TMI Blog2018 (2) TMI 1582X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of account as per the provisions of the Act. CIT was right in setting aside the assessment order passed by the AO u/s 143(3) as the assessment order is erroneous insofar as it is prejudicial to the interest of the revenue. We find merit in the arguments of the assessee that the CIT has given specific direction to the AO to disallow deduction claimed u/s 35(1), without offering an opportunity to furnish necessary details. The CIT, in his order, has given specific direction to the AO to disallow claim of deduction u/s 35(1), in the fresh assessment order passed consequent to order passed u/s 263. Therefore, we are of the view that the direction given by the CIT needs to be modified to the extent of allowing the AO to examine the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal conditions for allowing the said deduction, when such conditions are not at all mandated by s 35 or any other relevant section . 4 . The Order of learned CIT is against the weight of evidence, equity and natural justice . 2 . The brief facts of the case are that the assessee company engaged in the business of manufacturing and trading of electronic process control equipment and consultancy services, filed its return of income for the assessment year 2009-10 on 30-09-2009 declaring total income at ₹ 23,98,230. The assessment was completed u/s 143(3) on 31-10- 2011 determining total income at ₹ 26,46,230 interalia making additions towards disallowance of penal interest and adhoc disallowance of 10% travel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue. 4 . The CIT, after considering relevant submissions of the assessee observed that there is no documentary evidence available on record to establish that either the assessee has furnished necessary evidence to prove that it is entitled for deduction towards capital expenditure incurred on research and development nor the AO has examined the issue of allowability of deduction u/s 35 of the Act. Therefore, he opined that the assessment order passed by the AO is erroneous insofar as it is prejudicial to the interest of the revenue. The CIT(A) further observed that though the conditions prescribed u/s 35(1) stipulates that the assessee needs to maintain separate books of account for its R D activity, the authorised represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in the earlier and subsequent assessment years has been accepted by the department. The Ld.AR further submitted that the Ld.CIT(A) erred in directing the AO to disallow claim of deduction u/s 35, as such the direction was outside the scope of section 263. 6 . The Ld.DR, on the other hand, strongly supported the order of CIT. 7 . We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The CIT set aside the assessment order passed by the AO u/s 143(3) by invoking his powers u/s 263 on the ground that the assessment order passed by the AO is erroneous insofar as it is prejudicial to the interest of the revenue as the AO has allowed deduction claimed u/s 35(1) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the authorised representative of the assessee accepted before the CIT that it has not maintained separate books of account in respect of R D facility even though it was required to maintain separate books of account as per the provisions of the Act. Therefore, we are of the considered view that the CIT was right in setting aside the assessment order passed by the AO u/s 143(3) as the assessment order is erroneous insofar as it is prejudicial to the interest of the revenue. However, we find merit in the arguments of the assessee that the CIT has given specific direction to the AO to disallow deduction claimed u/s 35(1), without offering an opportunity to furnish necessary details. The CIT, in his order, has given specific direction to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
