Non-Filing of Form 3CL Not Ground to Reopen Assessment u/s 147: Kerala HC Quashes ITAT Order Against Apollo Tyres on Limitation [Read Order]

In a recent ruling, the Kerala High Court held that the non-filing of Form 3CL could not be treated as suppression of material facts for reopening an assessment under Section 147 of the Income Tax Act.

Apollo Tyres Ltd., the appellant, had challenged the Income Tax Appellate Tribunal’s order that upheld the reopening of its assessment for the assessment year 2009-10 beyond four years on the ground that Form 3CL, issued by the Department of Scientific and Industrial Research, was not produced during the original assessment.

The petitioner’s counsel argued that the reassessment was time-barred since all relevant facts had been disclosed, and Form 3CL had already been directly communicated to the income tax authorities by the prescribed authority.

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The company's counsel explained that under the law applicable at that time, Form 3CL only served to report approval of an in-house research and development facility, not to certify the quantum of expenditure eligible for deduction under Section 35(2AB) of the Income Tax Act.

The Division Bench comprising Justice A.Muhamed Mustaque and Justice Harisankar V. Menon observed that before the 2016 amendment to Rule 6(7A), it was the assessing officer’s duty to determine the allowable expenditure independently, and non-production of Form 3CL could not be considered material suppression.

The court pointed out that the omission of the assessing authority to verify the allowable deduction could not be used against the assessee unless there was deliberate concealment.

The court set aside the Tribunal’s order, holding that reopening the assessment after four years on this basis was invalid and time-barred. The appeal was allowed in favor of Apollo Tyres Ltd. and against the revenue.

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