to the Income Tax Act Authority specified under sector 35(2AB) of the Income Tax Act, 1961. This is to be signed by Secretary Department of Scientific and Industrial Research. The caution of Form 3CLA in the I.T. Rules is as under Report from an accountant to be furnished under sub sector (2AB) Section 35 o the Act relating to in house scientific research and development facility. The detailed Audit Report was filed on 26.11.2016. This report inter alia mentions about the expenditure relating section 35 (2AB) in para 19 of report. Hence, the details were available to the Assessing Officer and also filed during the course of hearing in reply dated 12 December, 2019. In the case of Advance Enzyme Technologies Ltd. vs. ACIT Circle-1 and 5172/Mum./2017 AYs 2011-12 and 2012- 13 vide order dt. 04.03.2020 the House ITAT observed in para 10 page 7 as under: “We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the Tribunal in assessee own case for A.Y. 2010-11, where it has been held that once, R&D facility has been recognized by the competent authority, then deductions provided u/s 35. 2AB cannot be denied merely or the reason that approval of expenditure for the impugned year in prescribed form has not been received from the competent authority. The relevant findings of the Tribunal are as under: We have heard both the parties, perused the material available on record and gone through orders of the authorities below. The assessee is in the business of manufacturing industrial enzymes. The assessee has setup three R&D facilities at various places and such R&D facilities has been approved and recognized by the competent authority, DSIR, Ministry of Science and Technology, Govt. of India vide letter dated18.01.2012. The assessee has obtained another approval from DSIR for a period of three years which was valid up to 31.03.2012. The undisputed position emerge from the fact before us is that the assessee has obtained initial recognition from competent authority DSIR, and such recognition was valid up to 31.07.2012 in respect of R&D facilities at Thane. In so far as R&D facility at Wagle Industrial Estate, Thane, it has commenced activities from 01.02.2011 and application for registration has been filed on 11.03.2011. In case of another R&D unit at 135/A Wagle Industrial Estate, Thane (NTRC) the assessee has commenced its activities from 01.08.2012. Thereafter, the assessee has filed an application for recognition of NTRC vide letter dated 12.10.2012. The DSIR neither rejected the claim of application filed by the assessee nor communicated the position of application filed by the assessee at any time during the relevant period. The assessee has filed writ petition before the Hon’ble Delhi High Court and challenge the action of the competent authority i.e. the Secretary, DSIR, Ministry of Science and Technology, Govt. of India and the writ application filed by the assessee pending for adjudication. Be that as it may, but the undisputed facts are that the DSIR has issued recognition for all units vide its communication dated 15.01.2014 and such recognition was valid up to 31.03.2016, subsequently, the renewal of recognition was also granted up to 31.03.2019. Further, the assessee has claimed deduction u/s 35 (2AB) of the Act, from AY 2002-03 to 2008-09 and such claim has been accepted by the department for those years. In fact there is no dispute with regard to claim for AY 2014-15 onwards. The only dispute is with regard to the intervening period of AY 2009-10 to AY 2013-14, where the department for the reason that necessary approval from the competent authority inform 3CM was not produced before the AO. In light of above factual background, if you examine the claim of the assessee in light of provisions of section 35(2AB) of the Act, one has to be see whether periodical approval/renewal from the competent authority is required to ‘clean the benefit of weighted deduction u/s 35 (2AB) of the Act, when the initial recognition from the competent authority was valid for the period under cover. The provisions of sec. 35 (2AB) of the Act, deals with a cases where a company engaged in the business of manufacture or production of any article or thing incurs any expenditure on scientific research on in- house research and development facility as approved by the prescribed authority then there shall be allowed a deduction of some equal to 150% of such expenses incurred by the assessee for in-house research and development facilities. For this purpose, prescribed authority is Secretary, DSIR, Ministry of Science and Technology, Govt. of India. Further Rule 6 and 7A of Income Tax Rules, 1962 provides the procedure of approval of R&D facility. As per Rule 6 of the Income Tax Rules, 1962, the prescribed authority for expenditure on scientific research and development for the purpose of 35 (2AB) of the Act, shall be the Secretary, DSIR. Sub Rule (4) requires the assessee to furnish the application in form 3CK. As per Sub Rule 8A. If the prescribed authority is satisfied the condition provided in this Rule and in Sub Sec. 2AB of Sec. 35 of the Ac are fulfilled then the prescribed authority shall an order in writing in from No. 3CM. In this case, there is no dispute with regard to fact that the R&D facility set up by the assessee at three places are initially recognized by the competent authority. In fact, the R&D facility of the assessee has been initially recognized by the competent authority from AY 2001-02 onwards. The only dispute is with regard to approval of prescribed authority in form No. 3CM. The A.O. as well as the Ld. CIT A was on the opinion that although the initial re-composition was to the assessee by the competent authority but the approval of the facility for the used in form 3C was not on record. Therefore that in absence of approval in prescribed form 3CM the assessee is not entitled for weighted deduction u/s 35 2AB of the IT Act. Expect this, existence of R&D facility at three places and consequent expenditure incurred for relevant purpose are not disputed by the authorities. In fact, the A.O. as well as Ld. CIT (A) have categorically accepted that the assessee has set up R & D centres and incurred various expenditure for in house research and development purpose. In this legal and factual background, if you go through the claim of the assessee towards dedication claim u/s 35 (2AB) of the Act, we need to examine such claim made by the assessee is in accordance with provision of section 35 (2AB) of the IT Act, and relevant Rule 6 and 7A of the IT Rules, 1962. In order to claim the benefit of weighted deduction u/s 35 (2AB) of the Act, the assessee should fulfilled two conditions. First condition is there should in- house research and development. The competent authority for this purpose has been defined as the secretary, DSIR, Ministry of Science and Technology, Govt. of India, there is a prescribed procedure for approval of R&D facility. Rules 6 and 7A of the Income Tax Rules, 1962, provides for mechanism of filing an application and related approval by the competent authority. At the cost of repetition, we note that the assessee has filed its application in from 3CK relevant period which is pending before the competent authority. The competent authority neither rejected the application filed by the assessee nor sent any communication in this regard. The assessee has challenged the action of the competent authority by way of writ petition before the Hon’ble Delhi High Court and such writ petition filed by the assessee is pending for adjudication. Be that as it may, fact remains that its facility has been initially recognized from the AY 2001-02 onwards, and the assessee has continuously claimed deduction u/s 35 (2AB) of the Act, up to AY 2008-9 and such claim has been accepted by the department. It is also not in dispute that from AY 2014-15 the assessee has been allowed the benefit of weighted deduction u/s 35 (2AB) of the Act. Having said so, let us see law laid down by various Courts on this issue the Hon’ble Gujarat High Court in the case of CIT vs. Claris Lifescience Ltd. supra has considered identical issue in list of provisions of Sec. 35 2AB of the Ac and held that the provisions nowhere suggest simply that R &D facility is approved from articular date and in other words it is no where suggested that date of approval only will be cut off date for eligibility. The court further held that once facility is approved, the entire expenditure so incurred on development of R&D facility has to be allowed for weighted denudation. The Hon’ble Delhi High Court in the case of Maruti Suzuki India Pvt. Ltd., (supra) vs. Union of India, had considered an identical issue and held that for availing the benefit u/s 35 (2AB) of the Act, what is relevant is not the date of recognition or the cut of date mentioned in the certificate of the DSIR or even the date of approval, but the existence of recognition. The Hon’ble Gujarat High Court in the case of Banko Product India Ltd. vs. DCIT (supra) had once again reiterated its earlier position in the case of claris Lifescience Ltd. (supra) and held that once an application is filed by the assessee would have no control over when such application is processed and decided. The Hon’ble court further held that period during which the approval is granted is not relevant as long as such approval is granted and expenditure has been incurred for this specified purpose. The Hon’ble Gujarat High Court in the case of CIT vs. Sun India Ltd. (supra) had once again considered on identical issue and held that once R&D facility set up by the assessee has been approved by the prescribed authority and necessary approval was granted in the prescribed format, then the communication in form 3CM was thereafter between the prescribed authority and the department. If the same was not so surely the assessee cannot be make to suffer. The Hon’ble Madras High Court in the case of CIT vs TVS Electronics Ltd. (supra) had held that the assessee cannot be punished for the bureaucratic delay in given such approval for the year in question, which was in the hands of the department concerned of the Central Govt. itself. On the very fact that for the period anterior period and posterior to the year in question such approval was very well on the record of the Revenue, weighted deduction for the expenditure incurred on the scientific research could not have been disallowed by authority below. The sum and substance of ration laid down by the Hon’ble High Court are that once the assessee has been b the competent authority then subsequent renewal/communication of such as approval in prescribed form is not relevant and what is relevant to decide the entitlement of deduction is existence of such facility (Emphasis supplied) The Assessing Officer in the online notice u/s 142(1) dated 28.11.2019 asked for the following details Large amount allowable as deduction claimed in schedule BP of return you have claimed appreciation and amortization of Rs. 13,99,09,078/-. Please furnish documentary evidence on this observation along with justification.

3. Gross total income is less than value of foreign remittance sent Please furnish the details of foreign remittances and their source along with justification on this observation. Mismatch between income/receipt credited to profit and loss account considered under other heads of income and income from other heads of income other that business/profession Furnace reconciliation in respect of income/receipt declared under the head “Income from business or profession”. “Income from other source” and as well as income from other heads. Large deduction clean under chapter VI-A: You have the large deduction under Chapter VI-A of the Act. In this regard, please justify the said deduction under the relevant section and that you fulfilled the requisite condition, stipulations, rules etc. Please furnish requisite documentary evidence based on which such deduction has been claimed. In case of your failure to furnish these details, the corresponding direction claimed is liable to be disallowed. Large deduction claimed u/s 35 2AA 35 2AB 35 CCC and 35 CCD: Please furnish the details of deduction claimed on the account of scientific research along with their document evidence. (Emphasis supplied) Large long term capital gains: You have shown a long term capital gain of Rs. 2,96,81,947/in return of Income for AY 2016-17. Please furnish the documentary evidence on this observation. Large outward remittance to non-residence not being a company, or to a foreign company Please furnish details in this regard alongwith their source and proper justification on this observation. Low capital gains with respect to sale consideration: Please furnish the complete detail of capital gain alongwith their sale consideration. Justify that capital gain are proportionate to the sale consideration. Large other expenses claimed in profit and loss a/c: Furnish details on this observation alongwith copy of ledger account of expenses claimed under this head with proper justification. It can be seen that AO has asked for large deduction claimed w/s 35 (2AA), 35 (2AB), 35 (CCC) and 35 (CCD). Hence the observation of Pr. CIT that AO has not examined maintained in para 3 of notice the AO has not enquired into 35 (2AB) in factually incorrect. The assessee vide reply to DCIT central circle filed on 12th December, 2019 filed as under: With reference to your query No. 1, sir, it is humbly submitted that depreciation is a statutory allowance and the working of the same may be verified with schedule of depreciation as per Income Tax Act, attached along with Tax Audit Report of the assessee company. With reference to your query No. 2, sir, in this regard it is submitted that the matter of the company relates to the TPO for which the last date for filing ITR was 30.11.2016 and the ITR of the assessee has been filed on 28.11.2016 vide acknowledgement no. 545253661281116 and there is no delay in filing ITR for the year under consideration. With reference to your query No. 3, sir, it is submitted that the evidence of foreign remittance are being produced herewith for your kind perusal. In reference to your query No. 4, sir, it is submitted that for the same books of accounts alongwith bills and vouchers are being produced here from which all the incomes may be reconciled.

In response to your query no. 5, competition of income of the assessee company alongwith all the reports prescribed as well as filed along with the ITR are being furnished here. In response to your query no. 6 regarding large deduction claim u/s 35 2AA 35 2AB 35 CCC and 35 CCD copy of form 3 CM and 3 CL are being enclosed herewith as well as the expenditure incurred in this respect, may be verified with the Audit Report Balance Sheet alread filed as well as with the books of accounts and bills or and voucher being produced here for your kind perusal. (Emphasis supplied) In response to your query no. 7, the concerned documentary evidences are being furnished herewith in support of Long Term Capital Gain. Query no. 8 is being replied in query no. 3 above. Query no. 9 and 7 are similar which is being replied in query no. 7 above. In response to your query no. 10, sir, it is stated that according to the size of the company as well as in comparison of earlier years, the same are quite reasonable, however, the same maybe verified with the books of accounts and bills and vouchers being produced herewith for your kind consideration. It can be seen at para 6 that copy for form 3CM and 3CL were enclosed and submitted all the documents concluding audio report bills voucher for verification. The Pr. CIT, (Central) has hypothetically assumed that there was error on the part of the Assessing Officer. As per sub section of 35 (2AB) the prescribed authority shall submit its report in relation to the approval of the said facility to the Pr. Chief Commissioner or Chief Commissioner or Pr. Director General or Director General in such form and within such time as may be prescribed. It can be seen that how Assessing Officer comes into the Picture regarding filing of report by the prescribed authority. The Pr. CIT, (Central) has nowhere discussed that how the assessment order is prejudicial to the interest of Revenue. Pr. CIT (Central) has expressed his own unique view which is out of the ambit of erroneous in so far as it is prejudicial to the interest of revenue. (Emphasis supplied) In the case of Infosys Technologies Ltd. vs JCIT vide order dated 02.06.2005. Hon’ble Bangalore ITAT stated as under: -----“However, if necessary enquiry has been made and satisfaction of assessing officer has been arrived at, though not clearly mentioned in the assessment order, such order cannot be raised on the ground that the claim has been allowed without the provision of law. We once again mention that without pointing out error in assessment order, The CIT is not justified, in passing an order in revision directing the assessing officer to make further enquires. We according set aside the order of learned CIT for assessment year 1996-97”---- (Emphasis supplied) In the notice under 263 the Pr. CIT, (Central) has mentioned in para 2 that approval of deduction in the prescribed proforma by the competent authority as per the provisions of section 35 (2AB) of IT Act, 1961, read with Rule 6 of IT Rule 1962 is not found on records.

2. Secondly Pr. CIT, Page 13 of 16 (Central) has not talked about new proforma w.e.f. 01.07.2016 in the notice u/s 263. In the entire notice Pr. CIT has not mentioned a single word regarding new proforma but while cancelling the assessment order he based his findings on old format and new format. In the notice u/s 263 Pr. CIT (Central) has However, not discussed the non filing of form 3CLA but while cancelling the assessment order he bases his findings on non availability of form 3CLA. The order of Pr. CIT, (Central) u/s 263 is beyond the domain of notice u/s 263 and such order cannot be legal. He has to state the error on the part of Assessing Officer and the order is prejudiced to the interest of revenue simultaneously. Approval of in house R&D facility u/s 35 (2A) was communicated from Department of Science and Infrastructure Technology vide letter dated 16/8/2007 to the assessee. This approval also contains 01.Form 3CM 02.Form 3CL Letter and the form 3CM and form 3CL are enclosed. Pr. CIT, (Central) had not assumed the jurisdiction ws 263 regarding ‘New and Old Form’ or for ‘Certificate in form 3CL’ while issuing the notice so the order of Pr. CIT, (Central) is illegal also and does not satisfy the twin conditions of erroneous and prejudicial to the interest of revenue. As well as on merits as discussed above there is no error in the assessment order. The detailed Audit Report was filed on 26.11.2016. This report inter alia mentions about the expenditure relating section 35 (2AB) in para 19 of report. Hence, the details were available to the Assessing Officer and also filed during the course of hearing. In the case of PCIT vs Universal Music India Pvt. Ltd., of 2018 vide order dated 19.04.2022 Hon’ble Bombay High Court observed as under: ‘ a---“In the case at hand, there is a finding by the Tribunal, as noted earlier, that no issue was raised by CIT in respect of particulars of Payment made to persons specified u/s 40A(2)(b) of the Act and even the show cause notice is silent about that.”---- Hon’ble ITAT is earnestly prayed that the order of Pr. CIT (Central) under section 263 maybe set aside in view of above. (C) At the time of hearing before us, the Ld. Counsel for the appellant assessee drew our attention to written submissions [relevant portion of which has been already been reproduced in foregoing paragraph (B.4) of this order] and placed reliance on it. The Ld. DR supported the impugned order passed u/s 263 of the Act.

Page 14 of 16 (C.1) We have heard both sides. We have perused materials on record. It is found that the Assessing Officer passed assessment order dated 07.02.2020, allowing the assessee’s claim u/s 35 the Act; which was revised by Ld. PCIT vide aforesaid impugned order u/s 263 of the Act. The contents of paper-book [referred to in foregoing paragraph (B.3) of this order] and written submissions from the assessee’s side [relevant portion already reproduced in foregoing paragraph (B.4) of this order] clearly indicate that the assessee had provided all relevant details pertaining to claim u/s 35 of the Act, during assessment proceedings, in response to queries of the Assessing Officer. Therefore, it is not a case of no inquiry by the Assessing Officer. The Ld. PCIT has, however, taken adverse view in impugned order u/s 263 of the Act, taking recourse to amended Rule 6 of Income Tax Rules (amended w.e.f. 01.07.2016), read with section 35(2AB) of the Act. [In operative part of his impugned order u/s 263 of the Act, at para 6 of his impugned order, Ld. PCIT refers to Rule 6, effective from 01.07.2016]. This case pertains to AY. 2016-17 (for which relevant previous year is 2015-16). The Ld. PCIT has, however, failed to discuss whether (and if yes, then why) amended provisions under Rule 6 of Income Tax Rules effective from 01.07.2016 would have any bearing on previous year 2015-16, ending on 31.03.2016.

(C.2) Notwithstanding the foregoing, the specific observations of the Ld. PCIT in support of his impugned order u/s 263 of the Act are twofold: firstly, he observed that Form 3CL is in old format instead of new format effective from 01.07.2016; and the same should have been furnished electronically. Secondly, the Ld. PCIT holds that audit report in Form 3CLA was to be furnished Page 15 of 16 electronically before the due date of filing of the return of income, which was not furnished to the Assessing Officer during the course of assessment proceedings. On perusal of Form 3CL, it is found that the same is issued by Secretary, Department of Scientific and Industrial Research, Government of India. Therefore, if the issuing authority has used the old Form 3CL instead of the new Form 3CL the assessee cannot be faulted for this. Similarly, if Form 3CL was not filed by the issuing authority in electronic form, but in physical form, the assessee cannot be faulted for this. These matters were not within the control of the assessee, because the Form 3CL is not prepared and issued by the assessee but instead, it is prepared and issued by Secretary, Department of Scientific and Industrial Research, Government of India. Secondly, as regards Form 3CLA, it is found that this is to be submitted to Secretary, Department of Scientific and Industrial Research, Government of India and not to the Assessing Officer or to any Income Tax Authority. Therefore, no adverse view can be taken against assessee for non-furnishing of the Form 3CLA to the Assessing Officer or to the Ld. PCIT. There is no dispute that in-house Research and Development Centre of the assessee is approved by Secretary, Department of Scientific and Industrial Research, Government of India. Further, there is no dispute that competent authority has already issued Form 3CL and sent to Chief Commissioner of Income Tax (Exemptions) as required u/s 35 of the Act. In view of the foregoing, it is obvious that the bases on which Ld. PCIT passed the aforesaid impugned order u/s 263 of the Act are unsustainable. Therefore, it is held that the Ld. PCIT erred in revising the assessment order dated 07.02.2020 passed by the Assessing Officer. Accordingly, Page 16 of 16 impugned order 21.03.2022 passed u/s 263 of the Act is set aside and assessment order dated 07.02.2020 is restored. In the result, the appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open Court on 18/03/2025.