2020 (8) TMI 96 - AT - Income Tax

Tribunal Invalidates Tax Provision Omission, Assessee Appeal Allowed

The Tribunal held that the omission of clause (i) of section 92BA of the Income Tax Act, 1961 rendered any reference to the Transfer Pricing Officer (TPO) ... Revision u/s 263 - transactions referred to clause (i) of section 92BA - mandatory for AO to refer the specified domestic transaction to the Transfer Pricing officer as per section 92CA which he failed to do so - Solitary grievance of assessee as confined to the issue that since clause (i) of section 92BA has been omitted by Finance Act, 2017, w.e.f. 01.04.2017 and the effect of such omission without any saving clause of General Clauses Act, means that the above provisions was not in existence or never existed in the statute, therefore, the jurisdiction exercised by the ld PCIT under section 263 of the Act is void - HELD THAT:- As in respect of specified domestic transactions which is referred to clause (i) of section 92BA of the Act, which was omitted with effect from 01.04.2017 and the effect of such “omission” of clause (i) of section 92BA means that this provision never existed in the statute book, hence reference to TPO was bad in law. As the issue is squarely covered in favour of the assessee by the decision of Coordinate Bench in the case of M/s Raipur Steel Casting India (P) Ltd [2020 (6) TMI 629 - ITAT KOLKATA]and there is no change in facts and law and the Revenue is unable to produce any material to controvert the above said findings of the Co-ordinate Bench. PCIT issued the above show cause notice u/s 263 in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act which was omitted with effect from 01.04.2017, and effect of such “omission” of clause (i) of section 92BA means that this provision never existed in the statute book, since clause (i) of section 92BA never existed in the statute book therefore, ld PCIT cannot exercise his jurisdiction under section 263 of the Act in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act. Therefore, the action of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue - Decided in favour of assessee Issues Involved:1. Validity of the reference to the Transfer Pricing Officer (TPO) under clause (i) of section 92BA of the Income Tax Act, 1961 after its omission.2. Jurisdiction of the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income Tax Act, 1961 in light of the omission of clause (i) of section 92BA.3. Applicability of section 6 of the General Clauses Act to the omission of clause (i) of section 92BA.Detailed Analysis:1. Validity of the Reference to the TPO:The Tribunal addressed the issue of whether the reference to the TPO was valid after the omission of clause (i) of section 92BA, which pertained to specified domestic transactions. The Tribunal referred to its earlier decision in the case of M/s Raipur Steel Casting India (P) Ltd. and Srinath Ji Furnishing Pvt. Ltd., where it was held that the omission of clause (i) of section 92BA with effect from 01.04.2017 had the effect of it being omitted from its inception. Therefore, any reference to the TPO under this clause was considered 'bad in law.' The Tribunal reiterated that the omission of clause (i) means that it never existed in the statute book, thus invalidating any proceedings initiated under it.2. Jurisdiction of the PCIT under Section 263:The Tribunal examined whether the PCIT could exercise jurisdiction under section 263 of the Income Tax Act in light of the omission of clause (i) of section 92BA. It was noted that the PCIT issued a show cause notice under section 263 concerning specified domestic transactions referred to in clause (i) of section 92BA, which was omitted with effect from 01.04.2017. The Tribunal concluded that since clause (i) was omitted without any saving clause, it should be treated as if it never existed. Consequently, the PCIT could not exercise jurisdiction under section 263 based on a provision that was legally non-existent.3. Applicability of Section 6 of the General Clauses Act:The Tribunal extensively discussed the difference between 'omission' and 'repeal' in the context of section 6 of the General Clauses Act. It referred to the Supreme Court's judgments in Rayala Corporation (P) Ltd., Kolhapur Canesugar Works Ltd., and General Finance Co., which clarified that section 6 of the General Clauses Act applies to repealed statutes and not to omitted statutes. The Tribunal emphasized that the omission of clause (i) of section 92BA did not include any saving clause, and thus, section 6 of the General Clauses Act could not be invoked to continue any proceedings under the omitted clause.The Tribunal also addressed the arguments presented by the Departmental Representative (DR) and distinguished the cases cited by the DR, namely M/s. Shree Bhagwati Steel Rolling Mills and M/s. Fibre Boards. It was clarified that these cases did not overrule the principles established in the earlier Supreme Court judgments and that the specific facts of the assessee's case did not align with the scenarios in the cited judgments.Conclusion:The Tribunal concluded that the omission of clause (i) of section 92BA with effect from 01.04.2017 rendered any reference to the TPO under this clause invalid. Additionally, the PCIT could not exercise jurisdiction under section 263 based on a provision that was legally non-existent due to its omission. The Tribunal upheld the principle that the omission of a statutory provision without a saving clause should be treated as if the provision never existed, thus invalidating any proceedings initiated under it.The appeal of the assessee was allowed, and the order of the Principal CIT was quashed as being ab initio void.