TMI Blog2021 (9) TMI 457X X X X Extracts X X X X X X X X Extracts X X X X ..... he same was submitted. The second situation where in previous assessments if any addition on account of transfer pricing adjustment of more than ten crores and addition being upheld in appellate proceedings is also not applicable in the case of the assessee, and this is not a case where search or seizure or survey operations had been carried out. In such a situation it cannot be said that the assessment is erroneous as reference to TPO was not made. Claim u/s 80IA(4)(iv) - As the said deduction had already been disallowed by the AO in the assessment order, and therefore the order on such issue cannot be said to be prejudicial to the interest of revenue. Claim u/s 35(2AB) - Deduction u/s 35 (2AB) of the IT Act 1961, was allowed on the basis of the expenditure based on the report submitted to DSIR. Thereafter, the Government of India Ministry of Science Technology, Department of Scientific and industrial Research, Technology Bhawan New Delhi vide its letter No. TU/IV-15(493)/2017 dated 3.11.2017 had restricted the eligible expenditure for Research, and accordingly the deduction was allowed in the assessment order, and the issue was again duly examined at the time of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32AC of the IT Act. The ld. PCIT had no firm conclusion that any addition made was not verifiable and there was only a suspicion or surmises. (c) To examine from records of the assessee and form books of accounts and documentary evidences and find out as to whether claim of deduction of ₹ 300860481/- as made u/s 35(1)(iv) of the IT Act includes any expenditure on acquisition of land after 29.2.1984 or not. Further also examine whether claim of deduction of ₹ 300860481 u/s 35(1)(iv) of the IT Act is an approved research and development unit. (d) To examine deduction u/s 80IA on power generation unit though the full deduction was disallowed by the ld. AO in the assessment order. The direction in this regard are vague and non specific. (e) To make to the total income and/ or to the book profit u/s 115JB wherever required in accordance with the provisions of the Income Tax as discussed in para 12 of the order u/s 263. 3. That the order passed originally by the assessing Officer under section 143(3) of the Income Tax was neither erroneous nor prejudicial to the interest of Revenue, therefore the impugned order passed u/s 263 by the ld. Principal C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee further pleaded that a bare statement to the effect that the AO has not done proper inquiries per se doesn t constitute a valid basis for assuming jurisdiction u/s 263 of the Act. It is a settled law that the provisions of section 263 cannot be invoked on mere presumptions or suspicion that an inquiry might have unearthed any escaped taxable income as held by the Hon ble Delhi High Court in its judgment in the case of CIT vs. Leisure Wear Exports Ltd. (2010) 46 DTR (del) 97wherein the Hon ble Court while relying upon the principle laid down by the Hon ble Apex Court in the case of Malabar Industrial Co. Ltd 243 ITR 83 (SC) has held that in the entire order emphasis laid by the CIT is that in respect of four issues mentioned by him, no queries were raised by the AO. On this premise, though it is observed that there was no application of mind on the part of the AO and the AO has not recorded any reasons to justify the omission to consider the said facts, the CIT does not take the said order to its logical conclusion which was the prime duty of the CIT in order to justify exercise of power under s.263. There is not even a whisper thatthe order is erroneous. Even if it is inferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case CIT v. Sunil Sankhla (2019) 411 ITR 437 (Raj.)(HC), the Hon ble Jurisdictional High court where it was observed that theCommissioner passed the revision order on the ground that the AO has passed the order without verification. Tribunal held that the AO has passed the order after examining the details and the financial statements had accepted the business profit declared by the assessee and had adopted a view that the order passed by the Assessing Officer was not prejudicial to the interests of the Revenue and that the Principal Commissioner was not justified to replace the Assessing Officer s view. High Court up held the order of the Appellate Tribunal. The assessee contended that in the present case also the order was made after due verification of the details submitted. The assessee also relied on the following cases with regard to the very jurisdiction invoked under section 263 and submits that in absence of the twin conditions being satisfied, the revision was not justified. a. C I T-1 Jaipur vs M/S Green Triveni Developer on 24 October, 2017(Rajasthan) D.B. Income Tax Appeal No. 114 / 2015. b. CIT v. Max India Ltd. (2007) 295 ITR 282 (SC) c. CIT v. Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. 13. The assessee referred to clause 3.2 of the CBDT circular and mentioned that the assessee case was not selected for scrutiny based on Transfer price risk parameter. In this regard the assessee mentioned that provisions of section 92CA which also says that where it is necessary or expedient to do so the AO may refer to the TPO, which also indicates that the reference to the TPO is not mandatory, and it is the judicial decision of the AO to make such a reference. 14. The assesseefurther mentioned that the assessee case does not fall under clause 3.3, which read as under: 3.3 Cases selected for scrutiny on non-transfer pricing risk parameters but also having international transactions or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Ld AO during the course of assessment proceedings and when the books of accounts and vouchers were submitted before him for verification and he did not draw any adverse inference therefrom. 17. In regard to the claim u/s 32AC on account of investment in new plant and machinery is concerned, the assessee submitted that the assesse claimed a deduction of ₹ 36,11,30,696 being 15% of the investment of ₹ 2,40,75,37,974/. The PCIT in his query letter have concurred with the fact that investment of ₹ 240.75 crores was in fact made by the assessee and the only shortcoming observed by him was that the AO has not conducted the required verification before allowing deduction and due to which the assessment order u/s 143(3) of the IT Act for AY 2016-17 is erroneous in so far as its prejudicial to the interest of revenue.In this regard the assessee submitted that all the details of additions in the fixed assets were submitted, and even all books and vouchers were presented to the AO, he had examined the same and after satisfaction allowed the deduction as claimed by the assessee u/s 32 AC and submitted that had he drawn any adverse inference on the additions or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inutely examined by him in the course of assessment proceedings. Therefore selectively picking up the issues against the assessee is against the principles of natural justice. 21. In regard to claim u/s 35(1)(iv) of the Act, the assessee submitted that it made expenditure of capital nature of ₹ 3008.60 lacs on scientific research related to the business carried on by the assessee. The R D facility is duly approved by DSIR and copy of the approval was submitted to the AO in the course of assessment proceedings. The assessee submitted that the above capital expenditure was not considered for claim u/s 35(2AB) of the IT act nor for the claim of depreciation u/s 32 of the IT act. These facts were verified by the AO in the course of assessment proceedings and when the books of accounts were submitted to him for examination. 22. In regard to claim u/s 35(2AB) of the Act, the assessee submitted that deduction u/s 35 (2AB) of the IT Act 1961 amounting to ₹ 988,415,684/- being 200% of total expenditure on Research development of ₹ 494,207,842/- is based on report submitted to DSIR. Thereafter, the Government of India Ministry of Science Technology, Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as erroneous or prejudicial to the interest of revenue. The PCIT has failed to specify as to how and on what ground the assessment order is erroneous and/ or which part of the CBDT instructions were not adhered to by the AO. Merely not recording the satisfaction, the AO on the records does not make the assessment order erroneous and prejudicial to the interest of revenue, as is decided in the various judicial pronouncement by various courts. We have also perused Instruction no 3/2016 and are of the opinion that it was not mandatory for the AO to make a reference to the TPO. Even as per the order and the show cause notice u/s 263 which has been issued it is evident that the selection of the case was for complete scrutiny and the issues was not on transfer pricing parameters risk factors. The Instruction No. 3 of 2016 in para 3.3 states that where cases are selected for scrutiny on non transfer pricing risk parameters but also having international transactions or specified domestic transactions, shall be referred to TPO in specified circumstances. The said clause 3.3.of the Instruction specifies three situations and we find that none of the situation is applicable in the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263. In the context of the present case if, as urged by the Revenue, the assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon the Principal CIT to undertake an inquiry as regards which of the assets were purchased and installed by the assessee out of its own funds during the assessment year in question and, which were those assets that were handed over to it by the DMRC. That basic exercise of determining to what extent the depreciation was claimed in excess has not been undertaken by the Principal CIT. It was argued that the Principal CIT had exercised the second option available to him under s. 263(1) by sending the entire matter back to the AO for a fresh assessment. That option, in the considered view of the Court, can be exercised only after the Principal CIT undertakes an inquiry himself in the manner indicated hereinbefore. That is missing in the present case. Tribunal was not in error in setting aside the impugned order of the Principal CIT under s. 263. No substantial question of law arises. 26. We may also refer to the findings of the ITAT Delhi Bench in the case of Amira Pure Foods Private limited reported in (2018) 63 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Principal CIT to make some minimum independent enquiry to reach to the conclusion that the order of the AO is erroneous and prejudicial to the interest of revenue. The reliance is rightly placed on the decisions of Delhi High Court in learned Principal CIT vs. Delhi Airport Metro Express (P) Ltd. (supra) and ITO vs. DG Housing Projects Ltd. (supra). The Hon ble Delhi High Court in Delhi Airport Metro Express (P) Ltd. (supra) has made the following observation: 10. For the purposes of exercising jurisdiction under s. 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interests of Revenue had to be preceded by some minimal inquiry. In fact, if the learned Principal CIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the learned Principal CIT to conduct such inquiry. 31. The learned Principal CIT has not referred to Expln. 2 of s. 263 of the Act which has been inserted w.e.f. 1st June, 2015 however we agree with the finding of the Co-ordinate Bench in the case of Narayan Tatu Rane (supra), wherein it has been held that explanation cannot said to have overridden the law as interpreted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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