ITAT Quashes Principal Commissioner's Order, Rules Specified Domestic Transactions Omission Was Never Part of Statute.

The ITAT ruled in favor of the assessee, quashing the Principal Commissioner's order under section 263 of the Income Tax Act, 1961, for Assessment Year 2014-2015. The Tribunal held that the omission of the provision concerning specified domestic transactions, effective from April 1, 2017, implied it was never part of the statute. Consequently, the assessment order was not erroneous, and the requirement to refer the matter to the TPO was inapplicable. The Tribunal's decision relied on legal principles and a Supreme Court judgment regarding the impact of omitted statutory provisions.

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Issues:
Appeal against order under section 263 of the Income Tax Act, 1961 for Assessment Year 2014-2015.

Analysis:
The appellant challenged the order of the Principal Commissioner of Income Tax-3, Ahmedabad, under section 263 of the Income Tax Act, 1961, regarding the assessment order for the Assessment Year 2014-2015. The appellant contended that the assessment order framed by the Assessing Officer (AO) under section 143(3) was not erroneous insofar prejudicial to the interest of revenue. The case involved scrutiny under CASS due to large specified domestic transactions. The AO accepted the income declared by the assessee in the return of income. However, the Principal Commissioner found that the AO should have referred the matter to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) as per CBDT directions. The Principal Commissioner set aside the assessment order as erroneous. The appellant, being aggrieved, appealed against this decision.

The appellant argued that the provision related to specified domestic transactions under section 40A(2)(b) was omitted by the Finance Act 2017, and thus, the requirement to refer the matter to the TPO did not apply. On the contrary, the Departmental Representative contended that the provisions were applicable during the relevant assessment year and supported the Principal Commissioner's order. The appellant emphasized that the omission of the provision implied it was never part of the statute, citing legal principles and a Supreme Court judgment to support this argument.

After hearing both parties, the Tribunal noted that the provision regarding specified domestic transactions under section 40A(2)(b) was omitted by the Finance Act 2017, effective from April 1, 2017. Referring to a Supreme Court judgment, the Tribunal held that the omission of a provision should be deemed as if it never existed. Consequently, since the provision was omitted at the time of the Principal Commissioner's order, the assessment order could not be considered erroneous. Therefore, the Tribunal quashed the impugned order and allowed the appeal of the assessee.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing that the omission of the provision related to specified domestic transactions meant the assessment order was not erroneous. The Tribunal's decision was based on legal principles and the Supreme Court's interpretation regarding the impact of omitted statutory provisions.

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