Case Law Details
Maharashtra Hybrid Seeds Company Private Limited Vs PCIT (ITAT Mumbai)
PCIT has passed the impugned revision order for the reason that the AO has not properly examined the weighted deduction claimed u/s 35(2AB) of the Act vis-à-vis Form 3CL. However, the AO has reopened the assessment and has examined the above said Form 3CL, but he has restricted the examination with respect to Capital Expenditure. Thus, the claim of the assessee towards revenue expenditure remained unverified. It was submitted that the assessee has filed a rectification petition u/s 154 of the Act submitting that there was excess allowance u/s 35(2AB) of the Act towards revenue expenditure, but the said rectification petition remained undisposed of.
We agree with the submission of the Ld A.R with regard to capital expenditure. However, since the claim of the assessee towards revenue expenditure remained unverified at the end of the AO and since the assessee itself has filed rectification petition u/s 154 of the Act before the AO on the very same issue, we are of the view that the revision order passed by the Ld PCIT may be confirmed partly with regard to revenue expenditure, since the claim of capital expenditure has already been examined by the AO in the reassessment proceedings. Accordingly we modify confirm the revision order passed by Ld PCIT and uphold the same with regard to the direction given in respect of revenue expenditure only. In the set aside proceedings, the AO shall verify the claim u/s 35(2AB) of the Act with regard to the revenue expenditure.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The assessee has filed this appeal challenging the revision order dated 19.03.2022 passed by Ld PCIT-1, Mumbai u/s 263 of the Act and it relates to the assessment year 2017-18. The assessee is challenging the revision order so passed by Ld PCIT.
2. The Ld A.R submitted that the assessing officer has completed the assessment for the assessment year 2017-18 u/s 143(3) of the Act on 30.12.2019. Subsequently, the Ld PCIT has passed the impugned revision order u/s 263 of the Act on 19-03-2022. The revision order was passed with regard to the claim for weighted deduction u/s 35(2AB) of the Act @ 200% of the expenses. The Ld A.R submitted that the assessee had incurred capital and revenue expenditure on scientific research to the tune of Rs.20,93,48,000/- and accordingly claimed weighted deduction of Rs. 41,86,96,000/- u/s. 35(2AB) of the Act. The case of Ld CIT was that the AO has allowed the above said deduction without verifying Form 3CL issued by DSIR. Hence he has passed the impugned revision order on 19.03.2022.
3. The Ld A.R submitted that the AO, in the mean time, has reopened the assessment u/s 147 of the Act for the very same purpose of verifying the weighted deduction claimed u/s 35(2AB) of the Act. The AO completed the reassessment on 29-03-2022, wherein he examined Form 3CL furnished by the assessee before him. After verification of Form 3CL, the AO accepted the weighted deduction claimed over the capital expenditure incurred on scientific research. Accordingly, the Ld A.R submitted that the AO himself has verified the Form 3CL in the reassessment proceedings and hence the object of impugned revision order has already been fulfilled by the AO in the reassessment proceedings. Accordingly, he prayed for quashing of the revision order.
4. The Ld D.R, on the contrary, submitted that the assessee has claimed weighted deduction u/s 35(2AB) both in respect of capital and revenue expenditure on account of non-furnishing of Form 3CL. However, the AO has examined the capital expenditure only in the reassessment proceedings. She further submitted that the impugned revision order has been passed against the original assessment order and hence, non-examination of the claim u/s 35(2AB) properly has rendered the original assessment order erroneous and prejudicial to the interests of revenue.
5. The Ld A.R, in the rejoinder, submitted that the AO has already examined capital expenditure in the reassessment proceedings and hence no purpose shall be served, by again examining the capital expenditure. With regard to the revenue expenditure, the Ld A.R submitted that the assessee, after examination of Form 3CL, has noticed that it has made excess claim of Rs.17.94 lakhs u/s 35(2AB) and accordingly, filed rectification petition u/s. 154 of the Act before the AO on 1st September, 2022 and the same is pending.
6. We heard the parties and perused the record. We noticed that the Ld PCIT has passed the impugned revision order for the reason that the AO has not properly examined the weighted deduction claimed u/s 35(2AB) of the Act vis-à-vis Form 3CL. However, the AO has reopened the assessment and has examined the above said Form 3CL, but he has restricted the examination with respect to Capital Expenditure. Thus, the claim of the assessee towards revenue expenditure remained unverified. It was submitted that the assessee has filed a rectification petition u/s 154 of the Act submitting that there was excess allowance u/s 35(2AB) of the Act towards revenue expenditure, but the said rectification petition remained undisposed of.
7. We agree with the submission of the Ld A.R with regard to capital expenditure. However, since the claim of the assessee towards revenue expenditure remained unverified at the end of the AO and since the assessee itself has filed rectification petition u/s 154 of the Act before the AO on the very same issue, we are of the view that the revision order passed by the Ld PCIT may be confirmed partly with regard to revenue expenditure, since the claim of capital expenditure has already been examined by the AO in the reassessment proceedings. Accordingly we modify confirm the revision order passed by Ld PCIT and uphold the same with regard to the direction given in respect of revenue expenditure only. In the set aside proceedings, the AO shall verify the claim u/s 35(2AB) of the Act with regard to the revenue expenditure.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 22.09.2022.
