Appeal allowed due to legal error in tax adjustment; Order quashed under Income Tax Act.

The Tribunal allowed the appeal of the Assessee, holding that the order passed by the authorities below was bad in law and quashed it. The Tribunal found that the provision under section 92BA(i) of the Income Tax Act, 1961, had been omitted from the statute by the Finance Act, 2017, rendering any adjustment made based on that provision invalid. Therefore, the Tribunal declared the impugned order void ab initio and without jurisdiction, ultimately partly allowing the appeal on a technical basis without delving into the merits of the issue raised by the Assessee.

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Issues:
1. Confirmation of addition made by AO/TPO for adjustment in Specified Domestic Transactions.

Analysis:
The appeal was filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals) regarding an assessment order passed under s. 143(3) r.w.s. 144C of the Income Tax Act, 1961 for the Assessment Year 2014-2015. The primary issue raised by the Assessee was the confirmation of the addition made by the AO/TPO for Rs. 19,28,148/- on account of adjustment in Specified Domestic Transactions. The Assessee, a partnership firm engaged in manufacturing Guar gum powder, had declared certain Specified Domestic Transactions and adopted the Comparable Uncontrolled Price (CUP) method to justify the arm's length price of the transactions. However, the TPO proposed an upward adjustment of Rs. 36,07,283/- based on the comparative chart filed by the Assessee, leading to the addition by the AO. The Ld. CIT(A) upheld the order of the AO but corrected an arithmetical error, confirming an upward adjustment of Rs. 19,28,148/- only.

The Assessee contended that the impugned transactions were removed from the scope of Specified Domestic Transactions by an amendment in the Finance Act, 2017, effective from 01/03/2017. The Assessee argued that once section 92BA(i) of the Act was deleted, no upward adjustment could be made. The Ld. DR supported the orders of the authorities below. The Tribunal noted that the issue had been decided in favor of the Assessee in various cases where it was held that the omission of section 92BA(i) from the statute book by the Finance Act, 2017, meant that the provision never existed in law. Therefore, any decision made by the AO/TPO invoking such section was without basis, jurisdiction, and invalid. Relying on these judgments, the Tribunal found no justification for the upward adjustment made by the AO/TPO under section 92BA(i) of the Act, as the provision had been omitted from the statute. Consequently, the Tribunal quashed the impugned order, declaring it void ab initio and without jurisdiction.

Given the identical facts and legal position as in the referenced cases, the Tribunal found no reason to uphold the orders of the authorities below. Therefore, the Tribunal allowed the appeal of the Assessee, holding that the order passed by the authorities below was bad in law and quashed it. As the appeal was allowed on a technical basis, the Tribunal did not delve into the merits of the issue raised by the Assessee. Thus, the ground of appeal of the Assessee was allowed, and the appeal was partly allowed by the Tribunal.

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