2021 (6) TMI 449 - AT - Income Tax

Appeal Successful: Assessment Order Invalid, Penalty Proceedings Invalidated.

The Tribunal allowed the appeal, declaring the assessment order invalid due to the omission of Section 92BA(1). Consequently, it did not examine the ... Determination of the Arm’s Length Price - reference u/s 92CA - HELD THAT:- The undisputed fact is that as per sub-clause (1) of section 92BA the assessee has undertaken the transaction which has exceeded the prescribed limit. It is also not in dispute that vide Finance Act, 2017 w.e.f. 01.04.2017 the said sub-clause (1) of section 92BA has been omitted. We find that the AO has made a reference u/s 92CA having observed that the assessee has entered into specific domestic transaction as the case is covered u/s 92BA of the Act. We have no hesitation to hold that the cognizance taken by the AO u/s 92B clause (1) and reference made to TPO u/s 92CA is invalid and bad in law. Therefore, the consequential order passed by the TPO and DRP is also not sustainable in the eyes of law. Additional ground is accordingly allowed. Issues Involved:1. Validity of the assessment order passed under Section 143(3) read with Section 144C of the Income Tax Act.2. Transfer Pricing adjustments and methodology.3. Applicability of Section 92BA(1) post its omission by the Finance Act, 2017.4. Initiation of penalty proceedings under Section 271(1)(c) of the Act.5. Charging of interest under Sections 234A and 234B of the Act.Detailed Analysis:Validity of the Assessment Order:The assessee challenged the validity of the assessment order dated 28.09.2017 passed under Section 143(3) read with Section 144C of the Income Tax Act. The appeal contended that the assessment of income at INR 23,80,23,611/- against the returned income of INR 19,07,01,250/- was erroneous. The Tribunal admitted an additional ground questioning the validity of proceedings under Section 92BA(1) due to its omission by the Finance Act, 2017. The Tribunal held that since Section 92BA(1) was omitted, the proceedings initiated under this section were invalid, rendering the assessment order unsustainable.Transfer Pricing Adjustments and Methodology:The assessee disputed the Transfer Pricing Officer's (TPO) adjustments, arguing that the TPO and Dispute Resolution Panel (DRP) erred in disregarding the arm’s length price determined by the assessee and rejecting the economic analysis in the Transfer Pricing documentation. The Tribunal noted that the TPO's adjustments were based on the rejection of multiple year/prior years’ data and segmental accounts of related parties. However, due to the invalidity of the assessment order, the Tribunal did not delve into the merits of these adjustments.Applicability of Section 92BA(1):The Tribunal focused on the additional ground concerning the omission of Section 92BA(1) by the Finance Act, 2017. It referred to judicial precedents, including the Supreme Court's decision in Kolhapur Canesugar Works Ltd. and the Karnataka High Court's decision in CIT Vs. GE Thermometrics India Pvt. Ltd., which established that the omission of a statutory provision without a saving clause renders the provision as if it never existed. Consequently, the Tribunal concluded that the proceedings initiated under Section 92BA(1) were invalid and the resultant orders by the TPO and DRP were unsustainable.Initiation of Penalty Proceedings:The assessee contended that the Assessing Officer (AO) erred in initiating penalty proceedings under Section 271(1)(c) of the Act. Given the Tribunal’s decision on the invalidity of the assessment order, the initiation of penalty proceedings was also rendered invalid.Charging of Interest:The assessee argued against the charging of interest under Sections 234A and 234B of the Act. However, the Tribunal did not address this issue separately, as the primary assessment order itself was held invalid.Conclusion:The Tribunal allowed the appeal, declaring the assessment order invalid due to the omission of Section 92BA(1). Consequently, it did not examine the merits of the Transfer Pricing adjustments or other related issues. The initiation of penalty proceedings and the charging of interest were also rendered invalid due to the primary order's invalidity. The Tribunal’s decision was pronounced in the open court on 03/06/2021.