TaxTMI 
TaxTMI 
2019 (7) TMI 1486
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....ansfer Pricing Officer (TPO) to verify whether the specified domestic transactions were at arm's length price or not. 3. In the facts and in the circumstances of the case, Ld. Pr. CIT-2, Indore erred in observing for the purpose of passing order under section 263 of the Act the assessment order has been passed without making necessary enquiries and investigations. 4. In the facts and in the circumstances of the case, Ld. Pr. CIT-2, Indore erred in setting aside the order to the file of Ld. Assessing Officer with a direction to the Ld. Assessing Officer to refer the large specified domestic transactions mentioned in Form 3CEB to the TPO and pass a fresh assessment order though limiting it to the issue of large specified domestic transactions only. 5. The appellant craves leave to add, amend, alter or otherwise raise any other ground of appeal." 2. Briefly stated facts are that the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as 'the Act') was framed vide order dated 29.9.2016 assessing the total income at Rs. 17,47,35,360/-. Subsequently, the Ld. Pr. CIT from the records observed that the assessee had made specific domestic transactions as it had made....
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.... and Company: It is a partnership firm. On reference to the return filed for the impugned year it is evident that it is taxable at maximum rate of 30%. There is no tax arbitrage. [PB 22-24] c. Vishnu Prasad Bindal: Assessee is an individual. On reference to the return filed for the impugned year it is evident that he is taxable at maximum rate of 30%. There is no tax arbitrage. [PB 25-28] d. Narayan Bindal: Assessee is an individual taxable at maximum rate of 30%. There is no tax arbitrage. e. Hitesh Bindal: Assessee is an individual. On reference to the return filed for the impugned year it is evident that he is taxable at maximum rate of 30%. There is no tax arbitrage. [PB 29-32] f. Geeta Devi Bindal: Assessee is an individual. On reference to the return filed for the impugned year it is evident that she is taxable at maximum rate of 30%. There is no tax arbitrage. [PB 33-36] g. Arpita Bindal: Assessee is an individual taxable at maximum rate of 30%. There is no tax arbitrage. 4. The transaction entered with ARKA Carbon Fuels Private Limited has already been assessed and no upward adjustment has been made by Ld. TPO. For the transactions entered with all the other par....
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....n account of this contingency, the order becomes prejudicial to the interests of the revenue." [emphasis supplied] b. Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. - [2000] 243 ITR 83 - order pronounced on 10.02.2000 - HEAD NOTE - "Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1983-84 - Whether in order to invoke section 263 Assessing Officer's order must be erroneous and also prejudicial to revenue and if one of them is absent, i.e., if order of Income-tax Officer is erroneous but is not prejudicial to revenue or if it is not erroneous but is prejudicial to revenue, recourse cannot be had to section 263(1) - Held, yes - Whether if due to an erroneous order of ITO, revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to interests of revenue - Held, yes - Assessee-company entered into agreement for sale of estate of rubber plantation - As purchaser could not pay instalments as scheduled in agreement, extension of time for payment of instalments was given on condition of vendee paying damages for loss of agricultural income and assessee passed resolution ....
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....pplied] d. Hon'ble Karnataka High Court in the case of V. G. Krishnamurthy - [1985] 20 Taxman 65 - order pronounced on 19.03.1984 - Para 10 - "Section 263 can be invoked by the Commissioner only when he prima facie finds that the order made by the ITO was erroneous and was prejudicial to the interests of the revenue. Both these factors must simultaneously exist. An order that is erroneous must also have resulted in loss of revenue or prejudicial to the interests of the revenue. Unless both these factors co-exist or exist simultaneously, the Commissioner cannot invoke or resort to section 263. It cannot be exercised to correct every conceivable error committed by an ITO. Before the suo moto power of revision can be exercised, the Commissioner must at least prima facie find both the requirements of section 263, namely, that the order sought to be revised is prima facieerroneous and prejudicial to the interests of the revenue. If one of the other factor was absent, the Commissioner cannot exercise the suo moto power of revision under section 263." [emphasis supplied] 7. In the instant case though the assessment order at best may be considered erroneous but it is not prejudicial ....
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....nched or continued by invoking section 6 of General Clauses Act after said omission and, therefore, proceedings against appellant had to be quashed - Held, yes" 10. Reliance is also placed on the decision of Hon'ble Bangalore Bench of ITAT in the case of Texport Overseas Private Limited - IT(TP)A No. 1722/Bang/2017 - order pronounced on 22.12.2017 - Para 9 - "From the aforesaid judgments, it has become abundantly clear that once a particular provision of section is omitted from the statute, it shall be deemed to be omitted from its inception unless and until there is some saving clause or provision to make it clear that action taken or proceeding initiated under that provision or section would continue and would not be left on account of omission.". [emphasis supplied] Considering the above facts, circumstances of the case, submissions made, documents on record and judicial precedence, appeal of the assessee be allowed." 4. Ld. D.R. opposed the submissions and supported the order of the Ld. Pr. CIT. Ld. CIT (DR) submitted that exfacie the assessing officer did not comply with the requirement of law. Ld. CIT(DR) drew our attention to the assessment order to buttress the content....
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....to exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i). the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent -- if the order of the Income-tax Officer is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue-- recourse cannot be had to Section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of the revenue" is not an expression of art and is not defined i....
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....der passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue. Rampyari Devi Saraogi Vs. Commissioner of Income-tax [67 ITR 84] and in Smt. Tara Devi Aggarwal Vs. Commissioner of Income-tax, West Bengal [88 ITR 323] (SC)." 6. If we apply the ratio held down by the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. (supra) on the facts of the present case there would not be any infirmity into the order of Ld. CIT(A) in holding that assessment order is erroneous if it is found that the A.O. has not followed the mandate of law. It is also to be examined what prejudice would be caused if such mandate of law was not followed by the A.O. There is no dispute with regard to the fact that transaction in question fall under the category of 'specified domestic transaction'. In terms of section 40A(2)(b) of the Act it has to be examined whether such transactions are within the arm's length price (in short 'ALP'). The moot question is whether the A.O. is authorised by law to examine and compute arm's length price related to 'specified domestic transactions'. Let us examine the law on this point. The Ld. Pr. CIT ....
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....t such provision was never on the statute book. He contended that it is a settled principle that where provision is omitted, it should be deemed to have never been part of the statute at any point of time. The reliance is placed on the decision of the Hon'ble Apex Court rendered in the case of General Finance Company Vs. ACIT (2002) 124 Taxman 432 (SC). There is merit into this contention as the Hon'ble Apex court has referred to the Judgements by the Hon'ble constitutional bench of the Supreme Court rendered in the case of Kolhapur Cane Sugar Works Limited Vs. UOI (2000) (2) SCC 536. The Hon'ble Apex court in General Finance Company Vs. ACIT (supra) after considering the submissions of the Ld. Counsel for the revenue in that case held as under: "8. Though we find the submissions of the learned counsel to be forceful, we are constrained to follow the two decisions of the Constitution Benches of this Court in Rayala Corpn. (P) Ltd.'s case (supra) and Kolhapur Canesugar Works Ltd.'s case (supra). This view has held that field for over three decades and reiterated even as late as two years ago. Non-compliance with section 269SS attracted prosecution as well as penal....