TMI Blog2022 (4) TMI 1589X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings initiated u/s.263 of the Act with a borrowed satisfaction is bad in law. Accordingly, proceedings initiated u/s. 263 of the Act are set aside. Decided in favour of assessee. - SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, HON'BLE JUDICIAL MEMBER For the Assessee : Shri P.J. Pardiwala Shri Tanzil Padvekar For the Department : Shri Sanjeev Kashyap ORDER PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of the Learned Principal Commissioner of Income Tax, Central-4, Mumbai [hereinafter in short Ld. Pr.CIT ] dated 30.03.2021 for the A.Y. 2014-15. 2. Brief facts of the case are, M/s. Multi Commodity Exchange of India (MCX), the assessee filed its original return of income on 29.11.2014 declaring total income at ₹.182,75,65,990/-. The case was selected for scrutiny under CASS and notice u/s.143(2) and 142(1) of the Act was issued to the assessee. The assessment was completed by passing order u/s.143(3) r.w.s 144C(3) dated 21.01.2019 determining total income at ₹.244,79,31,198/-. Ld. Pr.CIT observed that Special Audit Report (SAR) was directed by the Forward Marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed order u/s.92CA(3) of the Act without taking into consideration the SAR for determination of Arm s Length Price (ALP) for this assessment year. Accordingly, Ld. Pr.CIT set-aside the Assessment Order dated 21.01.2019. 5. Aggrieved assessee is in appeal before us raising following grounds in its appeal: - 1. The Learned Principal Commissioner of Income Tax - 4 (Ld. PCIT - 4 ) erred in initiating revision proceedings under section 263 of the Income Tax Act, 1961 ( the Act ). Your Appellants submit that the initiation of proceedings under section 263 of the Income Tax Act, 1961 is illegal and bad in law and the order of the Ld. PCIT - 4 be quashed. 2. The Ld. PCIT - 4 failed to consider the letter/submission dated 06/03/2019 filed before the Ld. PCIT -4 wherein your Appellant had explained in detail why the proceedings under section 263 of the Income Tax Act, 1961 are illegal and bad in law. 3. The Ld. PCIT - 4 erred in stating that the Appellant had not filed any submission/ presented the case. Looking into the facts circumstances of the case your Appellant submits that on change of the incumbent, on 13/02/2020, its authorized representative once again visited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds before the disposal of appeal as they may think fit by themselves or by their representatives. 6. At the time of hearing Ld. AR submitted submissions on legal jurisdictional issues which is reproduced below: - This appeal is filed challenging the impugned Order passed under Section 263 of the Act by the Ld. CIT (Central) by setting aside the Order of the Ld. Assessing Officer passed under Section 143(3) r.w.s. 144C(3)(1) Dt.30/03/2021 which involved issues of Domestic Transfer Pricing, on the reasoning that the Ld. A.O had failed to bring to notice the Special Audit/Review Report (SAR) prepared by PWC, Auditors, to Transfer Pricing Officer (TPO) who passed Order under Section 92CA(3) of the Act. Submissions on Legal Jurisdictional Issue No. 1: The Revision proceedings initiated by CIT u/Sec. 263 of the Act based on A.O's consideration and recommendation is bad in law: 2. While referring to the Para No. 3 of the Impugned order passed under Section 263 of the Act, it was argued by the Sr. Advocate for the Appellant that the impugned Order passed under section 263 is bad in law as the revision proceeding was initiated on the bases of satisfa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or conducting Special Audit to report whether there was misused of MCX trading Platform as well as Company by interested Persons/Parties for their benefits in violation of the Forward Contract (Regulations) Act, 1952. This Special Audit was directed by FMC due to payment settlement crisis in National Spot Exchange (NSEL), as the Appellant Company and NSEL were controlled by one Financial Technology India Ltd. (FTIL). The FMC directed the Appellant to undertake a Special Audit from in inception the Appellant Company i.e 2002 to 30/09/2013 for period of 10 years. As per directions of FMC, the Appellant Company appointed PWC to conduct Special Audit as per the guidelines laid down by FMC. The PWC completed Special Audit as per it's Audit Report dt. 21-04-2014 for specific purpose of FMC, under the scope of work as defined in the PWC Report. 5. The scope of work for the Review (AUDIT) is as under: (Pls. refer to at Pg. 108 of PWC Report Paper Book Para 1.2.1) Scope of work defined for this Review 1.2.1 The scope of work for this Review can be broadly classified as follows: Identification of related parties (as defined by FMC in the terms of ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion adopted by PwC, Auditors, with SPECIFIC DISCLAIMER Clause that it is a self-made definition of the related parties which is not in accordance with any law but made for the purpose of REVIEW and hence, those related Parties are not covered in strict sense as related parties within the meaning of section 92BA r.w.s 40A(2)(b) of the Act. Therefore, it was contended that all related Party as pointed in the Special Audit/Review Report of PWC do not fall with the definition of related parties as per Section 40A(2)(b) of the Act. All those Parties which are covered in the definition of the 'related party' under Sec. 40A (2)(b) are already disclosed to the TPO by filing Auditor Report in Form No. 3CEB, which is prescribed for reporting of domestic transactions subjected to TP Provisions and all such Parties have also been disclosed in Form 3CA which is Audit Report under Section 44AB. Hence, TPO would not have jurisdiction over the transactions between the Parties which did not fall within the preview of the related parties including the 676 as erroneously referred by Ld. CIT (Central) in impugned Order. 6. It was further argued that the Ld. A.O. has made disallowance in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CA(3) of the Act without considering the SAR report in which the report containing various discrepancies relating the related party transactions. We observe that the 263 proceedings were initiated mainly based on the satisfaction recorded by the Assessing Officer that Ld. Pr.CIT needs to revise the Assessment Order u/s. 263 of the Act. It clearly indicates that the 263 proceedings were initiated on the behest of the satisfaction recorded by the Assessing Officer not by the Ld. Pr.CIT. It is submitted before us the mandatory twin conditions provided u/s. 263 of the Act are (i) the Commissioner calling for and examining the record and (ii) in his consideration and Assessment Order is erroneous as well as prejudicial to the interest of the Revenue sin qua non for exercise of the power u/s.263 of the Act, and both the conditions stated above must be fulfilled together. In the given case both the conditions are not fulfilled by the Ld. Pr.CIT. Further it was also submitted before us that the Ld. Pr.CIT has no jurisdiction to revise the order passed by the TPO u/s.92CA(3) as section 263 of the Act does not confer any administrative or revisionary control over TPO. In this regard the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain conditions. Instantly, we are confronted with a situation in which the revision was initiated on the basis of the AO sending a proposal to the CIT and not on the CIT suo motu calling for and examining the record of the assessment proceedings and thereafter considering the assessment order erroneous and prejudicial to the interests of the revenue. The AO recommending a revision to the CIT has no statutory sanction and is a course of action unknown to the law. If AO, after passing an assessment order, finds something amiss in it to the detriment of the Revenue, he has ample power to either reassess the earlier assessment in terms of section 147 or carry out rectification u/s 154 of the Act. He can‟t usurp the power of the CIT and recommend a revision. No overlapping of powers of the authorities under the Act can be permitted. As the revision proceedings in this case have triggered with the AO sending a proposal to the ld. CIT and then the latter passing the order u/s 263 of the Act on the basis of such a proposal, we hold that it became a case of jurisdiction deficit resulting into vitiating the impugned order. Without going into the merits of the case, we quash the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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