TMI Blog2022 (7) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 7742/Mum/2019 And ITA No. 7582/Mum/2019, CO No. 62/Mum/2021 (Arising out of ITA No.7742/Mum/2019 for Assessment Year 2009-10), ITA No. 7933/Mum/2019 - - - Dated:- 18-7-2022 - Shri Prashant Maharishi, AM And Shri Sandeep Singh Karhail, JM For the Assessee : Shri Vijay Mehta, AR For the Revenue : Shri O P Sharma, DR ORDER PER PRASHANT MAHARISHI, AM: 01. These are three appeals and one cross objection pertaining to one assessee for two assessment years i.e. AY 2009-10 and 2010-11 involving common issue, therefore; same is disposed of by this common order. 02. For AY 2009-10 , ITA No. 7742/Mum/2019 is filed by the Asst. Commissioner of Income-tax (LTU-1 Mumbai) (the learned AO ) against the order passed by the Commissioner of Income-tax (Appeals)-3, Mumbai [the ld CIT (A) ] dated 18th September, 2019. Assessee has filed cross objection no. 62/Mum/2021. 03. The learned Assessing Officer has raised following grounds of appeal:- 1. Whether, on the facts and in the circumstances Rs. 2,62,74,26 of the case and in law, the Ld. CIT(A) was right in deleting the disallowance of weighted deduction claimed u/s. 35(2AB) of the Act even though para 4(xi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction on account of book value of capital work in progress ( CWIP) (excluding production development expenses already claimed in tax) of ₹ 5491.08 lakhs from the total consideration whereas as per the balance sheet as on 31/3/2009 and previous year figures CWIP in case of sales unit amounting to ₹ 5166.04 lakhs. Therefore, the assessee has claimed excess deduction amounting to ₹ 325.04 lakhs (₹ 5491.08 lakh - 5166.04 lakhs). 2.1 In the light of the above, the assessee company had incorrectly claimed excess deduction on account of book value of CWP amounting to ₹ 325.04 lakhs. 3. Allowance of R D expenses (contract receipts):- 3.1 The assessee has approved units at Goa and Baddi, which are claiming weighted deduction u/s 35 (2AB) of IT act of amount ₹ 2318.31 lakhs. During the year, the assessee has incurred gross research and development expenditure of ₹ 5145.84 lakhs. The assessee has received from its associated enterprises, Messer s Glen mark pharmaceuticals SA Switzerland, amount of ₹ 5231.89 Lacs on account of contract research rendered by it and claimed expenses of ₹ 3600.28 lakhs for rendering the services. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 6th December, 2016, rejecting the same, the learned assessing officer recomputed deduction u/s 35 (2AB) of The Act by reducing the contract research income and disallowed excess deduction claimed on research and development expenditure u/s 35 [2AB] of the Act . Further, in view of the adjustment of deduction with respect to Research and Development (R D) expenditure, the computation of deduction under Section 80IC of the Act was also revised. 011. Accordingly, the assessment order under Section 143(3) read with section 147 of the Act was passed on 27th December, 2016 at ₹332,57,68,397/- and book profit remain unchanged. 012. Assessee aggrieved with Assessment order preferred appeal before the learned CIT (A) contesting that action under Section 147 of the Act is bad in law as [1] it is merely on change of opinion, [2] no fresh tangible material brought on record and [3] as reassessment is beyond 4 years, no material has been brought on record to show failure on part of the assessee for full and true disclosure. 013. Assessee also challenged the disallowance of ₹86,05,000/- with respect to R D expenditure. The assessee submitted that the learned Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 50B of the Act, no addition has been made, therefore, it is now not matter of contention. He submitted that the reason no. 2 clearly shows that there is no tangible material coming into the knowledge of the learned Assessing Officer for reopening of the assessment. He referred to the reason and stated that it is merely from the perusal of the records which already existed. Further reopening of the assessment is made by notice dated 30 March 2016 for A.Y. 2009-10 i.e. after four years and there is no reference that what is the failure on the part of the assessee to fully and truly disclose the material. He referred to the Paper Book containing 174 pages. He also referred to the decision of the Hon'ble Bombay High Court in case of Asian Paints Ltd. vs. DCIT (2009) 308 ITR 195, to contest that mere change of opinion cannot allow the learned Assessing Officer to reopen the concluded assessment. He referred to Para no. 10 of that decision to support his case. 019. The learned Departmental Representative supported the order of the learned Commissioner of Income tax (Appeal). He submitted that as per Guidelines issued by DSIR, the contract research income should have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to disclose fully and truly all-material fact necessary for its assessment. He also noted that considering the new credible information on record, he has reason to belief about the escapement of income. 023. On careful reading of the reasons, we find that in Paragraph no. 3.1, the facts noted by the learned Assessing Officer are available in the audited accounts and supporting produced by the assessee during the original assessment proceedings. In appendix E attached to form no. 3CEB dated 25th September, 2009, assessee has disclosed that it is in receipt of contract research services from Glenmark Pharmaceutical SA amounting to Rs. 52,31,89,111/- as an international transaction which has been benchmarked adopting Transitional Net Margin Method as the most appropriate method. In the computation of total income, the assessee has given a breakup of claiming of weighted deduction under Section 35(2AB) of the Act. With respect to the Revenue expenditure and capital expenditure. Assessee has reduced Rs. 36,28,54,000/- being R D expenditure incurred by the assessee with respect to the contract research income. Thus from the total research expenditure, the contract resear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is of the opinion that assessee has claimed higher deduction. The learned Assessing Officer was also of the view that assessee has failed to disclose fully and truly all material facts necessary for its assessment. The disclosure made by the assessee has already been extracted above in earlier paragraphs. However, reasons recorded did not say that what is the information other than those already disclosed should have further been disclosed by the assessee to make it full and true. Merely, saying that assessee failed to dispose of its obligation does not prove that the failure of disclosure is on part of the assessee. Further, as the reassessment proceedings were initiated after the period of four years, it is mandatory for the learned Assessing Officer to show that what are the facts assessee has failed to disclose fully and truly . Even the paragraph no. 3.1 of the reasons recorded, the learned Assessing Officer has taken all the material only from the audited accounts, computation, and reports furnished by the assessee before him, which were available during the course of original assessment proceedings. Therefore, we do not find any escapement of income, if at all, is not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngible material should always be from outside record of the assessee. However, what are the new material that Assessing Officer has seen which were not available or could not be seen by him in the original assessment is required be demonstrated by learned Assessing Officer. This is missing in the reasons recorded by the learned Assessing Officer as well as in the order of the learned CIT(A) upholding such reasons. 030. In the result, we are not upholding the action of the learned Assessing Officer in reopening of the assessment as well as the order of the learned CIT(A) in upholding the action of the learned Assessing Officer. Accordingly, the reopening made by the learned Assessing Officer deserves to be quashed. Solitary ground of cross objection is allowed. 031. In view of our decision in the cross objection filed by the assessee which goes to root of the matter. We do not find it necessary to decide the issue involved in the appeal of the learned Assessing Officer. . However, for sake of completeness, whether the claim of the assessee under Section 35(2AB) of the Act is correct or not. In paragraph no. 6.3 of the order, the learned CIT(A) noted that the income from contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening is also beyond the period of four years. The reasons are identically worded except the amounts incorporated for this year. Assessee raised objection on 21st august, 2017, which was disposed off, identically by the learned Assessing Officer and the deduction of research and development expenditure claimed of Rs.4,605/- lacs is lower than the contract receipt income, therefore, he held that No deduction is allowable. Assessment order under Section 143(3) read with section 147 of the Act was passed on 26 December 2017, determining the total income of the assessee at Rs. Nil. 035. On appeal before the learned CIT(A), the action under Section 147 of the Act was upheld and deduction under Section 35(2AB) of the Act was allowed. 036. Identically, the learned Assessing Officer is aggrieved with the allowance deduction under Section 35(2AB) of the Act and assessee is aggrieved where reopening of the assessment is upheld. 037. Both the parties confirmed that there is no change in the facts of the case are identical for this year compared to that assessment year 2009-10. Therefore, as per the reason given by us in cross objection of the assessee for A.Y. 2009-10, whether reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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