TaxTMI 
TaxTMI 
2020 (2) TMI 897
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.... length price thereof. He quotes CBDT Instruction No.3/2016 dated 10.03.16 regarding guidelines for implementation of transfer pricing provisions. The assessee's reply dated 15.11.18 contested the PCIT's above revision proposal on facts as well in law. The PCIT has thereafter directed the Assessing Officer to frame afresh assessment as follows: "5. I have considered the facts of the case and submission of the assessee. The issueis regarding completion of the impugned assessment without any reference to TPO indetermination of Arm's length price thereby in contravention with Board's circular no.3/2016 dt. 10.03.2016. It is the case of the assessee that all documents pertaining to specified domestic transactions as per from 3CEB with details and comparisons were furnished before the AO who had duly examined the same. While placing reliance on the decision of Ld. ITAT, Lucknow (Prem Manohar Gupta)pronounced on 20.03.2018 which had quashed sec. 263 proceedings based on the 2016 circular, the assessee iterates that there was no transfer pricing risks mentioned in the circular as to make the impugned assessment order prejudicial to the interests of revenue. It is evident from th....
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....has stated in his return of income on the said issue. It is not necessary for the CIT to make further enquiries before cancelling the assessment order. The Commissioner can regard the order erroneous on the ground that the Assessing Officer should have made further enquiries. 7. Hon'ble Karnataka High Court in the case of Thalibai F. Jain vs. ITO 101 ITR1, 6 (Karn) has held that where no enquiries made by the Assessing Officer on the relevant issue, assessment must be held to be prejudicial to the interests of the revenue and what is prejudicial to the interest of the revenue must be held to be erroneous though the converse may not always be true. 8.Hon'ble Supreme Court in the case of Malabar Industrial Co. Pvt. Ltd vs. CIT reported in (2000) 243 ITR 83, 87-88(SC) affirming the Hon'ble Kerala High Court decision (198 ITR 611) has held that the phrase "Prejudicial to the Interests of the Revenue" is of wide import and is not confined to only loss of taxes. If the A.O. has accepted the claim of the assessee without any enquiries then such assessment order passed by the A.O. was held to be erroneous. 9. In this regard it is mentioned that mere non enquiry would a....
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....has not made any enquiry on a particular issue, then such order in view of the above detailed discussion has to be construed as erroneous and prejudicial to the interest of Revenue and therefore, the impugned assessment order is erroneous and prejudicial to the interest of Revenue as Assessing Officer has failed to make any enquiry. 11. Having regard to the facts and circumstances of the case and in the light of the aforesaid decisions of Hon'ble Supreme Court and Hon'ble High Court, and in accordance with the amendment made in Section-263 of the Act with effect from01.06.2015, I hold that the impugned assessment order dated 19.12.2016passed by the A.O. is erroneous in so far as it is prejudicial to the interests of the revenue. I further hold, after giving the assessee an opportunity of being heard, that the impugned assessment order dated 19.12.2016is liable to set-aside. Therefore, I set aside the said assessment order directing the A.O. to frame the assessment afresh after considering the aforesaid observations, Hon'ble Supreme Court and Hon'ble High Court decisions and as per law. 12.In the result, the assessment order u/s 143(3) dated 19.12.2016 for A.Y.....
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....egard was furnished vide Para 9 of assessee's letter dated 09.12.2016 [ Page109 of paper book]. It was explained before the lower authorities as also before us that in clause 9A of Part A- OI of the Income-tax Return in ITR-6, the assessee was required to specify the quantum of the amounts debited to the Profit & Loss Account ,to the extent disallowable u/s 40A, to the persons specified in Section 40A(2)(b) of the Act. In other words in the ITR the assessee was expected to specify the amount which was disallowable in terms of Section 40A(2)(b)of the Act. On the other hand, in Clause 23 of the TAR read with Annexure - IX thereto, the auditor had reported the payments actually made by the assessee to the persons specified in Section 40A(2)(b) of the Act. It was explained that the tax auditor, while giving his report in conformity with the form prescribed by the Board u/s 44AB of the Act, was required to reportonly the amounts paid to persons specified in S 40A(2) during the relevant reporting period and he was not required to express his opinion as to whether the payments to the specified persons were excessive and for that reason any part thereof was disallowable u/s 40A(2) of t....
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....;s part was highlighted by the assessee in it's submission then in the impugned order the Ld. Pr.CIT himself completely digressed from the reason set out in the SCN but none the less justified his action on the ground that the reference to TPO was necessary because the assessee's case was selected for scrutiny under the category of 'complete scrutiny'. We are however unable to accept an altogether new case made out by the Ld. Pr. CIT while passing the impugned order, justifying his interference that for not making reference to the TPO, order of assessment was erroneous in terms of Section 263 of the Act. In the first instance, we note that the Ld. Pr. CIT himself gave up the reason set out in SCN viz., that one of the CASS reason for selection of scrutiny assessment was a transfer pricing risk parameter. Once it is established that the transfer pricing risk parameter was not the ground for selection of scrutiny assessment u/s 143(3) of the Act, then we have to agree with the ld. AR's submission that Para 3.2 of the CBDT Instruction No. 3 of 2016 was not applicable in the given facts of the present case and therefore the AO's order could not have been held to....
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....as 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 (c) where search and seizure or survey operations have been carried out under the provisions of the 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." 28. From perusal of the above, it is noted that none of the conditions prescribed in these Paras necessitating mandatory reference to TPO were satisfied in the instant case. In fact, we find that in the impugned order, Ld. Pr. CIT himself did not to make out a case that the assessee's case fell under any of the situations prescribed in Paras 3.2 & 3.3 requiring mandatory reference u/s 92CA(2) of the Act. The only ground on which the Ld. Pr. CIT ultimately justified his order requiring AO to make reference u/s 92CA mandatorily was that the assessee's case was selected under complete scrutiny criteria and therefore all possible enquiries should have been made by the AO inter alia including m....
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....d. Pr. CIT had justified invocation of power u/s 263 with reference to assessee's transactions with persons specified in Section 40A(2)(b) of the Act. In other words in CIT's opinion assessee's specified domestic transactions coming within the ambit of Section 92BA(i) of the Act should have been referred for transfer pricing scrutiny. We however note that the relevant provisions of Section 92BA were amended by Finance Act, 2017w.e.f. 01.04.2017 whereby clause (i) of sec. 92BA relating to any expenditure in respect of which payment have been made or is to be made to a person referred to clause (b) of sub- section (2) of section 40A of the Act was omitted. Now the question arises whether after the omission of clause (i) from the statute, the CIT can justifiably set aside the order of assessment for not making a reference to TPO for examining transactions coming within the ambit of Section 92BA(i) of the Act. In this regard, our attention was invited to the decision of the coordinate bench of this Tribunal in the case of DVC Emta Coal Mines Ltd &Ors Vs ACIT in ITA Nos. 2430-2432/Kol/2017 dated 01.05.2019 wherein it was held that the legal effect of clause (i) of Section 92....