TMI Blog2015 (1) TMI 1008X X X X Extracts X X X X X X X X Extracts X X X X ..... l to the interests of revenue. Moreover, when the consideration paid by assessee to Matrix has been accepted to be genuine in the assessment conducted in case of Matrix which has been confirmed by DRP, the same transaction cannot be doubted in case of assessee. An assessment order can be considered to be erroneous and prejudicial to the interests of revenue on the basis of facts and materials available on record as on the date of completion of assessment. In the present case, according to ld. CIT himself at the time of completion of assessment, AO did not have the benefit of the TPO’s and DRP’s order for AY 2007-08, which were passed subsequently. That being the case, AO having passed the assessment order on the basis of facts and materials available before him, only because subsequently TPO in AY 2007-08 held the transaction to be not genuine on that basis alone assessment order cannot be held to be erroneous and prejudicial to the interests of revenue. More so, when the TPO in his order for AY 2006-07 has not questioned the genuineness of such transaction. Therefore, on considering the totality of facts and circumstances, we are of the view that as AO has passed the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of manufacture and sale of active pharmaceutical ingredients and its intermediates. For the AY under consideration, assessee filed its return of income on 29/11/2006 declaring loss of ₹ 5,56,02,362 under normal provisions and book profit of ₹ 4,09,82,718 u/s 115JB. In course of assessment proceeding, assessee filed a revised computation by revising the book profit to ₹ 6,18,63,863. During the scrutiny assessment proceeding, AO noticing that assessee has entered into international transaction, made a reference to the Additional CIT(TP), Hyderabad for determining the arm s length price (ALP) of international transaction. In terms with the order passed u/s 92CA(3) of the Act, by the TPO, AO completed the assessment in case of assessee for the impugned AY u/s 143(3) read with section 92CA vide assessment order dated 29/12/2009 by determining the loss at ₹ 5,56,02,362 and book profit at ₹ 6,18,63,863 as shown by assessee. The assessment order so passed was also challenged by assessee before ld. CIT(A) on the issue of interest charged u/s 234B of the Act and the appeal of assessee was also disposed by ld. CIT(A) on 03/11/2012. Ld. CIT while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use as to why the assessment order should not be revised as it is erroneous and prejudicial to the interests of revenue. In response to the show cause notice, assessee submitted a detailed reply, and also made submissions before ld. CIT. After considering the submissions of assessee, ld. CIT dropped the proceeding with regard to the first issue relating to excess debit of raw material consumption to the P L A/c. Hence, it is not necessary to deal with that issue any further. 5. As far as the other two issues are concerned, it was submitted on behalf of assessee that complete details of technical know-how, DMF and patent licencing were submitted to AO during the course of scrutiny assessment proceeding initiated both in case of assessee as well as Matrix Laboratories Ltd., who were assessed by same AO. It was submitted that while Matrix Laboratories treated the consideration received on transfer of know-how and DMF as capital gain, assessee on the other hand accounted the amounts paid towards know-how, DMF and patent licencing as intangible assets. Assessee also reconciled the alleged difference between the amounts shown in the books of Matrix and assessee. Thus, it was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29.10.2010.Thus, there was no occasion for the Assessing Officer to examine the genuineness of the purchase of intangible assets by the assessee from Matrix Laboratories Ltd in AY 2006-07. The Assessing Officer without examination of purchase of intangibles from Matrix Laboratories had accepted the purchase consideration in a mechanical manner and the TPO in Asst.Year 2007-08 gave a clear cut finding that the assessee failed to substantiate the purchase of intangible assets from Matrix Laboratories. Thus, the assessment order passed by the Assessing Officer AY 2006-07 is erroneous and it is prejudicial to the interests of revenue. 17. As observed earlier, the Assessing Officer did not examine as to how the value of intangible assets was determined at a sum of ₹ 105.32 crores. As a matter of fact, the purchase of technical know how and DMF was a transaction by the assessee with a shareholder. For the first time during the proceedings u/s .263, the assessee has filed a valuation report from Anmol Sekhri Associates stating that the value was determined by an independent valuer. The valuation report does not exist on the assessment record and it is filed for the first time. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no jurisdiction to either determine the ALP of the transaction involving purchase of know-how and DMF nor can disallow the depreciation by applying the benefit test as the transaction between two resident companies cannot be termed as international transaction under section 92B. In support of such contention, he relied upon a decision of the ITAT, Hyderabad Bench in case of DCIT Vs. M/s Swarnadhara IJMII Integrated Township Development Co. Pvt. Ltd., 2014 (6 TMI). Ld. AR submitted that ld. CIT relying upon the observations of the TPO in the order passed for AY 2007-08 has held the assessment order for impugned AY to be erroneous and prejudicial to the interests of revenue, which is not proper. It was submitted, AO who is same both for assessee as well as Matrix Laboratories Ltd. has gone into the entire factual aspect relating to the transfer of know-how and DMF by examining the relevant agreements and other documentary evidences produced not only in course of assessment proceeding of Matrix but also in case of assessee. Therefore, the issue having been examined in detail by AO, ld. CIT was not correct in observing that AO has not examined the issue. It was submitted, when the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much evident from the assessment order of Matrix for the impugned AY. Therefore, when the transaction is accepted as genuine in case of Matrix, it cannot be otherwise in case of assessee as they are two sides of same coin. Moreover, it is a fact on record that AO who completed the assessment in case of assessee as well as Matrix is same. Hence, it cannot be said that AO has not examined the evidences or applied his mind to the issue. On the contrary, the assessment order passed in case of Matrix for the impugned AY would clearly reveal that AO has gone into the depth of the issue while examining the transaction relating to acquisition of know-how and DMF by assessee from Matrix. Therefore, only because the TPO in the assessment year 2007-08, comes to a conclusion that the transaction is not genuine as it fails the benefit test, by relying upon such finding of TPO, the assessment order cannot be held to be either erroneous or prejudicial to the interests of revenue. Moreover, though, ld. CIT has observed that the TPO in course of proceeding for AY 2006-07 could not have examined the issue as assessee has not reported such transaction in the audit report, but, on examining the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf at the time of completion of assessment, AO did not have the benefit of the TPO s and DRP s order for AY 2007-08, which were passed subsequently. That being the case, AO having passed the assessment order on the basis of facts and materials available before him, only because subsequently TPO in AY 2007-08 held the transaction to be not genuine on that basis alone assessment order cannot be held to be erroneous and prejudicial to the interests of revenue. More so, when the TPO in his order for AY 2006-07 has not questioned the genuineness of such transaction. Therefore, on considering the totality of facts and circumstances, we are of the view that as AO has passed the assessment order after examining all the facts and evidences and after proper application of mind relating to the transaction of know-how and DMF, the assessment order cannot be revised u/s 263 of the Act by treating it as erroneous and prejudicial to the interests of revenue. In this context, we rely upon the decision of Hon ble AP High Court in case of Spectra Scrips and Shares Pvt. Ltd. Vs. CIT, 354 ITR 35 (AP). In the aforesaid view of the matter, the assumption of jurisdiction u/s 263 of the Act in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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