2024 (4) TMI 189 - AT - Income Tax

Assessment order under section 143(3) becomes non-est due to search proceedings under section 153A

Himatsingka Seide Ltd. Versus Deputy Commissioner of Income Tax, Central Circle-XVI, Kolkata. And (Vice-Versa) And Assistant Commissioner of Income-Tax, Central Circle-3 (4), Kolkata. Versus Himatsingka Seide Ltd.

Himatsingka Seide Ltd. Versus Deputy Commissioner of Income Tax, Central Circle-XVI, Kolkata. And (Vice-Versa) And Assistant Commissioner of Income-Tax, ... Issues Involved:1. Interpretation of law and facts by CIT(A).2. Disallowance of expenditure u/s 14A read with Rule 8D.3. Disallowance of interest on borrowed funds.4. Transfer pricing adjustment on export to subsidiary.5. Initiation of penalty proceedings u/s 271(1)(c).6. Arm's length price adjustment on inter-corporate loan.7. Corporate guarantee to AE and its implications.8. Computation of book profit u/s 115JB.Summary:1. Interpretation of Law and Facts by CIT(A):The assessee challenged the CIT(A)'s order as being based on incorrect interpretation of law and facts. The Tribunal did not find any substantial merit in these claims and upheld the CIT(A)'s decisions where applicable.2. Disallowance of Expenditure u/s 14A read with Rule 8D:The assessee contended that the AO's disallowance u/s 14A was borrowed from a non-est order u/s 143(3). The CIT(A) recomputed the disallowance based on the decision of the Hon'ble Calcutta High Court in CIT Vs. REI Agro Ltd., directing the AO to consider only investments yielding dividend income. The Tribunal upheld this recomputation, dismissing the grounds raised by both the assessee and the revenue.3. Disallowance of Interest on Borrowed Funds:The assessee argued that no borrowed funds were used for investments yielding dividend income. The Tribunal upheld the CIT(A)'s decision, which was based on a detailed examination of facts.4. Transfer Pricing Adjustment on Export to Subsidiary:The assessee challenged the TP adjustment of Rs. 1,02,35,877/-. The Tribunal noted that the AO had borrowed this adjustment from a non-est order u/s 143(3) and held that the AO should have made a fresh reference to the TPO as per section 92CA. Consequently, the Tribunal deleted the TP adjustments, allowing the assessee's ground and dismissing the revenue's related grounds.5. Initiation of Penalty Proceedings u/s 271(1)(c):The Tribunal did not specifically address this issue in detail, implying that the CIT(A)'s decision to uphold the initiation of penalty proceedings was not overturned.6. Arm's Length Price Adjustment on Inter-Corporate Loan:The revenue's appeal included grounds challenging the deletion of an ALP adjustment of Rs. 3,86,54,453/-. The Tribunal found that the AO had not followed proper procedures under section 92CA, and therefore, the adjustments were not tenable. The Tribunal dismissed the revenue's grounds.7. Corporate Guarantee to AE and Its Implications:The revenue argued that the CIT(A) erred in deleting an adjustment of Rs. 2,02,00,000/- for a corporate guarantee to its AE. The Tribunal found that the AO had not made a proper reference to the TPO and dismissed the revenue's grounds.8. Computation of Book Profit u/s 115JB:The revenue contested the deletion of Rs. 40,03,074/- in computing book profit u/s 115JB. The Tribunal upheld the CIT(A)'s decision, relying on the jurisdictional High Court's ruling in the case of DCIT Vs. Birla Corporations, which stated that section 14A disallowances should not affect book profits under section 115JB.Final Decision:The Tribunal allowed the assessee's appeal in IT(SS)A No. 17/Kol/2018, partly allowed the revenue's appeal in IT(SS)A No. 20/Kol/2018, and dismissed the revenue's appeal in ITA No. 785/Kol/2018 as infructuous.