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2020 (10) TMI 1011 - AT - Income TaxRevision u/s 263 - Disallowance under Section 14A of the Act r.w.r. 8D and applicability of Section 115JB - In computing the book profits u/s 115JB profits of foreign branches was wrongly excluded and certain provisions were omitted to be added back, deduction u/s 36(1)(vii) in respect of bad debts written off was incorrectly allowed and disallowance made as per Rule 8D was not considered in computing the book profits - HELD THAT:- Issue of applicability of book profits to the nationalised banks was agitated by the assessee before the CIT(A) and CIT(A) has already passed an order on 21.06.2017 in favour of the assessee that the provisions of Section 115JB of the Act does not apply to the assessee - in the show cause notice, similar issue was raised by ld. PCIT and passed an order on 27.03.2018, therefore, in our considered view, ld. PCIT cannot invoke the provisions of Section 263 of the Act in this matter. With regard to issue of deduction claimed under Section 36(1)(vii) and 36(1)(viia) of the Act, assessee has filed detailed submissions before the Assessing Officer and the Assessing Officer has considered the submissions even though he has not discussed it in his order under Section 143(3) -material submitted before us clearly indicate that assessee has made elaborate submissions on this issue and the Assessing Officer has satisfied himself that assessee is eligible to claim deduction under Section 36(1)(vii) and 36(1)(viia) and, therefore, in our considered view, ld. PCIT cannot form another view on the same issue in which the Assessing Officer has already satisfied himself and passed an order which clearly indicates that the Assessing Officer has verified and investigated the matter in detail. Even in this issue, the provisions of Section 263 of the Act cannot be invoked. With regard to the third issue raised in the show cause notice, i.e. disallowance under Rule 8D which was not considered in computing the book profits, we notice that the ld. PCIT himself dropped this issue and has not directed any revision to the Assessing Officer. Issues raised in the show cause notice issued under Section 263 of the Act do not survive. Therefore, in our considered view, the order passed under Section 263 of the Act deserves to be quashed. Large international transactions during this year - AO failed to refer this case to the TPO - In this case,the transactions undertaken by the assessee are domestic as well as international transactions and the issues involving domestic and corporate issues were already verified by the Assessing Officer and also the order of ld. CIT(A) merged with the assessment order, therefore, in our considered view, the Assessing Officer should have referred the international transactions to the TPO to verify the international transactions whether the transaction are at arm’s length. Since the Assessing Officer failed to follow the due procedure, and the fact that the Revenue Department created specialized cell to deal with the complicated and complex issues arising out of transfer pricing mechanism, the assessment by this special officer (TPO) is an additional assessment of ‘ALP’ of international transactions and it can be assessed separately without disturbing the regular assessment carried out by Assessing Officer under Section 143(3) - we are retaining the directions of ld. PCIT in his order relevant only to reference to TPO with a further direction to the Assessing Officer to refer the case to TPO and any adjustment recommended by the TPO alone may be assessed separately and merge the same in the draft assessment order if there is any adjustment to be made, it may be assessed to tax as per law. Appeal of the assessee is partly allowed.
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