Non-production of evidence does not constitute material suppression justifying reopening of assessment beyond four years under the Income Tax Act.

JUDGMENT :

A. MUHAMED MUSTAQUE, J.

1. This appeal, at the instance of an assessee under the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’), seeks to challenge the order dated 30.11.2023 in I.T.A. No.139/COCH/2020 of the Income Tax Appellate Tribunal, Cochin Bench, with respect to the assessment year 2009-10, by which, the findings of the first appellate authority to the effect that reopening of the assessment under Section 147 of Act, after four years was bad in law, was set aside. The appellant-assessee has raised the following questions of law:

i. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessment under Section 147 for AY 2009-10 is not barred by limitation?

ii. Whether on the facts and in the circumstances of the case, there was any evidence or material on record before the Income Tax Appellate Tribunal to find that the Appellant did not disclose material information in the form of Form 3CL and consequently, the period of limitation of four years would not be applicable for AY 2009-10?

iii. Whether on the facts and in the circumstances of the case and in the light of Section 35 (2AB)(4) of the Act, ITAT was right in finding that there was failure on the part of the Appellant in not disclosing fully and truly all material facts for the assessment?

2. The questions raised are reframed by us, and the following question arises for consideration:-

Whether the facts forming part of the assessment record can be treated as suppression of material facts, when such facts are not, by themselves, determinative of the claim for a deduction under Section 35 (2AB) of the Act, to justify reopening of an assessment beyond four years by invoking Explanation 1 to Section 147 of the Act ?

3. Assessment of the appellant for the assessment year 2009-10 was completed on 31/12/2013. In the assessment, the appellant claimed a deduction under Section 35 (2AB) of the Act. The total deduction claimed under Section 35 (2AB) was Rs. 4111.09 lakhs. Under Section 35 (2AB), any expenditure on scientific research is allowable as a deduction. A sum equal to one and one-half times the expenditure is allowed as such a deduction. The prescribed authority mentioned under Section 35 (2AB) is the Secretary, Department of Scientific Industrial Research (Government of India). As per the law that stood on the assessment year, the prescribed authority shall submit its report in relation to approval of the in-house research and development facility in Form 3CL to the Director General (Income Tax Assessment) within 60 days from the date of granting such approval. This rule, referred to under Rule 6(7A) of the Income Tax Rules, underwent an amendment with effect from 01.07.2016. After the amendment, it is mandated that, apart from the reporting of the approval, the prescribed authority shall also quantify the expenditure incurred by the company on in-house development and research facilities. This certified expenditure qualifies for a weighted deduction under Section 35 (2AB). That means before the amendment, the assessing authority itself has to be satisfied with the actual amount allowable for deduction and not based on the report of the prescribed authority, though such reports may indicate expenditure.

4. Assessment in this matter for the year 2009-10 was completed on 31/12/2013, as noted earlier. 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 the assessee and the income tax authority well before the completio