TMI Blog2020 (6) TMI 563X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee. - ITA No.117/Gau/2019 - - - Dated:- 17-6-2020 - Shri A. T. Varkey, JM And Dr. A.L. Saini, AM For the Assessee : Shri Sanjay Modi, FCA For the Respondent : Shri M.K. Dal, Addl. CIT, Sr. Dr ORDER PER DR. A. L. SAINI: By way of this appeal, the assessee appellant has challenged correctness of the order dated 13.03.2019 passed by the Learned Principal Commissioner of Income Tax-Guwahat-2 ( for short PCIT ), under section 263 of the Income Tax Act 1961, ( hereinafter referred to as the Act ). Grievances raised by the assessee are as follows. 1. For that the revisionary order of the learned Principal Commissioner of Income Tax (PCIT) passed under section 263 of the I.T. Act, 1961 (the Act) is bad in law, facts and procedure. 2. For that the ld. PCIT even after admitting that the assessee has submitted that in view of the amendment made in section 92BA of the Act, no transaction was entered into during the year under consideration by the assessee for determination of ALP of which reference could be made to TPO, without finding any error in the said submission, was not justified in still passing the impugned revisionary order. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, but at the time of hearing the solitary grievance of the assessee has been confined to the legal issue that since clause (i) of section 92BA was omitted with effect from 01.04.2017 and the effect of such omission is that clause (i) of section 92BA had obliterated from the Statute and it would be treated that such clause (i)of section 92BA was never existed in the Statute Book, therefore, ld PCIT can not exercise his jurisdiction under section 263 of the Act. 3. Brief facts qua the issue are that ld PCIT issued a notice u/s 263 of the Act on 03.12.2018 proposing to set aside the assessment order u/s 143(3) dated 28/10/2016 on the ground that the said order was erroneous and prejudicial to the interest of revenue as the assessing, officer (AO) had failed to refer to the Transfer Pricing Officer(TPO) under section 92CA related party transactions amounting to ₹ 51,08,99,031/- which is falling within the meaning of'specified domestic transactions' under section 92BA(i) of the Income Tax Act, 1961 to arrive at the Arm's Length Price (ALP) u/s 92C of the Act as required in terms of CBDT InstructionNo. 3/2016 dated 10.03.2016. 4. In response to the notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Ld. Pr. CIT, under these undisputed facts in the light of the Judgement of the Hon'ble Supreme Court rendered in the case of General Finance Company (supra) as well as the order of the coordinate bench rendered in the case of Texport Overseas Pvt. Ltd. (supra), the impugned order cannot be sustained, hence is hereby quashed. The order impugned is thus quashed and the grounds raised in the appeal are allowed. 10. On the very identical facts, the Coordinate Bench of ITAT Kolkata in the case of M/s Raipur Steel Casting India Pvt Ltd, in ITA No.895/Kol/2019, for A.Y. 2014-15, order dated 10.06.2020 held as follows: 11. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld PCIT under section 263 of the Act and other materials brought on record. We note that assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to reduce the compliance burden of the taxpayers, it was proposed by the Finance Act 2017 to provide that expenditure in respect of which payment has been made by the assessee to a person referred to in section 40A(2)(b) are to be excluded from the scope of section 92BA of the Act. The whole object of the omission of clause (i) of section 92BA is to reduce the compliance burden of taxpayers. As we noticed that clause (i) of section 92BA has been omitted with effect from 01.04.2017. The effect of such omission without any saving clause of General Clauses Act, means that the above provision was not in existence or never existed in the statute book. If it is held that effect of such omission of clause (i) of section 92BA means that this provision was never existed in the statute book, then in that situation the exercise of jurisdiction by the ld PCIT [ in respect of above said clause (i) of section 92BA] under section 263 of the Act would fail. 12. We note that ld PCIT has issued a show cause notice under section 263 of the Act to the assessee, which is reproduced below: It is observed from the assessment records that as per Form 3CEB your concern had made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding by way of prosecution could be initiated even though it might be in respect of an offence committed earlier during the period that the rule was in force. We are inclined to agree with the submission of Mr. Sen that the language contained in clause 2 of the Defence of India (Amendment) Rules, 1965 can only afford protection to action already taken while the rule was in force, but cannot justify initiation of a new proceeding which will not be a thing done or omitted to be done under the rule but a new act of initiating a proceeding after the rule had ceased to exist. On this interpretation, the complaint made for the offence under R. 132A(4) of the D.I. Rs., after 1st April, 1965 when the rule was omitted, has to be held invalid. This view of ours is in line with the general principle enunciated by this Court in the case of S. Krishnan and Others' v. The State of Madras(1), relating to temporary enactments, in, the following words :-- The general rule in regard to a temporary statute is that, in the absence of special provision to the contrary, proceedings which are being taken against a person under it will ipso facto terminate as soon as the statute expi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffected by the expiry as respects things previously done or omitted to be done. The Act could, therefore, be held to be in operation in respect of acts already committed, so that the conviction could be validly made even after the expiry of the Act in respect of an offence committed before the expiry. In the case before us, the operation of R. 132A of the D.I. Rs. has not been continued after its omission. The language used in the notification only affords protection to things already done under the rule, so that it cannot permit further application of that rule by instituting a new prosecution in respect of something already done. The offence alleged against the accused in the present case is in respect of acts done by them which cannot be held to be acts under that rule. The difference in the language thus makes (1) [1947] A.C. 362. it clear that the principle enunciated by the Privy Council in the case cited above cannot apply to the notification with which we are concerned. Reference was next made to a decision of the Madhya Pradesh High Court in State of Madhya Pradesh v. Hiralal Sutwala(1), but, there again, the accused was sought to be prosecuted for 'an offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the amended sub-s. (4) of s. 1 of the Act had the effect of making applicable the principles laid down in s. 6 of the General Clauses Act, so that a legal proceeding could be instituted even after the repeal of the Act in respect of an offence committed during the time when the Act was in force. As we have indicated earlier, the notification of the Ministry of Home Affairs omitting R. 132A of the D.I.Rs. did not make any such provision similar to, that contained section 6 of the General Clauses Act. Consequently, it is clear that, after the omission of R. 132A of the D.I.Rs., no prosecution could be instituted even in respect of an act which was an offence when that Rule was in force . In this connection, Mr. Desai pointed out to us that, simultaneously with the omission of R. 132A of the D.I.Rs., s. 4(2) of the Act was amended so as to bring the prohibition contained in R. 132A(2) under s. 4(1) of the Act. He urged that, from this simultaneous action taken, it should be presumed that there was no intention of the Legislature that acts, which were offences punishable under R. 132A of the D.I.Rs., should go unpunished after the omission of that rule. It, however, appears that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2017, therefore, in the absence of such condition/ saving clause it would be presumed that clause (i) of section 92BA had obliterated from the inception, that is, it would be presumed that clause (i) of section 92BA was never existed in the statute book. 13. We note that the Hon`ble Supreme Court in the case of KolhapurCanesugar Works Ltd (2000), Civil Appeal No.2132of 1994, dated 01/02/2000, has distinguished the terminology omission and Repeal as follows: 29. We have carefully considered the decisions in Saurashtra Cement and Chemical Industries (supra) and Falcon Tyres case (supra). Though the judgments in these cases were rendered after the decision of the Constitution Bench in Rayala Corporation Pvt. Ltd. (supra) a different view has been taken by the High Courts for the reasons stated in the judgments. The Full Bench of the Gujarat High Court in Saurashtra Cement and Chemical Industries (supra), as it appears from the discussions in the judgment, tried to distinguish the decision of the Constitution Bench in M/s Rayala Corporation (supra) for reasons, we are constrained to say not sound in law. The decision of the Constitution Bench is directly on the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 24 of the General Clauses Act which makes provision for continuation of orders, notification, scheme, rule, form or bye-law, issued under the repealed Act or Regulation under an Act after its repeal and re-enactment. In that case section 6 did not come up for consideration. Therefore the ratio of that case is not applicable to the present case. With respect we agree with the principles laid down by the Constitution Bench in M/s Rayala Corporation case (supra). In our considered view the ratio of the said decision squarely applies to the case on hand. 32. For the reasons set forth above we do not accept the view taken in Saurashtra Cement and Chemical Industries Ltd. (supra), in Falcon Tyres Ltd. (supra) and the other decisions taking similar view. It is not correct to say that in considering the question of maintainability of pending proceedings initiated under a particular provision of the rule after the said provision was omitted the Court is not to look for a provision in the newly added rule for continuing the pending proceedings. It is also not correct to say that the test is whether there is any provision in the rules to the effect that pending proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in Section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In a case where a particular provision in a statute is omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of the legislature is that the pending proceeding shall not continue but a fresh proceeding for the same purpose may be initiated under the new provision. In the present case, as noted earlier, Section 6 of the General Clauses Act has no application. There is no saving provision in favour of pending proceeding. Therefore action for realisation of the amount refunded can only be taken under the new provision in accordance with the terms thereof. The further question that arises for consideration in this connection is whether the notification No. 267/77 dated 6.8.77 by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionally omitted without a saving Clause in favour of pending proceedings therefore ld PCIT cannot exercise the jurisdiction under section 263 of the Act. 14. Our view is also fortified by the judgment of the Hon`ble Supreme Court in the case of General Finance Co. 257 ITR 338 (SC), wherein the Hon`ble Supreme Court relied on its previous judgments in the case of Rayala Corporation (P) Ltd. vs. Director of Enforcement 1969 (2) SCC 412, and Kolhapur Canesugar Works Ltd Anr. vs. Union of India Ors. 2000 (2) SCC 536, and held that an omission of a provision is different from a repeal and section 6 of the General Clauses Act applies to a repealed law and not to omission. The Hon ble Supreme Court held in the context of section 276DD of the Income Tax Act that in the Income Tax Act, section 276DD stood omitted from the Act but not repealed and hence, a prosecution could not have been launched or continued by invoking section 6 of the General Clauses Act after its omission. The findings of the Hon`ble Supreme Court are as follows: 6. Net result of this discussion is that the view taken by the High Court is not consistent with what has been stated by this Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 263 of the Act during the currency of the Act is very much valid. The said issue has been already addressed by us in para 12 of this order, hence we do not repeat the same for the sake of brevity. 17. Regarding second grievance of ld DR who relied on the following two judgments of Hon`ble Supreme Court, namely: (1) M/s. Shree Bhagwati Steel Rolling Mills vs. C.I.T. Excise Others - 2015(326) ELT 209(S.C.) and (2) M/s. Fibre Boards 62 Taxmann.com 135 (S.C.) and contended that these two judgments interpret the lis in favour of the Revenue. In order to appreciate the contention of ld DR, let us go through, one by one, the concluding para and ratio decendai of the said judgments, in the case of (1) M/s. Shree Bhagwati Steel Rolling Mills (supra) and (2) M/s. Fibre Boards (supra) First, we take the judgment of Hon`ble Supreme Court in the case of M/s. Shree Bhagwati Steel Rolling Mills vs. C.I.T. Excise Others - 2015(326) ELT 209(S.C.), the relevant paras of the said judgment are reproduced below: 24. Fibre Boards case is a recent judgment which, as has correctly been argued by Shri Radhakrishnan, learned senior counsel on behalf of the revenue, clarifies the law i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he levy of penalty under the aforesaid provisions is mandatory in character. In view of what has been held by us today, this appeal will also have to be allowed in the same terms as the other assessees appeals which have been allowed. All the aforesaid appeals are disposed of accordingly. Having gone through the concluding para, as mentioned above, we note that Hon`ble Supreme Court in the case of M/s. Shree Bhagwati Steel Rolling Mills (supra), has not decided the issue in favour of Revenue. Therefore, the contention of ld. D.R. that Hon ble Supreme Court has interpreted the issue in favour of Revenue, is not tenable. In fact, the concluding para No. 44 of the said judgment clearly speaks that the appeals filed by the Revenue are dismissed and the appeals filed by the assessees are allowed. The said judgment of the Hon`ble Supreme Court also advocates that omitted provision being treated as if it never existed and as Section 6 of the General Clauses Act would not then apply to allow the previous operation of the provision so omitted or anything duly done or suffered thereunder. Nor may a legal proceeding in respect of any right or liability be instituted, continued or enforc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for they do indeed say that in Section 6 of the General Clauses Act, the word repeal would not take within its ken an omission . 21. In Rayala Corporation (P) Ltd. , what fell for decision was whether proceedings could be validly continued on a complaint in respect of a charge made under Rule 132A of the Defence of India Rules, which ceased to be in existence before the accused were convicted in respect of the charge made under the said rule. The said Rule 132A was omitted by a notification dated 30th March, 1966. What was decided in that case is set out by paragraph 17 of the said judgment, which is as follows: 17. Reference was next made to a decision of the Madhya Pradesh High Court in State of Madhya Pradesh v. HiralalSutwala [AIR 1959 MP 93] but, there again, the accused was sought to be prosecuted for an offence punishable under an Act on the repeal of which Section 6 of the General Clauses Act had been made applicable. In the case before us, Section 6 of the General Clauses Act cannot obviously apply on the omission of Rule 132-A of the DIRs for the two obvious reasons that Section 6 only applies to repeals and not to omissions, and applies when the repeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prosecution in cases of non-compliance of the provision therein contained was only transitional and cases covered by it were few and far between, and hence found on facts that it was not an appropriate case for reference to a larger bench. 25. We may also point out that in G.P. Singh s Principles of Statutory Interpretation, 12th Edition, the learned author has criticized the aforesaid judgments in the following terms: Section 6 of the General Clauses Act applies to all types of repeals. The section applies whether the repeal be express or implied, entire or partial or whether it be repeal simpliciter or repeal accompanied by fresh legislation. The section also applies when a temporary statute is repealed before its expiry, but it has no application when such a statute is not repealed but comes to an end by expiry. The section on its own terms is limited to a repeal brought about by a Central Act or Regulation. A rule made under an Act is not a Central Act or regulation and if a rule be repealed by another rule, section 6 of the General Clauses Act will not be attracted. It has been so held in two Constitution Bench decisions. The passing observation in these cases that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in Act or Regulation - Where any Central Act or Regulation made after the commencement of this Act repeals any enactment by which the text of any Central Act or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal. 29. A reading of this Section would show that a repeal can be by way of an express omission. This being the case, obviously the word repeal in both Section 6 and Section 24 would, therefore, include repeals by express omission. The absence of any reference to Section 6A, therefore, again undoes the binding effect of these two judgments on an application of the per incuriam principle.1 30. Thirdly, an earlier Constitution Bench judgment referred to earlier in this judgment, namely, State of Orissa v. M.A. Tulloch Co., (1964) 4 SCR 461 has also been missed. The Court there stated: 1 In Mamleshwar Prasad Anr. v. Kanahaiya Lal (dead) through LRs., (1975) 3 SCR 834, Krishna Iyer, J., succinctly laid down what is meant by the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fted . (At page 484) 31. The two later Constitution Bench judgments also did not have the benefit of the aforesaid exposition of the law. It is clear that even an implied repeal of a statute would fall within the expression repeal in Section 6 of the General Clauses Act. This is for the reason given by the Constitution Bench in M.A. Tulloch Co. that only the form of repeal differs but there is no difference in intent or substance. If even an implied repeal is covered by the expression repeal , it is clear that repeals may take any form and so long as a statute or part of it is obliterated, such obliteration would be covered by the expression repeal in Section 6 of the General Clauses Act. 32. In fact in Halsbury s Laws of England Fourth Edition, it is stated that: So far as express repeal is concerned, it is not necessary that any particular form of words should be used. (R v. Longmead, (1795) 2 Leach 694 at 696). All that is required is that an intention to abrogate the enactment or portion in question should be clearly shown. (Thus, whilst the formula is hereby repealed is frequently used, it is equally common for it to be provided that an enactment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply, and the notification of 1967, declaring Thane to be an urban area, would be continued under and for the purposes of Section 54A. 36. A reading of Section 54G makes it clear that the assessee is given a window of three years after the date on which transfer has taken place to purchase new machinery or plant or acquire building or land. We find that the High Court has completely missed the window of three years given to the assessee to purchase or acquire machinery and building or land. This is why the expression used in 54G(2) is which is not utilized by him for all or any of the purposes aforesaid . . It is clear that for the assessment year in question all that is required for the assessee to avail of the exemption contained in the Section is to utilize the amount of capital gains for purchase and acquisition of new machinery or plant and building or land. It is undisputed that the entire amount claimed in the assessment year in question has been so utilized for purchase and/or acquisition of new machinery or plant and land or building. 37. The High Court is not correct when it states:- 31. The word purchase is not defined under the Act and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1), the assessee is given a period of three years after the date on which the transfer takes place to purchase new machinery or plant and acquire building or land or construct building for the purpose of his business in the said area. If the High Court is right, the assessee has to purchase and/or acquire machinery, plant, land and building within the same assessment year in which the transfer takes place. Further, the High Court has missed the key words not utilized in subsection (2) which would show that it is enough that the capital gain made by the assessee should only be utilized by him in the assessment year in question for all or any of the purposes aforesaid, that is towards purchase and acquisition of plant and machinery, and land and building. Advances paid for the purpose of purchase and/or acquisition of the aforesaid assets would certainly amount to utilization by the assessee of the capital gains made by him for the purpose of purchasing and/or acquiring the aforesaid assets. We find therefore that on this ground also, the assessee is liable to succeed. The appeals are, accordingly, allowed and the judgment of the High Court is set aside. Having gone thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling Mills vs. C.I.T. Excise Others - 2015(326) ELT 209(S.C.), and M/s. Fibre Boards 62 Taxmann.com 135 (S.C.), therefore, the assessee can not use them in his favour. We do not agree with such contention of ld DR, rather, we have noticed after going through the subsequent judgments of Hon`ble Supreme Court in the case of M/s. Shree Bhagwati Steel Rolling Mills (supra) and M/s. Fibre Boards (supra) that these previous judgments in the case of Kolhapur Canesugar Works Ltd (supra) and in Rayala Corporation P. Ltd (supra) were appreciated and accepted by the subsequent judgments of the Hon ble Supreme Court. In one of the subsequent judgments, in the case of M/s. Fibre Boards (supra), both these judgments were appreciated in the following words: 19. But then Shri Arijit Prasad put before us two roadblocks in the form of two Constitution Bench decisions. He cited Rayala Corporation (P) Ltd. and M.R. Pratap v. Director of Enforcement, New Delhi , (1969) 2 SCC 412 which was followed in Kolhapur Canesugar Works Ltd. Anr. v. Union of India Ors., (2000) 2 SCC 536. He argued based upon these two judgments that an omission would not amount to repeal and that since the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms and conditions, as discussed above, are absent in case of omitted clause (i) of section 92BA of the Act, therefore as per the law laid down by the Hon ble Supreme Court in the case of Rayala Corporation (supra) and Kohlapur Cane Sugar (supra), it will be presumed that clause (i) of section 92BA never existed in the Statute Book, meaning thereby it is obliterated from the very beginning and hence the jurisdiction exercised by the Ld. PCIT u/s. 263 of the Act invoking clause (i) of section 92BA, for reference by A.O. to TPO is null in the eye of Law, as clause (i) of section 92BA is omitted and not repeated and there is no provision in any other section of the Income Tax Act saving the pending proceedings initiated under the omitted provision [ (clause (i) of sec, 92BA)] as the said clause (i) was omitted on 01.04.2017, therefore, subsequent revision proceedings by ld. PCIT u/s. 263 on dated 08.03.2019 would be invalid. As we noticed above that an omission of a provision is different from a repeal and section 6 of the General Clauses Act applies to a repealed law and not to omission of law, therefore section 6 of the General Clauses Act does not apply. So in the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may be initiated under the new provision. In this case, Clause (i) of section 92BA was omitted w.e.f 01.04.2017, and after its omission the ld. PCIT passed order u/s. 263 on 28.03.2019. Since clause (i) of section 92BA was unconditionally omitted without a saving clause in favour of Pending Proceedings therefore ld. PCIT ought not to have proceeded u/s. 263 of the Act, since the omission took place prior to 08.03.2019 and such omission in clause (i) of section 92BA is unconditional, that is, it does not say that Pending Proceedings under clause (i) of section 92BA would continue in future, even after its omission on 01.04.2017. Therefore, Ld. PCIT erred in exercising his jurisdiction u/s. 263 of the Act, so far clause (i) of section 92BA is concerned, reason being, in the eyes of law after omission of clause (i) of section 92BA, it would be treated as if it never existed in the Statute Book. In other words, clause (i) of section 92BA, was omitted w.e.f 1.4.2017 unconditionally and without a saving clause therefore section 6 of the General Clauses Act has no application. We note that ld PCIT issued the above show cause notice u/s 263 in respect of specified domestic tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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