TMI Blog2021 (3) TMI 1229X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y.2014-15, is neither erroneous nor prejudicial to the interest of revenue, and hence the order passed by the ld PCIT under section 263 of the Act is hereby quashed. - Decided in favour of assessee. - ITA No. 308/SRT/2019 - - - Dated:- 22-3-2021 - SHRI PAWAN SINGH AND DR. A. L. SAINI, JJ. Assessee by : Shri Hiren Vepari - CA Respondent by : Shri S. T. Bidari - CIT (DR) ORDER Dr. A. L. SAINI, J. Captioned appeal filed by the assessee, pertaining to the Assessment Year (AY) 2014-15, is directed against the order passed by the learned Principal Commissioner of Income Tax -3, Surat [in short the ld. PCIT ], under section 263 of the Income Tax Act, 1961 [hereinafter referred to as the Act ], dated 22.03.2019. 2. The grievances raised by the assessee are as follows: (I) Assuming Jurisdiction: (1).The Principal Commissioner of Income Tax -3, Surat (hereinafter referred as 'PCIT ) was not justified in assuming jurisdiction particularly when the Assessment order was not erroneous. (2).The PCIT was driven by extraneous considerations in assuming jurisdiction particularly when all that had happened was the AO faltering in following internal instr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 92BA of the Act) and non-reliance on the decision of Hon'ble High court of Delhi in the matter of Sony India Pvt. Ltd (288-ITR-52) for non-reference of the case to TPO up to threshold of ₹ 15 crore. (1).The PCIT was further not justified in not considering the threshold limit of ₹ 15 Crores for international Transaction (or Specified Domestic Transactions) as provided in Instruction no. 3 of 2003 for the reference of case of assessee to the TPO. The PCIT ought to have followed the Delhi High Court in the matter of Sony India Pvt. Ltd (288-ITR-52). (V) Assessment proceedings related to Domestic Transfer Pricing are null and void after 01.04.2017 (1) Oder issued by the PCIT under section 263 of the Act leading to de novo assessment would be null and void as the reference of the transactions entered into with parties covered under section 40A(2)(b) of the Act, has been withdrawn from the ambit of Specified Domestic Transactions w.e.f. 01.04.2017 in Section 92BA of the Act, without any saving provision related to proceeding for the earlier assessment years. (VI) Miscellaneous: The appellant craves leave to add, alter or vary any of the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2017. 7. The assessee, during the course of revision proceedings under section 263 of the Act, submitted reply to the ld. PCIT on various counts. However, ld. PCIT has rejected the assessee s submission and held assessment order dated 09.11.2016 of the AO is erroneous in so far as prejudicial to the interest of revenue on the ground that assessment, order was not in accordance with Instruction No. 3/2016 dated 10.03.2016, issued by the Board under section 119 of the Act and same is covered under Explanation 2(c) of section 263 of the Income Tax Act which makes an order erroneous in so far as it was prejudicial to the interest of the revenue if the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119 of the Act. Therefore, ld PCIT directed the Assessing Officer to make reference to the TPO for determination of ALP of the specified domestic transactions carried out by the assessee in terms of the Instruction No.3/2016 dated 10.03.2016 issued by the Board under section 119 of the Act and finalize the assessment on the issue as per relevant provisions of the Income Tax Act. 8. Aggrieved by the order of the ld PCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is to be seen that whether Assessing Officer has conducted adequate enquiry and sufficient scrutiny or not. Hence, even if Explanation-2 to Section 263 (assuming not applicable to the assessee), even then, the ld. PCIT has right to invoke the jurisdiction under section 263 of the Act on the basis of inadequate enquiry, that is, if the Assessing Officer fails to make adequate enquiry. Therefore, ld. DR for the Revenue submitted that this is a case where the Assessing Officer has failed to make sufficient enquiry in respect of international transactions, therefore, the order passed by the Assessing Officer is erroneous as well as prejudicial to the interest of Revenue, hence, the order passed by the ld. PCIT should be upheld. 11. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. PCIT and other material brought on record. First of all, we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is there existing before the Pr. CIT to exercise his power. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer is erroneous and prejudicial to the interest of Revenue. We note that ld. PCIT has merely exercised his jurisdiction under section 263 of the Act because the assessee has entered into specified domestic transactions with persons referred in section 40A(2)(b) of the IT Act to the tune of Rs, 16,24,53,238/-. As one of the reason for scrutiny was Large specified domestic transaction(s) (form 3CEB), the case should have been referred, to TPO for determination of ALP as per Instruction No. 3/2016 dated 10.03.2016 of the CBDT issued under section 119 of the Income Tax Act. However, it is noticed that the Assessing Officer (AO) has not referred the case to TPO as per Instruction No. 3/2016 dated 10.03.2016 issued by the CBDT under section 119 of the Act, thus assessment order passed by AO was erroneous in so far as it is prejudicial to the interest of the Revenue. The ld PCIT, vide para 5 of his order under section 263 of the Act, has held that assessment order dated 09.11.2016, passed by the Assessing Officer is erroneous, in so far as prejudicial to the interest of Revenue on the ground that assessment order was not in accordance with Instruction No.3/2016 dated10.03.2016, which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Let us, first examine Explanation-2(c) of section 263 of the Income Tax Act, which reads as follows: Explanation 2.- For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 15. As we have already made it clear in para 13 of this order that ld. PCIT has mainly taken support of the newly inserted Explanation-2(c) to Section 263 of the Income Tax Act to exercise his jurisdiction under section 263 of the Act. What is relevant for Clause(c) of Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer. (a) Crompton Greaves Ltd v. CIT [ITA No. 1994/Mum/2013] dated 01.02.2016. (b) Madhurima International Pvt Ltd v. Pr. CIT [ITA No. 421/Mum/2017] dated 28.04.2017. 23. In this regard, we observe that the aforesaid judgments have been later considered by Hon'ble Mumbai Tribunal in several other cases. Further, in the recent judgments, the Hon'ble Tribunal has taken a view that the provisions to Explanation 2 to s. 263 of the Act introduced by the Finance Act, 2015 is prospective in nature and would not apply to the year under consideration as follows: (a) AV Industries v. ACIT [ITA No. 3469/Mum/2010] dated 06.11.2015. (b) Metacaps Engineering and Mahendra Constructions Co. (JV) v. CIT [ITA No. 2895/Mum/2014] dated 11.09.2017 (c) Reliance Money Infrastructure Ltd. v. PCIT [ITA No. 3259/Mum/2017] dated 06.10.2017. (d) Shantikrupa Estate Pvt. Ltd. [ITA No. 1252/Ahd/2015] dated 09.09.2016 (e) Amira Pure Foods Pvt. Ltd. v. PCIT [ITA No. 451/Del/2017] dated 29.11.2017. 17. On the similar facts, Coordinate Bench of ITAT, Ahmedabad in the case of Shantikrupa Estate Pvt. Ltd in ITA No. 1252/Ahd/2015, for A.Y. 2010-11, order dated 09.09.2016, held as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to conduct the inquiry and verification to establish and show that the assessment order was unsustainable in law. The ITAT Mumbai Bench has further held that the intention of the legislature could not have been to enable the CIT to find fault with each and every assessment order without conducting any inquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The ITAT Mumbai Bench of the Tribunal went on to hold that the opinion of the Commissioner referred to in section 263 of the Act has to be understood as legal and judicious opinion and not arbitrary opinion. 5.7 We also note that it has been held by the ITAT Mumbai Bench in the case of M/s Indus Best Hospitality Realtors Pvt. Ltd. in ITA No. 3125/Mum/2017 vide order dated 19.01.2018 that Explanation 2 to Section 263 of the Act introduced by Finance Act, 2015 is prospective in nature. Since the year under consideration is AY 2014-15, we are afraid that Explanation 2 to section 263 will not come to the aid of the department in this case. Similar v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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