TMI Blog2022 (4) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... rther, the excess consideration received by the holding company was to be treated as capital gains and the assessee was to be treated as representative assessee of its holding company in terms of Sec. 160 163 of the Act to pay the tax in respect of the above gains. Since, the assessment was completed without proper enquiry and non-application of mind, the order was erroneous and prejudicial to the interest of the revenue. Undisputed position that emerges is that the issue which has been racked up by Ld. Pr. CIT in the impugned order was never the subject matter of examination either by Ld. TPO or by Ld. AO during the course of regular assessment proceedings. The queries raised by lower authorities during the course of regular assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee read as under: 1:0 Re: Validity of Order u/s. 263: 1:1 The learned Principal Commissioner of Income-tax ( PCIT') has erred in passing an Order u/s. 263 of the Income-tax Act, 1961 beyond the time limit prescribed. Without prejudice to the foregoing 1:2 The learned PCIT failed to appreciate that the conditions precedent to passing an Order under the said section were not satisfied and hence the Order u/s. 263 of the Income-tax Act, 1961 is ultra vires and void. 1:3 The Appellant submits that the impugned Order u/s. 263 of the learned PCIT be struck down. Without prejudice to the aforesaid: 2:0 Re: Buyback transaction of the Appellant with Coats International Pte Ltd ('CIPL') co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revisional order were never subject matter of verification and examination by lower authorities. 3. Having heard rival submissions and after going through the impugned order, our adjudication would be as given in succeeding paragraphs. 4. We find that the assessee being resident corporate assessee is stated to be engaged in manufacturing and trading of threads, zips and accessories. It was assessed for the year u/s 143(3) r.w.s. 92CA(3) 144C of the Act on 31.01.2017. In the said assessment, Ld. AO has made certain Transfer Pricing Adjustment as well as disallowance u/s 14A. Since the assessee had entered into international transactions with its Associated Enterprises (AE), a reference was made to Ld. Transfer Pricing Officer (T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently, Ld. Pr. CIT, upon perusal of case records, held an opinion that the order was erroneous and prejudicial to the interest of the revenue and accordingly, show-caused the assessee on 31.01.2019. The same stem from the observation of Ld. Pr. CIT that the assessee bought back the shares from its holding company M/s Coats International Pvt. Ltd., a Singapore incorporated entity. The consideration of buy-back was met out of general reserves and surplus. The payment so made was to be considered as distribution of accumulated profits to its holding company on the reduction of capital of the assessee company as envisaged in Sec. 2(22)(d). Accordingly, the assessee was liable to pay tax on distributed profits u/s 115-O besides payment of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shares to the assessee is to be treated sale consideration in the hands of M/s. CIPL, Singapore and capital gains arising on the transfer of shares is to be taxed in the hands of M/s. CIPL Singapore, in terms of section 46A of the Act, Moreover, in terms of section 5(2), any income which accrues or deemed to accrue in India to a non-resident or any income received or deemed to be received in India by a nonresident is to be taxed. Accordingly, the capital gain arising on sale of the shares is to be taxed in the hands of M/s. CIPL, Singapore. But in terms of section 163 of the Act, the assessee is to be treated as an agent of M/s CIPL, Singapore and in terms of 160 of the Act, the assessee is to be treated as representative in respect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in K A, Ramaswamy Chettiar vs. CIT (220 ITR 657) has held that when the Officer is expected to make an enquiry of income and if he does not make an enquiry as expected, it is to be a ground to interfere with the order passed by the Assessing Officer since such an passed by the officer is erroneous and prejudicial to the interest of revenue. When the Assessing Officer failed to discuss as to why and how the claim was accepted as correct, the revision powers under section 263 would be justified in view of the decision of the Hon'ble Punjab Haryana High Court in the case of CIT Vs Raja Industries (340 ITR 344). 7, In view of the above, I am satisfied that the order dated 31,01 2017 passed by the Assessing Officer u/s 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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