2023 (5) TMI 255 - AT - Income Tax

Tribunal quashes Pr. CIT's order citing repealed provision, allowing assessee's appeal

The Tribunal allowed the appeal of the assessee, quashing the order of the Principal Commissioner of Income Tax (Pr. CIT). The Tribunal held that the ... Revision u/s 263 - TP Adjustment - Domestic Transfer Pricing u/s 92BA(i) as assessee had made purchases from its related party - Pr. CIT held that the assessment order passed u/s 143(3) as erroneous and prejudicial to the interest of Revenue for the only reason that the Assessing Officer failed to refer the specified domestic transactions to the TPO for determining the Arm’s Length Price - HELD THAT:- It is observed that sub clause (i) of section 92BA has been repealed vide Finance Act, 2017 with effect from 1.04.2017. This Amendment to sub clause (i) of section 92BA was made even prior to completion of assessment under section 143(3) of the Act by the Assessing Officer on 22.09.2017 and for that matter even prior to passing of the order by the ld. Pr. CIT under section 263 of the Act. In the case on hand admittedly the order under section 143(3) of the Act has been revised solely on the ground that the Assessing Officer has not referred to the TPO to determine the Arm’s Length Price of the specified domestic transactions. Since the provision of sub clause (i) of clause 92BA itself stood omitted at the time when the order was passed by the ld. Pr. CIT, in the light of the above judgements and also the decision of the Hon’ble Supreme Court in the case of General Finance Company[2002 (9) TMI 3 - SUPREME COURT] the impugned order of the ld. Pr. CIT passed under section 263 cannot be sustained and the same is hereby quashed. The ground raised by the assessee is allowed. Issues Involved:1. Whether the assessment order passed under section 143(3) of the Income Tax Act, 1961 was erroneous and prejudicial to the interest of the Revenue.2. The necessity of referring specified domestic transactions to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP).Summary:Issue 1: Erroneous and Prejudicial to Revenue- The appeal was filed by the assessee against the order of the Principal Commissioner of Income Tax (Pr. CIT) Dehradun, which held that the assessment order passed under section 143(3) was erroneous and prejudicial to the interest of the Revenue.- The Pr. CIT set aside the assessment order, directing a fresh assessment after due verification, as the Assessing Officer (AO) failed to refer the specified domestic transactions to the TPO for determining the ALP.Issue 2: Necessity of Referring to TPO- The assessee contended that the AO had conducted proper enquiry and verification of related party transactions and that it was not mandatory to refer every case to the TPO.- The assessee argued that section 92BA(i) was repealed by the Finance Act, 2017 w.e.f. 01.04.2017, and thus, any pending proceedings under this section should be considered null and void.- The assessee cited multiple judicial precedents to support the argument that the omission of a provision without a saving clause implies that the provision was never in existence.Tribunal's Findings:- The Tribunal noted that sub-clause (i) of section 92BA was repealed with effect from 01.04.2017, before the completion of the assessment and the passing of the order by the Pr. CIT.- Citing various judicial decisions, including those from the Supreme Court and ITAT benches, the Tribunal observed that the omission of section 92BA(i) implied that it was never part of the statute.- The Tribunal held that the Pr. CIT could not exercise jurisdiction under section 263 based on the omitted provision, as it was deemed to have never existed.- Consequently, the Tribunal quashed the order of the Pr. CIT passed under section 263 and allowed the appeal of the assessee.Conclusion:- The appeal of the assessee was allowed, and the order of the Pr. CIT was quashed, reaffirming that the omission of section 92BA(i) rendered any proceedings under it invalid.