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2017 (12) TMI 189
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.... required details from time to time. Assessment order dated 29.06.2016 was passed u/s 143(3) accepting the returned income of Rs. 70,88,78,060/-. The books of account and vouchers were produced and examined by the Assessing officer. 3. The Principal Commissioner of Income Tax(Central), Gurgaon, issued notice u/s 263 of the Act dated 21.10.2016, seeking to revise the assessment order passed u/s 143(3). The ld. PCIT has held that the assessment order was passed without making proper inquiries/ verification/investigations which should have been made before accepting the trading results/other issues and therefore, the order is erroneous and prejudicial to the interest of revenue. The LD. PCIT issued show cause notice u/s 263 of the Act in respect to the following issues: i. Transaction for determining the arms length price not analyzed by the AO and the transaction with Associated Enterprise not referred to TPO. ii. Trading results accepted without making any inquiry/investigation and genuineness of sales/purchases accepted without thorough examination iii. Nature of forward contracts and why revenue has not been accounted for, not examined by the AO ....
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....ions during the F.Y. 2013-14. The assessee submitted various details and explanation with respect to the trading items, FOB value of exports, claim and compensation, opening and closing capital work in progress and interest and expenses. The assessee contended that all the aforesaid issued were duly examined/investigated/verified by the AO during the course of assessment proceedings. 7. The ld. PCIT held that the assessment order has been passed without making proper inquiries/verification/investigations which should have been made before accepting the trading results and other issues and the same is therefore erroneous and prejudicial to the interest of revenue. Accordingly, the ld. CIT(A) vide its order u/s 263 of the Act dated 17.02.2017 set aside the assessment order and directed the AO to redo the assessment de novo after making necessary inquiries/ verification/investigations. 8. Against the order of the ld. PCIT u/s 263 of the Act, the assessee has preferred this appeal before ITAT on the following grounds: 1. "That the notice issued u/s 263 and the order passed by the Principal Commissioner of Income Tax ("Pr. CIT") u/s 263 are illegal, bad in law and without....
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....sment order passed u/s 143(3) merely on the basis of the assumptions and presumptions and without holding any independent enquiry. 9. That the Pr. CIT has erred on facts and in law in assuming jurisdiction u/s 263 regarding the issue of pending forward contracts, even when the assessee is exempt from disclosure requirements on unsettled forward transactions during F.Y. 2013-14 in view of the provisions of AS-11. Thus the assessment order u/s 143(3) is neither erroneous nor prejudicial to the interest of Revenue. 10. That the Pr. CIT has erred on facts and in law in holding that the AO has not examined the rates of purchase of goods from Amira C Foods International DMCC and the port of loading is in India. The Pr. CIT has failed to appreciate that in respect of goods purchased from Amira C Foods International DMCC, delivery was from India as Amira C Foods International DMCC had purchased goods from M/S PEC LTD. and STC LTD. in open tender system and wheat was dispatched directly from Krishna Patnam Port and Mundra Port to Bangladesh. The assessment has been completed after examining the various details. Hence the assessment order is legal and not erroneous or preju....
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....ent order and directing the AO to make de novo assessment when his notice and the order passed is limited to certain issues only. Hence the order passed u/s 263 is illegal and bad in law. 19. That the Pr. CIT has passed the order u/s 263 ignoring the evidence, documents filed by the assessee and material available on record. 20. That the explanations given, evidence produced, material place and available on record has not been properly considered and judicially interpreted and the same do not justify the order passed u/s 263. 21. That the assessee craves leave to alter, amend or withdraw all or any objections herein or add any further grounds as may be considered necessary either before or during the hearing. 9. The counsel for the appellant submitted that the order passed by the ld. PCIT is not valid and not maintainable in law as the same has been passed without considering the submissions of the assessee filed in response to the show cause notice u/s 263 of the Act. It is submitted that the order passed is in violation of principle of natural justice because the objections to proceedings u/s 263 of the Act and the submissions made in response to not....
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.... by the AO during the assessment proceedings. The appellant had appeared before the AO and filed replies, however, the ld. PCIT has completely ignored the detailed enquiry conducted by the AO and has, therefore, erred in exercising jurisdiction u/s 263 of the Act in respect of the issues which were already examined by the AO. 12. Relying on the decision of Apex Court in the case of Malabar Industrial Co. Ltd. V. CIT [(2000) 243 ITR 83], it is submitted that the power of CIT u/s 263 of the Act can only be exercised by the ld. PCIT when the twin conditions of the order being erroneous as well as prejudicial to the interest of revenue, are satisfied and the same cannot be exercised to substitute its own finding in place of the AO and therefore, the ld. PCIT cannot re-examine the issues already inquired into by the AO. Reliance is also placed on the Bombay High Court's decision in the case of CIT v. Gabriel India Ltd. [(1993) 203 ITR 108]. The power u/s 263 of the Act is to be exercised in the case of "no inquiry" and not in the case of "inadequate inquiry" or "lack of inquiry" whereas the case of the assessee is not even a case of lack of inquiry. 13. It is submitted that under ....
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.... the ld. PCIT, unmindful of the enquiries conducted by the AO during the assessment proceedings and submissions made by the assessee in response to notice u/s 263 of the Act, has merely observed that the assessment order was passed without making proper enquiries and it is a matter of record that LD. PCIT has himself not undertaken any enquiry to reach a conclusion that the order is erroneous and prejudicial to the interest of revenue. Therefore, in the absence of any justification for exercise of jurisdiction u/s 263 of the Act, the order of ld. PCIT passed u/s 263 of the Act is liable to be set aside. 17. There is difference between 'Lack of enquiry' and 'inadequate enquiry'. It is for the AO to decide the extent of enquiry to be made as it is his satisfaction as what is required under law. Reliance is placed on the decision of CIT v. Sunbeam Auto Ltd. [(2010) 332 ITR 167], wherein Hon'ble Delhi High Court has held that if there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass order u/s 263 of the Act, merely because the Commissioner has a different opinion in the matter and that only in cases where there is no enquiry, the ....
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....ansfer pricing risk parameters [in respect of international transaction or specified domestic transactions] b. Cases selected for scrutiny on non-transfer pricing risk parameters but also having international transaction or specified domestic transactions shall be referred to TPO only in the following circumstances: i. Where the AO comes to know that the taxpayer has entered into international transactions or specified domestic transactions or both but the taxpayer has either not filed the Accountant's report u/s 92E at all or has not disclosed the said transactions in the Accountant's report filed ii. Where there has been a transfer pricing adjustment of Rs. 10 crore or more in an earlier assessment year and such adjustment has been upheld by the judicial authorities or is pending in appeal; and iii. Where search and seizure or survey operations have been carried out under the provisions of Income Tax Act and findings regarding transfer pricing issues in respect of international transactions or specified domestic transactions or both have been recorded by the Investigation Wing or the AO. 20. During the course of hearing, the counsel of the a....
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....port of loading is Mundra port (india) and rate of purchase could not be verified for both parties as AO did not make a reference to TPO and foreign exchange fluctuation has not been examined. Regarding the issue of purchases made by the assessee from Amira C Foods International DMCC and port of loading of the same being in India (Mundra Port), the counsel for the assessee submitted that Amira C Foods International DMCC had purchased the goods from M/s PEC Ltd. and STC Ltd., which are government entities, in an open tender system and wheat was dispatched directly from Krishna Patnam Port and Mundra Port to Bangladesh. It was submitted that the appellant had rendered explanation with complete details to the ld. PCIT but the same has been ignored by him, he referred to pg 350 of the paper book in this regard. He further submitted that reference to TPO was not mandatory in view of the instructions No 3 of 2016. He also contended that all the purchase vouchers were produced before AO along with books of account during the course of assessment and were checked on test check basis by the AO. Moreover, the effect of foreign exchange fluctuation is duly recorded in the books of account whi....
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.... vide questionnaire u/s 142(1) had sought the justification of all the expenses which were debited in the Profit & Loss Account [relevant question being 19] and in response to this, the assessee had furnished party wise details of various expenses along with the other details of TDS deducted, etc. * Books of account and vouchers were produced and examined by the AO. The details have been asked by the AO and as such it cannot be said that no enquiry was made. The expenses have been allowed after due examination. Reliance was placed on this Hon'ble Tribunal's decision in Vodafone Essar South Ltd. v. CIT ([2011) 12 taxmann.com 233), which is further affirmed by the Hon'ble Delhi High Court in CIT v. Vodafone Essar South Ltd. ([2012] 28 taxmann.com 273) iv. Capital work in progress * It is submitted that the AO vide questionnaire u/s 142(1) had examined the said issue by a specific and detailed query [relevant question being 4] and the assessee had furnished its reply thereto. Therefore, it is submitted that necessary examination was already done by AO. The related interest is already capitalized. v. Unsecured Loans * The AO during the assessment procee....
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....xplanation 2 has been invoked by the ld. PCIT is not tenable as the same is nowhere noted to have been invoked by the ld. PCIT in its order. Reliance is placed on the decision of the jurisdictional Punjab & Haryana High Court in the case of CIT v. Jagadhari Electric Supply & Industrial Co. [[1983] 140 ITR 490] wherein the High Court dealt with a similar situation. He also submitted that the case of the appellant has not been selected on TP risk parameters or on the basis of the second condition of Instruction no. 3 of 2016 and the contention of the Ld. DR that the case of the appellant was selected for scrutiny on the basis of international transactions is misplaced. The counsel for the appellant submitted that the case of the was selected for scrutiny on account of mismatch in remittance in ITR and the amount received and this reason has nothing to do with the two reasons for selection laid down in the Instruction No. 3 of 2016 and therefore, it was not mandatory for the AO to refer the matter to the TPO. It is contended that Form No 15CA is for reporting the foreign remittance and it may be to AE or to anyone else, hence it cannot be linked with Transfer pricing risk para meters.....
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.... its case does not fall under the conditions referred to in the instruction no. 3 of 2016 and as such it wasn't obligatory for the AO to make a reference to TPO. The ld. PCIT has not dealt with this contention of the assessee and has given a bald finding that AO should have referred to TPO as per instruction no. 3 of 2016. The ld. PCIT has not specified under which condition of instruction No. 3 of 2016, the AO should have referred to TPO. The argument of the ld. DR that selection under CASS was made because of mismatch in foreign remittent and Form 15CA, also doesn't help the cause of the revenue. As per Rule 37BB, the reporting in Form 15CA is in respect of payment made to nonresident not being a company or to a foreign company. The reporting is not limited or is not particularly in respect of payment made to associated enterprise. We are of the view that the CASS selection was not on the basis of TP risk parameters as envisaged in instruction No. 3 of 2016 and as such the AO was not bound to make a reference to the TPO. 30. The assessee had filed various replies to the ld. PCIT in response to notice u/s 263 of the Act stating that all the issues raised by the ld. PCIT have be....