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2019 (5) TMI 1709 - AT - Income TaxReference made to TPO under section 92CA - assessment order passed by the Assessing Officer (AO) pursuant to the directions of Hon ble Dispute Resolution Panel (DRP) - HELD THAT - In the instant case by the Finance Act 2017 clause (i) of section 92BA has been omitted w.e.f. 01.04.2017. The legal effect of a provision being omitted by subsequent amendment then it would be deemed that clause (i) was never been on the statute book. While omitting the clause (i) of section 92BA we note that nothing was specified whether the proceeding initiated or action taken on this continue. Therefore the proceeding initiated or action taken under that clause would not survive at all. In the light of this legal position the cognizance taken by the AO under section 92BA(i) and reference made to TPO under section 92CA is invalid and bad in law. Therefore the consequential order passed by the TPO and DRP is also not sustainable in the eyes of law. Therefore the legal effect is when this clause (i) is omitted from the statute it has to be taken as though there is no clause (i) since its inception. And when looked from that angle the AO should have framed the assessment as in normal course after making necessary enquiries of particular claim of expenditure in accordance with law. But this exercise could not happen on account of provisions of section 92BA clause (i) of the Act. Therefore since this clause (i) has been omitted from the statute by virtue of the aforesaid amendments the AO is required to adjudicate the issue of claim of expenditures in accordance with law after affording opportunity of being heard to the assessee. We therefore set aside the orders of the AO and the DRP and restore the matter back to the AO with the direction to readjudicate the issue of claim of expenditure incurred in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A of the Act. Accordingly since we have restored the matter to the AO we find no justification to deal with the other issues on merit. Accordingly appeal of the assessee stand allowed for statistical purposes. Therefore all the appeals of assessee are allowed for statistical purposes.
Issues Involved:
1. Jurisdictional validity of the assessment order. 2. Impact of the omission of Section 92BA(1) by the Finance Act, 2017. 3. Validity of the reference made by the Assessing Officer (AO) to the Transfer Pricing Officer (TPO). 4. Enhancement of income by Rs. 13,52,49,494. Issue-wise Detailed Analysis: 1. Jurisdictional Validity of the Assessment Order: The appellant contended that the assessment order passed by the AO pursuant to the directions of the Dispute Resolution Panel (DRP) was invalid and bad in law. The grounds for this argument were based on the fact that the Finance Act, 2017 omitted Section 92BA(1), thereby removing the impugned transactions from the definition of specified domestic transactions. Consequently, the appellant argued that the assessment order should be annulled. 2. Impact of the Omission of Section 92BA(1) by the Finance Act, 2017: The appellant argued that since Section 92BA(1) was omitted by the Finance Act, 2017, the transactions in question no longer fell within the definition of specified domestic transactions. The Tribunal noted that the legal issue raised was no longer res integra and had been adjudicated by the Bangalore Bench of the Tribunal in the case of Texport Overseas Private Limited Vs. DCIT for AY 2013-14. The Tribunal cited several judgments, including those of the Hon’ble Supreme Court, which clarified that the omission of a provision in an Act is different from its repeal. The Tribunal concluded that the omission of Section 92BA(1) meant that the provision was deemed never to have existed, and therefore, any proceedings initiated under this provision would not survive. 3. Validity of the Reference Made by the AO to the TPO: The Tribunal examined whether the reference made by the AO to the TPO under the now-omitted Section 92BA(1) was valid. It was concluded that since Section 92BA(1) was omitted by the Finance Act, 2017, the reference made by the AO under this provision was invalid and bad in law. Consequently, the orders passed by the TPO and the DRP based on this reference were also deemed unsustainable in the eyes of the law. 4. Enhancement of Income by Rs. 13,52,49,494: Given the Tribunal's findings on the invalidity of the reference made by the AO and the subsequent orders by the TPO and DRP, the enhancement of the appellant's income by Rs. 13,52,49,494 was also deemed unsustainable. The Tribunal set aside the orders of the AO and the DRP and restored the matter to the AO with the direction to re-adjudicate the issue of the claim of expenditure in accordance with the law, after affording the appellant an opportunity of being heard. Conclusion: The Tribunal allowed the appeals of the assessee for statistical purposes, setting aside the orders of the AO and the DRP, and remanded the matter back to the AO for re-adjudication of the claim of expenditure. The Tribunal emphasized that the AO should frame the assessment in the normal course, making necessary inquiries in accordance with the law, given that Section 92BA(1) was omitted from the statute.
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