TMI Blog2023 (9) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... owed by assessing officer. Deduction of section 80IA disallowed on the basis of finding of TPO in earlier years - Such action of assessing office in not in accordance with mandate of CBDT Circular no.3 of 2016. There is no dispute that the Circulars of CBDT is binding on the assessing officer. So far as other / remaining specified domestic transaction of more than Rs. 23 Crore, the assessment order is totally silent, hence, the assessment order is certainly not only erroneous on such issue but so far as prejudicial to the interest of revenue. In absence of reference to TPO with regard to such domestic transaction, the transaction remained unexamined. The specified domestic transaction has direct bearing on the computation of income, therefore, to that extent it is certainly prejudicial to the interest of revenue. Further clause (c) of Explanation-2 of section 263 is also attracts in the present case. In our considered view the twin conditions for invoking the jurisdiction under section 263 is fully met out. PCIT while granting approval of reference to TPO with regards to international transaction reported by AE, considered the issue of specified domestic transaction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.03.2022 u/s 263 of the Act has been issued without complying with the provision of the Act and deserves to be quashed in toto. 3. On appreciation of the facts and circumstances of the case and interpretation of law the learned PCIT has erred in setting aside the order of the Learned Assessing Officer u/s 143(3) r.w.s. 144B dated 25.10.2021 and in directing the Learned Assessing Officer to frame the assessment order afresh. The order of the Learned PCIT u/s 263 of the Act is contrary to facts of the case and law and deserves to be deleted in toto. 4. On appreciation of facts and circumstances of the case the Learned PCIT has erred in dealing with issues that were not forming part of the notice dated 17.03.2022 issued u/s 263 of the Act. The order of the Learned PCIT u/s 263 of the Act is contrary to facts of the case and law and deserves to be deleted in toto. 5. The appellant craves leave to add, amend modify or alter the above grounds of appeal at any stage of appellate proceedings. 6. The appellant humbly prays that the appeal be allowed in toto. 2. Brief facts of the case are that assessee-firm is a Multinational Company, engaged in the business of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t acquired for so called unit of Boiler divisions are primarily meant for production of ink. The assessing officer proposed disallowance of deduction under section 80IA in the draft assessment order in his show cause notice. In response to show cause notice on the proposed additions in the draft assessment order, the assessee filed its reply dated 24.09.2021. In the reply the assessee stated that observation of TPO in earlier year were self-contradictory. The assessee stated that observation of assessing officer that boiler unit is not separate and independent unit but part of manufacturing unit is incorrect. The reply of assessee was not accepted and held that similar disallowances were made in assessment years 2015-16, 2016-17 and 2017-18 on account of sale of steam by Boiler undertaking to other division of assessees manufacturing units. The assessee disputed the disallowances in all assessment years before Ld. CIT(A) and appeals are pending. The Assessing Officer made disallowance of entire claim of Rs. 23.65 crores under section 80IA of the Act in the assessment order dated 25.10.2021 passed under section 143(3) rws 144C(3). 3. Subsequently, the assessment order was revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Board of Direct Taxes (CBDT for short) Instruction No.3/2016 dated 10.03.2016, the Assessing Officer was duty bound to refer the matter international as well as specified domestic transaction to TPO. The CBDT instruction is binding on the assessing officer and he was bound to refer such issue to TPO. The Assessing Officer has not referred the specified domestic transaction to any scrutiny or examination by TPO, the assessment order passed by him is erroneous in nature. The CBDT s instruction is binding to Assessing Officer and plethora judgment is available on such position. The specified domestic transaction has a direct bearing that computation of income as specified domestic transaction has not been subject-matter of scrutiny. The Assessing Officer has disallowed the deduction under section 80IA of the Act without verifying it, which has a direct bearing of computation of income of assessee. Therefore, to that extent the order is prejudicial in the interest of revenue. The Ld. PCIT also noted that Assessing Officer has not made any remarks towards expenses, which was incurred for earning exempt income under section 14A. 6. The ld. PCIT further noted that assessing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of transfer steam of boiler division to manufacturer division and such decision was arrived by Assessing Officer on the basis of all material and consideration thereto, therefore the assessment order is not erroneous and in so far as prejudicial to the interest of Revenue. The Ld. AR for the assessee further submits that when two views are possible, on issue and the Assessing Officer adopted one of the possible views, exercising of revisional power on such view under section 263 of the Act is not justified. The Assessing Officer consciously took the decision that there was no SDT and he took a possible view and no reference was made. 8. The Ld. AR for the assessee further submits that reference of TPO is made with the approval of Ld. PCIT. The Ld. PCIT agreed with the proposal of Assessing Officer to make the reference with regard to TPO only with regard to International Transaction and not in respect of SDT. The Ld. PCIT later on tried to review his own approval and granted for reference only on International Transaction. Thus, Ld. PCIT is clearly taking a different view on the same subject-matter. To support such submission, Ld.AR for the assessee relied upon decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted within a period of eighteen months from the end of relevant assessment year. Further, section 153(4) prescribed that where a reference under sub-section (1) of section 92CA is made during the course of assessment proceedings, the period available for completion of assessment under sub-clause (1), (2)(3) shall be extended by twelve months only. Therefore, to avail the extended period of completion the reference to TPO shall be made within a time of completion of assessment on or before 30.09.2020. The time limit available to the Assessing Officer for making reference of SDT to TPO under section 92CA for assessment year 2018-19 has already been expired on 30.09.2020. Thus, the revisional power under section 263 cannot be invoked to extend the period of such limitation. To support such submission, Ld. AR for the assessee relied upon the decision of Hon'ble Madras High Court in the case of Virtusa Consulting Services (P.) Ltd. vs. Dispute Resolution Panel (DRP) (2022) 139 taxmann.com 361 (Mad). The Ld. AR for the assessee while summing up of his submission, submitted that the Assessing Officer during the assessment has examined all the issues including the issue of SDT and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, which is beyond his jurisdictional power. Thus, the assessment order is erroneous and so far as prejudicial to the interest of revenue. The assessee reported SDT of more than Rs. 47.00 crore and the assessing office disallowed deduction to the limit of claim under section 80IA. Admittedly there is no discussion about other / remaining domestic transaction of more than Rs. 24.00 Crore, which clearly established that the assessment order is prejudicial to the interest of revenue. The ld CIT-DR for the revenue prayed for upholding the order of ld PCIT. To support his submission, the ld CIT-DR for the revenue relied on the following decisions; Adani Agro (P) Limited (2013) 32 taxmann.com 356 (Guj), Malabar Industries Co Ltd. Vs CIT 243 ITR 83 SC/109 Taxman 66 SC, Add CIT Vs Mukur Corporation (1978) 111 ITR 312 (Guj), Deniel Marchant (P) Ltd Vs ITO (2018) 95 taxmann.com 366 (SC), CIT Vs Amitabh Bachchan (2016) 384 ITR 200 SC / 69 taxmann.com 170 (SC). 14. We have considered the rival submissions of the parties and perused the order of lower authorities carefully. We have also deliberated on various case laws relied by ld AR for the assessee. There is no dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal consequences are to be followed as per the statutory provisions. The ratio of decision in Virtusa Consulting Services (P Limited Vs DRP (supra) is not applicable on the facts of the present case. In the said case the TPO passed the order beyond permissible limit of 21 months. However, in our case, ethe assessing officer or TPO will be bound to pass order giving effect as per the statutory proceeding. And there is no such enlargement of period of limitation as argued by ld AR for the assessee. We are also not convinced with the submissions that the ld PCIT has revived order of his predecessor by passing order under section 263. As recorded earlier that once it is proved that assessment order is erroneous and prejudicial to the interest of revenue, the PCIT has no option except to exercise his jurisdiction under section 263. There is no bar in section 263 that the ld PCIT cannot revise the issue where it contained the determination of Arm s Length Price. Thus, in view of the aforesaid discussions, we do not find any merits in all the grounds of appeal raised by the assessee. 17. In the result, appeal of the assessee is dismissed. Order pronounced in the open court on 06/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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