Tribunal Rules PCIT Lacked Jurisdiction After Finance Act 2017 Omission of Section 92BA Clause (i.

The Tribunal quashed the PCIT's order under Section 263 of the Income Tax Act, determining that the omission of clause (i) of Section 92BA by the Finance Act, 2017, without a saving clause, rendered the provision nonexistent. Consequently, the PCIT lacked jurisdiction to act under the omitted provision. The Tribunal allowed the assessees' appeals, emphasizing that omissions without saving clauses imply the provision was never part of the statute, thus invalidating any jurisdictional claims based on it. The decision focused on the technicality of omission, without delving into the substantive merits of the case.

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Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act.
2. Effect of omission of clause (i) of Section 92BA by Finance Act, 2017.
3. Validity of the Principal Commissioner's order under Section 263.
4. Impact of non-referral of specified domestic transactions to the Transfer Pricing Officer.
5. Applicability of Section 6 of the General Clauses Act to omissions.

Detailed Analysis:

1. Jurisdiction under Section 263 of the Income Tax Act:
The assessees challenged the jurisdiction assumed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961. They contended that the PCIT erred in assuming jurisdiction without first satisfying that the assessment order was erroneous and prejudicial to the interest of revenue.

2. Effect of Omission of Clause (i) of Section 92BA by Finance Act, 2017:
The core issue revolved around the omission of clause (i) of Section 92BA by the Finance Act, 2017, effective from 01.04.2017. The assessees argued that the omission of this clause without any saving clause meant that it was as if the clause never existed in the statute. Thus, the jurisdiction exercised by the PCIT under Section 263 was void. The Tribunal noted that the omission of a statutory provision without a saving clause implies that the provision was never in existence.

3. Validity of the Principal Commissioner's Order under Section 263:
The Tribunal examined whether the PCIT's order under Section 263, issued after the omission of clause (i) of Section 92BA, was valid. The Tribunal concluded that since clause (i) of Section 92BA was omitted without a saving clause, the PCIT could not exercise jurisdiction under Section 263 for a provision that was never in existence. The Tribunal relied on the Supreme Court's judgments in Rayala Corporation P. Ltd. and Kolhapur Canesugar Works Ltd., which distinguished between "omission" and "repeal," and held that Section 6 of the General Clauses Act applies only to repeals, not omissions.

4. Impact of Non-referral of Specified Domestic Transactions to the Transfer Pricing Officer:
The PCIT had initiated proceedings under Section 263 because the Assessing Officer (AO) did not refer specified domestic transactions to the Transfer Pricing Officer (TPO) as required by Section 92CA. The Tribunal noted that the omission of clause (i) of Section 92BA meant that the requirement to refer such transactions to the TPO was no longer valid. Therefore, the AO's action could not be deemed erroneous or prejudicial to the interest of the revenue.

5. Applicability of Section 6 of the General Clauses Act to Omissions:
The Tribunal addressed the argument that Section 6 of the General Clauses Act, which saves certain rights and proceedings, does not apply to omissions but only to repeals. The Tribunal reiterated that the omission of a statutory provision without a saving clause results in the provision being treated as if it never existed. Consequently, the PCIT's jurisdiction under Section 263, based on the omitted clause (i) of Section 92BA, was invalid.

Conclusion:
The Tribunal quashed the PCIT's order under Section 263, holding that the omission of clause (i) of Section 92BA meant that the provision was never in existence, and thus, the PCIT could not exercise jurisdiction based on it. The Tribunal allowed the appeals of the assessees on this technical ground without addressing the merits of the case. The judgment emphasized that the effect of an omission without a saving clause is that the omitted provision is treated as if it never existed in the statute book.

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