TMI Blog2020 (2) TMI 897X X X X Extracts X X X X X X X X Extracts X X X X ..... he Finance Act 2017 s omission of section 92BA(i) carrying retrospective effect and therefore, such an inaction in not making reference to the TPO does not render the assessment erroneous causing prejudice to interest of the revenue. We accordingly reverse the PCIT s revision directions therefore. - Decided in favour of assessee. - I.T.A. No. 1332/Kol/2019 - - - Dated:- 31-12-2019 - SHRI S. S. GODARA, JM AND Dr. A. L. SAINI, AM For the Appellant : Shri Sunil Surana, FCA For the Respondent : Shri Radhey Shyam, CIT ORDER Per Shri S. S. Godara: This assessee s appeal for assessment year 2014-15 arises against the Principal Commissioner of Income Tax (A), Kolkata dated 12.03.2019 involving proceedings u/s 263 of the Income Tax Act, 1961 (in short the Act ). Heard both the parties. Case file perused. 2. Relevant facts involved in the instant lis are in a very narrow compass. The Assessing Officer has framed his regular assessment in issue dated 19.12.16 disallowing administrative expenditure of ₹ 46,420/- under Rule 8D(2)(iii) r.w. section 14A of the Act. The PCIT assumed his revision jurisdiction terming the above regular assessment as erron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c transactions were concerned and as required within the periphery of section 40(A)(2)(b) of the Act (to quote). However in the case at hand there is no evidence put forth by the assessee that any independent enquiry was made by the AO. The only evidence appears to be compliance to requisition of AO for details of specified domestic Transactions as per Form 3CEB. In other words, itis very clear that no independent scrutiny was made by the AO apart from calling and placing the submissions on record. Therefore as held in the case of Ranbaxy Laboratories Ltd. vs. CIT (DHC), not taking recourse there to and passing the order amounted to making assessment without conducting proper inquiry and investigation as enjoyed by which was also warranted in the facts of the case at hand would make such assessment erroneous and prejudicial to the interest of revenue in the light of law laid down by the Apex court in Malabar Industrial Co. Ltd. 6.Hon'ble Delhi High Court in the case of GEE VEE Enterprise vs. Addl.CIT reported in 99 ITR 375, 386 (Del) has held that the CIT may consider the order of the Assessing Officer to be erroneous not only if it contain some apparent error of reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts made in the pleading proved by the minimum amount of be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which come before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not be made and not because there is anything order if all the facts stated therein are assumed to be correct. 10.Further to this it is noticed that there is no appeal right available to the Revenue from the order of assessment passed by Assessing Officer and i.e. why revisionary powers have been given to the Commissioner and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b- section (2) of section 40A stands omitted by the Finance Act 2017 w.e.f 01.04.17 and therefore, the foregoing omission is applicable with retrospective effect in the impugned assessment year 2014-15 as well. Learned coordinate bench s decision to this effect reads as under: 22. In Ground Nos. 5 to 7, the assessee has objected to Ld. Pr. CIT's finding with reference to reasons set out in Clause 3(b) of the SCN which read as follows: One of the reasons for selection of scrutiny was mismatch in amount paid to related persons u/s 40A (2) (b) reported in Audit report (Form 3CEB) and ITR. However, the case was not referred to TPO. As per para 3.2 of CBDT's. Instruction No. 3 of 2016, the instant case had to be mandatorily referred to the TPO (the Transfer Pricing Officer) by the A.O after obtaining the approval of Principle CIT. However, the A.O has completed assessment u/s 143(3) of the Act on 29-12-2016 without referring the matter to Transfer Pricing Officer. 23. We find that the assessee's case was selected under CASS inter alia on the parameter that Mismatch in amount paid to related persons u/s 40A (2) (b) reported in Audit report and ITR . We note t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icing risk parameter was mandatory in terms of Para 3.2 of the CBDT Instruction No. 3 of 2016. 25. Having considered rival submissions we find merit in the ld. AR's primary contention that the SCN proceeded on the wrong presumption that the assessee's case was selected on a transfer pricing risk parameter. We note that the parameter for selection was as follows: Mismatch in amount paid to related persons u/s 40A (2) (b) reported in Audit report and ITR 26. It is thus noted that nowhere the CASS reason stated the selection of the assessee's case was on the ground of there being large value of specified domestic transactions or large value of international transactions so as to warrant an inference that the case was selected on transfer pricing risk parameter. On the contrary, the CASS reason merely claimed that there was mismatch in the amount paid to related persons u/s 40A(2)(b) of the Act reported in Audit report and ITR. From plain reading of the said CASS reason, we are of the view that no prudent person properly instructed in law would have inferred that the aforesaid parameter constituted 'transfer pricing risk parameter' so as to warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... example. Instruction No. 6/2014 for selection in F.Y 2014-15 and Instruction No. 8/2015 for selection in F.Y 2015-16), on the basis of transfer pricing risk parameters [in respect of international transactions or specified domestic transactions or both] have to be referred to the TPO by the AO, after obtaining the approval of the jurisdictional Principal Commissioner of Income-tax (PCIT) or Commissioner of Income-tax (CIT). The fact that a case has been selected for scrutiny on a TP risk parameter becomes clear from a perusal of the reasons for which a particular case has been selected and the same are invariably available with the jurisdictional AO. Thus, if the reason or one of the reasons for selection of a case for scrutiny is a TP risk parameter, then the case has to be mandatorily referred to the TPO by the AO, after obtaining the approval of the jurisdictional PCIT or CIT. 3.3 Cases selected for scrutiny on non-transfer pricing risk parameters but also having international transactions or specified domestic transactions, shall be referred to TPOs only in the following circumstances: (a) where the AO comes to know that the taxpayer has entered into international tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;s order was erroneous and prejudicial to the interests of the Revenue. 29. Even with regard to CIT's allegation that in complete scrutiny case, the AO did not conduct any enquiries whatsoever with regard to transactions referred to in Section 40A(2)(b) as well as Section 92CA of the Act, we find that prior to completion of assessment the AO had indeed conducted enquiries with regard to CASS reason as also the assessee's international transactions with the AEs. We note that before completion of assessment, the assessee was asked to provide explanation even with regard to its international transactions with its associated enterprises. By its letter dated 16.12.2016 [Pages 87 to 89 of paper book], the assessee had furnished its explanation in respect of its international transactions. In the said letter it was particularly brought to the AO's attention that based on the Transfer Pricing Audit report in Form 3CEB, wherein the auditors had certified ALP of international transactions, the assessee had suo moto offered adjustments in the computation of income on account of corporate guarantee fees and interest on loan to AEs which were not actually charged. We therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not set aside the order for alleged non-compliance with provision of law which no longer existed in the statute as on the date of order. The Ld. Pr. CIT's direction requiring the AO to consider making a reference to the TPO in the set aside proceedings is also contrary to the view expressed in the foregoing decision of the coordinate bench(supra). For all the foregoing reasons therefore, we hold that the AO's order did not suffer from any error for the reason that he did not make reference to the TPO. Accordingly the Ld. Pr. CIT's order for the reason setout in clause 3(b) of the SCN and for the entirely new set of reasons contained in the impugned order, is set aside. Ground Nos. 5 to 7 are accordingly allowed. 5. We adopt the above detailed discussion mutatis mutandis and conclude that the PCIT has erred in law and as well as on facts in terming the above regular assessment dated 19.12.16 as erroneous causing prejudice to interest of the revenue qua the assessee s specified domestic transaction not having subjected to section 92CA reference to the Transfer Pricing Officer. We make it clear that learned coordinate bench has already held in assessment year 2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
