Apollo Tyres Ltd Vs ACIT (Kerala High Court)
Reopening of assessment beyond four years was unsustainable as non-filing of Form 3CL did not constitute non-disclosure of material facts.
Conclusion: Form 3CL was not a determinative document for claiming deduction, and non-production of the same did not amount to wilful non-disclosure or suppression of material facts under Explanation 1 to Section 147. The reopening of assessment beyond four years was therefore invalid and time barred.
Held: Assessee claimed a deduction under Section 35(2AB) for the assessment year 2009-10. In the approval granted, in Form 3CL, the prescribed authority quantified the expenditure allowable under Section 35(2AB) at Rs. 1875.02 lakhs. This was communicated both to assessee and the income tax authority well before the completion of the assessment in the year 2013. This was communicated in Form 3CL on 15/11/2011. Assessee did not produce Form 3CL during the assessment proceedings as it was already communicated to the Director General of Income Tax (Exemption), as seen from the form itself. However, AO did not take into account the eligible expenditure stated in Form 3CL and completed the assessment on 31/12/2013. The reassessment procedure was initiated under Section 147 in light of the expenditure certified in Form 3CL. This was resisted on the ground that the reassessment proceedings had been initiated beyond the 4 years contemplated under Section 147. The question was whether non-disclosure of Form 3CL was material or not. Appellate Authority ruled in favour of assessee. Tribunal observed that the mere fact that Form 3CL had been communicated to the Director of Income Tax would not, by itself, absolve assessee from the statutory obligation to place the said Form before AO at the relevant time. Consequently, the wilful non-disclosure of Form 3CL would furnish sufficient ground for reopening the assessment under Section 147. It was held that Tribunal erred in entering into a finding, placing reliance on explanation 1 of Section 147. As the law stood for the assessment year, the prescribed authority was not under the obligation to assess the expenditure incurred for scientific research as mandated under Section 35(2AB) based on Form 3CL. Any reference to expenditure in the Form 3CL thus became inconsequential or insignificant for AO to allow the deduction claimed. In the light of the law as it stood at the time of assessment, it could not be said that there was willful non-disclosure, as the prescribed authority’s reporting was only to report about approval and not about the expenditure incurred. Therefore, there was no necessity for the assessee to produce Form 3CL except to establish the approval. Since approval was not in dispute, it was obligatory for AO to verify actual expenditure incurred, including with reference to the non-binding report as to the expenditure reflected in Form 3CL, added the bench.
