TMI Blog2018 (10) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have considered the same and disallowed the employee’s contribution towards ESIC and EPF after the prescribed date under the respective Act. The Assessing Officer failed to take note of the judgment of the Jurisdictional High court cited supra. In view of the above judgment, the assessment order is erroneous in so far as it is prejudicial to the interest of the revenue. Non consideration of TPA provision applicability - Held that:- Regarding referring the matter to the Transfer Pricing Officer u/s. 92CA(1) when the specified transactions with the sister concerns exceeded ₹ 15 crores, as per the provisions of the Act, the Assessing Officer should have examined whether the assessee’s case is fit to refer to the TPO or not. However, there was no whisper in the assessment order regarding the applicability of section 92CA(1) of the Act. The failure on the part of the Assessing Officer to make necessary enquiry in this matter, renders the assessment erroneous which also resulted in loss to the revenue, hence, it is prejudicial to the interests of the Revenue. Therefore, the CIT correctly exercised the power conferred under section 263 in setting aside the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies Hycon India Private Limited and Hycon Power Electronics Private Limited which transacted specified domestic transactions are coming under the same tax bracket, ie, 30.9%, which is the maximum tax rate for a corporate assessee. Hence, even from the department point of view, referral to TPO is a revenue neutral exercise. 3. The facts of the case are that the assessee is a private limited company engaged in the business of trading and servicing of UPS and solar equipments. For the assessment year 2014-15, the assessee e-filed its return of income, declaring income of ₹ 16,64,260/-/ The assessment order was passed on 19/12/2016, determining the total income at ₹ 20,64,260/- by disallowing a sum of ₹ 4,00,000/- from the claim of travelling expenses. 4. On examination of the records, the CIT(A) found that the Assessing Officer had not examined the following issues: (a) The assessee has collected employees' share of EPF and ESI, but the payment towards the fund has not been made within the period prescribed for the purpose by Government of India. (b) Employees contribution towards ESI Corporation for an amount of ₹ 1,86,423/- and Emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paid the following amounts within the due dates. 1. ESI payment (Employees' Contribution) Rs.1,86,423 2. EPF payment (Employees' Contribution) Rs.9,00,593 According to the CIT, the assessee is entitled to deduction of employees' contribution to Provident Fund/ ESIC only if the same is credited by the assessee to the employees' account in the relevant funds on or before the due dates specified in the respective labour laws. The CIT relied on the judgment of the Kerala High Court in the case of M/s. Kalyan Silks Trichur Pvt. Ltd., dated 16.10.2017(ITA No.68 of 2016) wherein it was held that the belated deposit of employees' contribution to Provident Fund or Employees State Insurance is not deductible while computing taxable income of the assessee even though the payment was made before the due date of filing of returns under the Income Tax Act, 1961. Hence, the CIT held that the assessment order was prejudicial to the interests of revenue. 5.1 Regarding large specified domestic transactions and the volume of transactions of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee before him. The Assessing Officer was statutorily required to make the assessment under Section 143(3) after scrutiny and not in a summary manner as contemplated by Sub-section (1) of Section 143. The Assessing Officer is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. The Assessing Officer should protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return. The order passed by the Assessing Officer becomes erroneous when an enquiry has not been made before accepting the genuineness of the claim which resulted in loss of revenue. 6.1 In the present case, we find that the issue relating to employees contribution towards ESIC and EPF both are to be disallowed u/s. 36(1)(va) of the Act in view of the judgment of the Jurisdictional High court in the case of CIT vs. Merchem Ltd. (378 ITR 443) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e TPO or not. However, there was no whisper in the assessment order regarding the applicability of section 92CA(1) of the Act. In other words, he has not called for any information regarding the applicability of transfer pricing provisions to the assessee s case. Being so, without making any enquiry at all to ascertain the applicability of TP provisions to the assessee s case, the Assessing Officer completed the assessment. The failure on the part of the Assessing Officer to make necessary enquiry in this matter, renders the assessment erroneous which also resulted in loss to the revenue, hence, it is prejudicial to the interests of the Revenue. Therefore, the CIT exercised the power conferred under section 263 of the I.T. Act in setting aside the assessment order and remanded the case back to the file of the Assessing Officer to make necessary enquiry into the applicability of TP provisions and decide thereupon. As such, the CIT remitted the issue back to the file of the Assessing Officer for fresh consideration. We do not find any infirmity in directing the Assessing Officer to refer the matter to the TPO by invoking the provisions of section 263 of the Act. Accordingly, we confi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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