TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1774
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....g: (i) by making an addition/disallowance/adjustment of Rs. 1,27,76,315/- out of interest payable/paid by the Appellant on Fully & Compulsorily Convertible Debentures (FCCD's) as issued by it to its Associated Enterprise (AE); (ii) by ignoring the fact that interest @16% per annum on such FCCD's as per Security Holders Agreement entered into by the Appellant and the AE was at arm's length price/rate; (iii) in not accepting or ignoring the detailed transfer pricing study/economic analysis as undertaken by the Appellant for justifying the interest @16% per annum to be at arm's length price; (iv) in not appreciating the fact that FCCD's being hybrid instruments i.e. a mix of debt and equity, carried a higher risk and hence could not be compared with plain vanilla loan or bond instruments/arrangements; (v) in not considering or ignoring the fact that interest @16% per annum on FCCD's by adopting PLR of SBI plus 300 basis points was in accordance with FEMA regulations; and (vi) by inappropriately restricting the interest rate to @12.25% per annum by not fully considering / appreciating the facts / submissions / evidence produced made/filed before....
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.... addition as made is not based on any incriminating material found during the course of search and further no assessment for such year was pending on the date of search. 2. That in the absence of any incriminating material found during the course of search relating to international transaction as undertaken with the AE, no reference u/s 92CA(1) of I.T. Act could have legally been made by the AO to the TPO particularly since no assessment for such year was pending on the date of search. The above additional grounds are based on the facts of the case of the Appellant where no incriminating material was found during search proceedings relating to the international transaction as undertaken by it with the AE. Moreover, the assessment for the year under consideration having been completed on 05/09/2010 vide intimation passed u/s 143(1), therefore, on the date of search as conducted on 29/10/2013, no assessment for such year was pending. As per ground No. 1 as already raised in the memo of appeal, the Appellant has already challenged the illegality of the above addition and the additional grounds are being raised in order to make them more specific. Moreover, as per Ground No. 7 as....
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....ectly assess the tax liability of an assessee." 8. Similarly, the Hon'ble Apex Court in the case of CIT Vs Sinhgad Technical Education Society (2017) 397 ITR 344 (supra) held as under: "That the Tribunal permitted the assessee to raise the additional ground on the ground that it was a jurisdictional issue taken up on the basis of facts already on record, that under section 153C of the Act, incriminating material which was seized had to pertain to the assessment years in question, and that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. The Tribunal found that the material disclosed in the satisfaction note belonged to assessment year 2004-05 or thereafter. The Tribunal rightly permitted this additional ground to be raised and correctly dealt with the ground on the merits as well. The High Court was right in affirming this view of the Tribunal." 9. In the present case also, the assessee raised the additional grounds which were on a jurisdictional issue on the basis of facts already on record. Therefore, the same deserve to be admitted. In view of the above, the legal grounds raised by the assessee are admitted....
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....tions, the maximum rate of interest that could be paid on FCCDs subscribed by associated enterprise would be 16% per annum (13% plus 300 basis points) which could be considered as proposed price at which transaction could happen. It was stated that FCCDs were hybrid instrument which exhibited features of both debt as well as equity, therefore, merely using the SBI PLR for benchmarking the transaction of payment of interest on FCCDs was not appropriate. It was also stated that entire amount of interest of Rs. 5,45,12,277/- paid by the assessee during the relevant previous year was capitalized in the books of the assessee and was not claimed as expenditure. Therefore, no adjustment on account of international transaction of payment of interest was warranted in the case of the assessee. Reliance was placed on the decision of the ITAT Delhi Bench in the case of Honda Motorcycles and Scooters India Pvt. Ltd. Vs ACIT (ITA No. 1379/Del/2011). It was pointed out that the ld. DRP vide order dated 21.11.2014 in the case of M/s Gujarat Guardian Ltd. for the assessment year 2010-11 deleted the Transfer Pricing addition holding that the engineering fees paid by the assessee had been capitalized....
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.... was also submitted that the intimation sent u/s 143(1) of the Act was also an assessment. The reliance was placed on the judgment of the Hon'ble Karnataka High Court in the case of CIT Vs IBC Knowledge Park P. Ltd. 385 ITR 346. It was also stated that the TPO/AO incorrectly had taken SBI PLR at 12.25% as prevalent on 01.01.2009 whereas at the time of issue of FCCDs vide Share Subscription Agreement dated 11.12.2008, the correct SBI PLR was 13% as prevalent on 10.11.2008. A reference was made to page nos. 143 & 144 of the assessee's compilation which is the copy of the SBI PLR rate as extracted from SBI portal. It was accordingly submitted that the TP adjustment/addition which had been made because of the differential in the interest rate was within the acceptable range of 5% as permitted u/s 92C of the Act and that the risk factors on account of such unsecured and hybrid/quasi equity instrument had not been factored by the authorities below while computing the ALP of interest rate. It was also stated that in the absence of the assessee having claimed any deduction on account of interest on FCCDs during the year under consideration, no addition out of interest could have been made ....
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....ashed the assessment. For the assessment year 2005-06, though no order under section 143(3) had been passed, an intimation under section 143(1) had been issued. The Tribunal held that for the purpose of section 153A read with section 153C of the Act, an intimation under section 143(1) was also an order of assessment. It upheld the validity of the assessment for the assessment year 2005- 06." It has further been held as under: "That one of the conditions precedent for invoking a block assessment pursuant to a search in respect of a third party under section 158BD of the Act, i.e., recording satisfaction that undisclosed income belongs to the third party, which was detected pursuant to a search had not been complied with. Though documents belonging to the assessee were seized at the time of search operation, there was no incriminating material found leading to undisclosed income. Therefore, assessment of income of the assessee was unwarranted." 20. In the present case also, although the assessment was not framed u/s 143(3) of the Act but an intimation was issued u/s 143(1) of the Act, however, the time to issue the notice u/s 143(2) of the Act has already expired before the sea....
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....nducted requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise, (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income" of the six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six assessment years in which both the disclosed and the undisclosed income would be brought to tax. (iv) Although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made with....
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....could give even remote possibilities of altering the income of the assessee based on any incriminating documents. Admittedly both the assessment years in these appeals are completed assessments in case of the assessee. The reliance placed upon by the learned authorized representative on the decision of the Hon'ble Delhi High Court in the case of C/T v. Kabul Chawla [2016] 380 ITR 573 (Delhi) where original assessment have been made under section 143(1) of the Act is apt and squarely covers issue in favour of the assessee. The Hon'ble High Court in paragraph No. 37 of that decision has held that no addition can be made in the hands of the assessee in the absence of any incriminating material unearthed during the course of search or requisition of documents. On reading of the order of the Assessing Officer we could not find that there is any incriminating material referred to by the Assessing Officer which is found during the course of search for making these additions. Therefore, respectfully following the decision of the Hon'ble Delhi High Court in the case of CIT v. Kabul Chawla (supra) we confirm the order of the learned Commissioner of Income-tax (Appeals) and ....