AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1633
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....t order passed was erroneous and prejudicial to the interests of the Revenue. The Appellant prays that the order passed u/s. 263 of the Income Tax Act, 1961 may therefore please be quashed in appeal. 2. On facts and circumstances of the case and in law, the learned Principal Commissioner also failed to note that the assessment order was already a subject matter o appellate order passed by Commissioner (Appeals) at the time of revision and that in this circumstance; he was not competent to revise the assessment order. The Appellant prays that the order passed u/s. 263 of the Income Tax Act, 1961 may therefore please be quashed in appeal 3. The Appellant reserves the right to add to, alter or delete any of the above grounds with permission of Hon'ble Tribunal." 2. Briefly stated, the facts of the case are that the assessee firm which is engaged in the business of providing infrastructure facilities to educational institutions had e-filed its return of income for A.Y. 2012-13 on 30.09.2012, declaring total income of Rs. 7,51,720/-. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, the case was selected for scrutiny ....
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....n to exercise the power of revision did arise. The assessee to buttress its contention that the assessment order passed under Sec. 143(3) could not be revised, submitted that the revisional powers though could be exercised in a case where no inquiry as required under the law was done, however, the same could not be exercised for directing a fuller inquiry to find out whether the view taken is erroneous, specifically when the view had already been taken after carrying out an inquiry. The assessee further submitted that as per Explanation 2(a) of Sec. 263 introduced by the Finance Act, 2015 w.e.f. 01.06.2015, the order passed by the A.O would be deemed to be erroneous in so far it was prejudicial to the interest of the revenue, if the order was passed without making inquiries or verifications which should have been made. It was further submitted by the assessee that Explanation 2(a) to Sec. 263 would take within it sweep the orders passed by the assessing officer without carrying out inquiries or verifications, which a prudent officer would have carried out. 5. The assessee in order to drive home its contention that the order passed by the A.O under Sec. 143(3), dated 31.03.2015 was....
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....ede the order of the A.O with respect to the matter of interest on borrowed capital. 6. The assessee submitted that as a precautionary measure it had filed the TP Study Report and Form 3CEB during the course of the assessment proceedings. Based on these, the A.O chose not to make a reference to the TPO, because it was not an international transaction, and/or for the reason that the contemplated additions of Rs. 31,91,837/- under Sec. 36(1)(iii) and Rs. 4,829/- under Sec. 14A would be more than whatever the TPO might suggest after reviewing the transaction as an international transaction. It was thus the claim of the assessee that now when the A.O had passed the order after considering the option available to him and had made the maximum addition on the basis of the facts and information available before him, therefore, having arrived at a possible view, the order passed by him under Sec. 143(3), dated 31.03.2015 could not be revised. The assessee further in order to fortify its claim that the order passed by the A.O under Sec. 143(3), dated 31.03.2015 was not open for revision, submitted that as the assessee had carried the matter in appeal before the CIT(A)-42, Mumbai, who vide h....
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....the disallowance under Sec. 36(1)(iii) was sustained by him for the reason that the contentions of the assessee that the amount advanced to its WOS, viz. Universal Middle East FZCO was by way of commercial exigency and as a strategic investment, had not found favour with the appellate authority. However, it was noticed by the Pr. CIT that the CIT(A) while disagreeing with the assessee and upholding the disallowance of interest of Rs. 31,91,837/- made by the A.O under Sec. 36(1)(iii), had neither raised nor even discussed the issue of reference of the said international transaction to the TPO. In the backdrop of the aforesaid facts, it was observed by the Pr. CIT that the issue of determining the ALP of interest to be charged by the assessee from its WOS was not the same as disallowance under Sec. 36(1)(iii) of the Act, as the former was in context of the income to be charged including allowance for any expense or interest arising from any international transaction, while for the latter pertained to the claim of deduction from the income. The Pr. CIT thus held a conviction that as the issue of reference of the international transaction of the assessee to the TPO had neither been ref....
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.... tax payer, the A.O remained under an obligation to record a satisfaction before seeking the approval of the Pr. CIT to refer the matter to TPO. It was further observed by the Pr. CIT that where the applicability of Chapter X of the Act was objected by the tax payer, the A.O was required to specifically deal with it, so as to make sufficient compliance with the principles of nature justice. 8. On the basis of the aforesaid observations, the Pr.CIT held a conviction that as the A.O had failed to comply with the Instruction No.3 of CBDT with regard to the international transaction of the assessee, hence for the limited purpose of making a reference to the TPO, the order of the A.O, dated 31.03.2015 passed under Sec. 143(3) of the Act was held to be erroneous in so far as it was prejudicial to the interest of the revenue. Thus, on the aforesaid limited issue for making necessary compliance with the Instruction No.3/2016, dated 10.03.2016 of CBDT and also the provisions of Chapter X, specifically Sec. 92CA of the Act, the order of the A.O was set aside with a direction to make a reference to the TPO for determining the ALP relating to the international transaction involved in the case....
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....r the purpose of substituting his view as against that arrived at by the A.O. The Ld. A.R. in support of his aforesaid contention relied on the judgments of the Hon'ble High Court of Bombay in the case of CIT Vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom) & CIT Vs. Fine Jewellery (I) Ltd. (2015) 372 ITR 303 (Bom) and the judgments of the Hon'ble Supreme Court in the case of CIT Vs. Max India Ltd. (2007) 295 ITR 282 (SC) & CIT Vs. Greenworld Corporation (2009) 314 ITR 81 (SC). It was further vehemently submitted by the Ld. A.R. that as the A.O after making necessary inquiries and perusing the TP Study Report had formed a view that the transactions entered into by the assessee with its WOS were not in the nature of a transaction referred to in Sec. 92B of the Act, and the Transfer Pricing provisions were not applicable, therefore, the Pr. CIT could not have invoked his revisional jurisdiction on the ground of inadequate enquiry by the A.O. The Ld. A.R further submitted that as the assessee had answered the issues on the basis of which the revisional proceedings were initiated by the Pr. CIT, and the latter had while passing his order not shown as to how the same were erroneous, thus....
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.... that as on the date of framing of the assessment, viz. 31.03.2015, two of the CBDT Instructions relied upon by the Pr. CIT i.e (i). Instruction No. 15-2015, dated 16.10.2015; and (ii). Instruction No. 3/2016, dated 10.03.2016, were not available before the A.O, thus the assessment order passed by him could not be held as erroneous in so far it was prejudicial to the interest of the revenue, on the ground that the A.O had failed to comply with the said respective instructions. 10. Per contra, the Ld. Departmental Representative (for short 'D.R.') relied on the order passed by the Pr. CIT under Sec. 263 of the Act. It was submitted by the Ld. D.R that as the A.O while framing the assessment had failed to make a reference to the TPO as required by the CBDT Instruction No. 3, dated 28.05.2003, therefore, the Pr. CIT rightly appreciating that the order passed by the A.O under Sec. 143(3) of the Act, dated 31.03.2015 was erroneous in so far as it was prejudicial to the interest of the revenue, as the same was passed not in accordance with the Instructions issued by the CBDT, had thus rightly exercised the powers vested with him under Sec. 263 and had set aside the order of the A.O on t....
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....eodesicLtd. Vs. DCIT-8(1), Mumbai (2017) 79 taxmann.com 215 (Mumbai-Trib). 11. The ld. A.R in his rejoinder, submitted that as clause (c) and clause (a) to Explanation 2 of sub-section (1) of Sec. 263, are not interchangeable, as both of the respective clauses operate in their independent fields, therefore, clause (c) could not been substituted by the Pr. CIT while revising the order by clause (a). The ld. A.R submitted that the revenue cannot be permitted to add any new ground to support the order passed under Sec. 263 of the Act. The ld. A.R in support of his aforesaid contention relied on the judgment of the High Court of Punjab & Haryana in the case of CIT Vs. Jagadhri Electric Supply & Industrial Co. (1983) 140 ITR (P&H). It was further submitted by the ld. A.R that as the transaction of advancing interest free amount to its WOS was a shareholding transaction, thus for the said reason the assessee had not filed the transfer pricing audit report in Form 3CEB. 12. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We may herein observe that the Ld. A.R assailing the validity of th....
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....vanced by the Ld. A.R before us. We find that as the assessee had advanced an interest free loan to its WOS, viz. M/s Universal Middle East FZCO, UAE, which as observed by the Pr. CIT being a transaction of lending of money by the assessee to its associate enterprise, viz. M/s Universal Middle East FZCO, UAE, was clearly as per Sec. 92B(1) an international transaction carried out by the assessee during the year under consideration. We are unable to persuade ourselves to be in agreement with the claim of the assessee that the advancing of the amount to its WOS was not be characterized as an international transaction. Rather, the assessee pursuant to the query raised by the A.O in the course of the assessment proceedings, as regards the applicability of the transfer pricing provisions, had furnished with him Form 3CEB and TP Study Report. We are not impressed with the claim of the assessee that it had filed the TP Study Report and Form 3CEB with the A.O as a precautionary measure to avoid any future litigation and penal consequences. As a person who had entered into an international transaction during the previous year is required as per the mandate of Sec. 92E of the Act to obtain a....
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.... loans to its WOS, viz. Universal Middle East FZCO, UAE, had carried out an international transaction during the year under consideration, but had in blatant violation of the statutory obligation of filing the requisite details of the said international transaction in the prescribed Form 3CEB along with its return of income for the year under consideration, had however filed the same only during the course of the assessment proceedings. Be that as it may, in the backdrop of the aforesaid facts, we are of a strong conviction that the assessee cannot seek non-applicability of the CBDT Instruction No. 3/2003, dated 20.05.2003. We are of the considered view that the failure on the part of the A.O to have made a reference to the TPO during the course of the assessment proceedings, having rendered the order passed by him under Sec. 143(3), dated 31.03.2015 as erroneous in so far as it was prejudicial to the interest of the revenue, thus, had rightly been revised by the Pr. CIT. We are of the considered view that no infirmity emerges from the setting aside by the Pr. CIT of the order passed by the A.O, on the limited issue that a reference shall be made to the TPO for determining the ALP ....