TMI Blog2019 (7) TMI 1486X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act. The provisions of section 92BA(1) of the Act has been omitted w.e.f. 1.4.2017. It is vehemently argued that the impact of omission of this provision would be that it has to be construed that such provision was never on the statute book.It is a settled principle that where provision is omitted, it should be deemed to have never been part of the statute at any point of time. The reliance is placed on the decision of the Hon'ble Apex Court rendered in the case of General Finance Company Vs. ACIT [ 2002 (9) TMI 3 - SUPREME COURT] . In view of the Ld. Pr. CIT is not correct. In view of the aforesaid discussion, moreover, the coordinate bench has also examined the issue in the case of Texport Overseas Pvt. Ltd. [ 2017 (12) TMI 1719 - ITAT BANGALORE] . Admittedly, in this case, the order has been revised purely on the basis that the assessing officer has not referred to determine the arm s length price to the TPO. Since the provision itself stood omitted at the time when the order was passed by the Pr. CIT, under these undisputed facts in the light of the Judgement in the case of General Finance Company (supra) as well as the order of the coordinate bench rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 (hereinafter called as the Act ) was framed vide order dated 29.9.2016 assessing the total income at ₹ 17,47,35,360/-. Subsequently, the Ld. Pr. CIT from the records observed that the assessee had made specific domestic transactions as it had made purchases from the parties covered u/s 40A(2)(b) of the Act. It was observed that the A.O. did not refer the case to the Transfer Pricing Officer to verify whether the transactions were at Arm s Length Price or not. Hence, the Ld. Pr. CIT after examining the records was of the view that the assessment order was erroneous in so far as it was prejudicial to the interest of the revenue. The Ld. Pr. CIT therefore, issued a show cause notice u/s 263 of the Act calling upon the assessee as to why the assessment order should not be revised. In response to the same, the assessee filed a detailed submission, which was not found acceptable by the Ld. Pr. CIT. Therefore, the Ld. Pr. CIT set aside the assessment order and directed the A.O. to make fresh assessment order in accordance with law. 3. Aggrieved by this, the assessee is in present appeal before this Tribunal. Ld. Counsel for the assessee reiterated the submissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee is an individual. On reference to the return filed for the impugned year it is evident that she is taxable at maximum rate of 30%. There is no tax arbitrage. [PB 33-36] g. Arpita Bindal: Assessee is an individual taxable at maximum rate of 30%. There is no tax arbitrage. 4. The transaction entered with ARKA Carbon Fuels Private Limited has already been assessed and no upward adjustment has been made by Ld. TPO. For the transactions entered with all the other parties also there is no loss of revenue to the Department as all have been taxed at the maximum rate of 30%. There is no tax arbitrage. 5. One of the twin conditions for invoking the provisions of section 263 i.e. prejudicial to the interest of Revenue is not satisfied. Thus, provisions of section 263 cannot be invoked. Order passed by Ld. Pr. CIT -2, Indore u/s 263 has no legal sanctity. 6. It is a well settled law that to invoke the provisions of section 263 both the conditions that the order must be erroneous and prejudicial to the interest of Revenue must be satisfied. Reliance is placed on the following judicial precedents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax Officer is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue, recourse cannot be had to section 263(1) - Held, yes - Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue - Held, yes - Assessee-company entered into agreement for sale of estate of rubber plantation - As purchaser could not pay instalments as scheduled in agreement, extension of time for payment of instalments was given on condition of vendee paying damages for loss of agricultural income and assessee passed resolution to that effect - Assessee showed this receipt as agricultural income - Resolution passed by assessee was not placed before Assessing Officer - Assessing Officer accepted entry in statement of account filed by assessee and accepted same - Commissioner under section 263 held that said amount was not connected with agricultural activities and was liable to be taxed under head 'Income from other sources' - Whether, where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of any s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interests of the revenue. Unless both these factors co-exist or exist simultaneously, the Commissioner cannot invoke or resort to section 263. It cannot be exercised to correct every conceivable error committed by an ITO. Before the suo moto power of revision can be exercised, the Commissioner must at least prima facie find both the requirements of section 263, namely, that the order sought to be revised is prima facieerroneous and prejudicial to the interests of the revenue. If one of the other factor was absent, the Commissioner cannot exercise the suo moto power of revision under section 263. [emphasis supplied] 7. In the instant case though the assessment order at best may be considered erroneous but it is not prejudicial to the interest of the Revenue. Since the twin conditions are not satisfied the impugned order is ought to be quashed. B. Omission of a provision from the Income Tax Act, 1961. 8. Provisions of Section 92BA read For the purposes of this section and sections 92, 92C, 92D and 92E, specified domestic transaction in case of an assessee means any of the following transactions, not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(TP)A No. 1722/Bang/2017 order pronounced on 22.12.2017 Para 9 From the aforesaid judgments, it has become abundantly clear that once a particular provision of section is omitted from the statute, it shall be deemed to be omitted from its inception unless and until there is some saving clause or provision to make it clear that action taken or proceeding initiated under that provision or section would continue and would not be left on account of omission. . [emphasis supplied] Considering the above facts, circumstances of the case, submissions made, documents on record and judicial precedence, appeal of the assessee be allowed. 4. Ld. D.R. opposed the submissions and supported the order of the Ld. Pr. CIT. Ld. CIT (DR) submitted that exfacie the assessing officer did not comply with the requirement of law. Ld. CIT(DR) drew our attention to the assessment order to buttress the contention that the assessment has been framed in a casual and mechanical manner without making enquiries. The income declared by the assessee was accepted in a mechanical manner. Ld. CIT(DR) further submitted that there is no whisper in the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner has to be satisfied of twin conditions, namely, (i). the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent -- if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue-- recourse cannot be had to Section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase prejudicial to the interests of the revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dawjee D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue. Rampyari Devi Saraogi Vs. Commissioner of Income-tax [67 ITR 84] and in Smt. Tara Devi Aggarwal Vs. Commissioner of Income-tax, West Bengal [88 ITR 323] (SC). 6. If we apply the ratio held down by the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. (supra) on the facts of the present case there would not be any infirmity into the order of Ld. CIT(A) in holding that assessment order is erroneous if it is found that the A.O. has not followed the mandate of law. It is also to be examined what prejudice would be caused if such mandate of law was not followed by the A.O. There is no dispute with regard to the fact that transaction in question fall under the category of specified domestic transaction . In terms of section 40A(2)(b) of the Act it has to be examined whether such transactions are within the arm s length price (in short ALP ). The moot question is whether the A.O. is authorised by law to examine and compute arm s length price related to specified domestic transactions . Let us examine the law on this point. The Ld. Pr. CIT is of the view that the A.O. is under obligation to refer the issue to the Transfer pricing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that where provision is omitted, it should be deemed to have never been part of the statute at any point of time. The reliance is placed on the decision of the Hon'ble Apex Court rendered in the case of General Finance Company Vs. ACIT (2002) 124 Taxman 432 (SC). There is merit into this contention as the Hon'ble Apex court has referred to the Judgements by the Hon'ble constitutional bench of the Supreme Court rendered in the case of Kolhapur Cane Sugar Works Limited Vs. UOI (2000) (2) SCC 536. The Hon'ble Apex court in General Finance Company Vs. ACIT (supra) after considering the submissions of the Ld. Counsel for the revenue in that case held as under: 8. Though we find the submissions of the learned counsel to be forceful, we are constrained to follow the two decisions of the Constitution Benches of this Court in Rayala Corpn. (P) Ltd. s case (supra) and Kolhapur Canesugar Works Ltd. s case (supra). This view has held that field for over three decades and reiterated even as late as two years ago. Non-compliance with section 269SS attracted prosecution as well as penalty. Omission of the provision regarding prosecution will no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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