TaxTMI 
TaxTMI 
2020 (2) TMI 947
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....r observed in assessment order that as per the CBDT's instruction No.3/2016, the transfer price issue had not been examined at all. 3. We proceed further to notice that the PCIT sought to assume his sec. 263 revision jurisdiction by treating the foregoing regular assessment as erroneous causing prejudice to the interest of the Revenue as follows:- "Sub: Show cause notice u/s 263 of the Income Tax Act, 1961 in the case of M/s Kritika Wires Pvt. Ltd. (PAN: AACCK5615N) for the A.Y.2014-15 - matter reg. This refers to the above. On examination of the assessment records of above mentioned assessment year 2014-15, it transpires prima facie that there was failure on part of the AO to assess the income correctly and as such, the instant order u/s 143(3) dated 23.11.2016 appears erroneous in so far as it is prejudicial to the interest of the revenue within the ambit of sec. 263 of the Income Tax Ac, 1961. In this case one of the reasons for scrutiny was "Large specified domestic transaction(s) (3CEB)". Therefore, it was mandatory to refer the matter to the Transfer Pricing Officer (TPO) for conducting transfer pricing Audit to ascertain ALP adjustment ....
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....d. vs. CIT 243 ITR 83 (SC) - CIT vs.Max India Ltd. 268 ITR 128 (P&H) [affirmed in 295 ITR 282 (SC)] - CIT vs. Kwalaity Steel Suppliers Complex 395 ITR - CIT vs. Amitabh Bachchan 384 ITR 200 (SC) - CIT vs. Hindustan Lever Ltd. 343 ITR 161 (Bom) - CIT vs. Vikas Plymers 341 ITR 537 (Del) - CIT vs. Sunbeam Auto Ltd 332 ITR 167 (Del) - CIT vs. Development Credit Bank Ltd 323 ITR 206 (Bom) - Vimgi Investment (P) td 290 ITR 5050 (Del) - Hari Iron Trading Co. vs. CIT 263 ITR 437 (P&H) - CIT vs. Gabriel India Ltd 203 ITR 108 (Bom) 6.3 It may be further noticed that in order to provide clarity on the issue of "erroneous in so far as it is prejudicial to the interest of the revenue", a new Explanation has been inserted to clarify that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in the opinion of the Principal Commissioner or Commissioners. '(a) The order is passed without making inquiries or verification which, should have been made, (b) The order is passed allowing any relief without....
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....statutory amendment in the Act as follows:- "4. We have given our thoughtful consideration to rival contentions reiterating both the parties' respective stands against and in support of the impugned revision jurisdiction. We find that Id. PCIT has exercised his section 263 revision jurisdiction only on account of the Assessing Officer's alleged inaction in not making reference to the TPO for determining arm's length price of assessee's specific domestic transactions. This tribunal's coordinate bench's decision in Eveready Industries India Ltd. vs. PCIT ITA No.805/Kol/2019 dated 13.12.19 holds that such a reference prescribed in section 92BA(i) regarding "any expenditure in respect of which payment has been made or is to be made to a person referred to in clause (b) of sub- section (2) of section 40A" stands omitted by the Finance Act 2017 w.e.f 01.04.17 and therefore, the foregoing omission is applicable with retrospective effect in the impugned assessment year 2014-15 as well. Learned coordinate bench's decision to this effect reads as under: "22. In Ground Nos. 5 to 7, the assessee has objected to Ld. Pr. CIT's finding with refere....
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.... the Income-tax Return in ITR-6 and Clause 23 of the TAR being materially different, and the figures reported in ITR and in Clause 23 of TAR did not match. 24. The Id. AR submitted that the CASS parameter referred only to mismatch of the figures reported in tax audit report in relation to payments made to persons referred 40A(2)(b) with the figures mentioned in income-tax return. The CASS reasons did not make reference to the 'transfer pricing audit report' furnished in Form 3CEB, as wrongly alleged by the Ld. Pr. CIT in his SCN. He therefore submitted that when the reason for selection under CASS was examined and the AD was satisfied with the explanation furnished for the same, the Ld. Pr. CIT could not justify invocation of power u/s 263 on the ground that before completion of assessment reference to TPO on transfer pricing risk parameter was mandatory in terms of Para 3.2 of the CBDT Instruction No. 3 of 2016. 25. Having considered rival submissions we find merit in the Id. AR's primary contention that the SCN proceeded on the wrong presumption that the assessee's case was selected on a transfer pricing risk parameter. We note that the para....
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....tion 3 of 2016. 27. So far as the Ld. Pr.CIT's finding justifying his case that the AO's order became erroneous and prejudicial to the interests of the Revenue for not referring the assessee's case to the TPO u/s 92CA of the Act on the ground that the assessee's case came with the category of 'complete scrutiny', we note that this contention of the Ld. Pr. CIT is in fact contrary to the extant instructions of the CBDT contained in Paras 3.2 to 3.3 of Instruction No. 3/2016 wherein the Board have set out the following specific situations/instances where the reference to TPO has been made mandatory: "3.2 All cases selected for scrutiny, either under the Computer Assisted Scrutiny Selection [CASS] system or under the compulsory manual selection system (in accordance with the CBDT's annual instructions in this regard -for example. Instruction No. 6/2014 for selection in F.Y 2014-15 and Instruction No. 8/2015 for selection in F.Y 2015-16), on the basis of transfer pricing risk parameters [in respect of international transactions or specified domestic transactions or both] have to be referred to the TPO by the AO, after obtaining the approval....
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....support of such conclusion the Ld. Pr. CIT has placed reliance on the CBDT Instruction No. 3 of 2016, the said Instruction nowhere even suggests let alone provides that every case of an assessee selected on non-transfer pricing risk parameter but involving 'complete scrutiny', the reference must be made to the TPO if such an assessee had entered into international transactions or specified domestic transactions during the relevant year. Instead in Para 3.3 the Board has enumerated only three specific instances/ situations when the reference to TPO has been made mandatory even though as per the CA SS, the case of an assessee is not selected on "transfer pricing risk parameter". We find that in the impugned order the Ld. Pr. CIT has not brought on record any material to show that the AO had acted in violation of the CBDT Instruction No. 3 of 2016 and for that reason the AO's order was erroneous and prejudicial to the interests of the Revenue. 29. Even with regard to CIT's allegation that in complete scrutiny case, the AO did not conduct any enquiries whatsoever with regard to transactions referred to in Section 40A(2)(b) as well as Section 92CA of th....
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....ent, would mean that clause (i) never existed in the statute and consequently no adverse inference with reference to omitted provision can be drawn against an assessee. While omitting the clause (i) of section 92BA of the Act. nothing was specified whether the proceeding initiated or action taken on this count can continue. Therefore, this Tribunal held that any proceeding initiated or action taken under that clause would not survive at all and any reference made to TPD under section 92CA in respect of transactions referred to in clause (i) of Section 92BA of the Act shall be invalid and bad in law. 31. Applying the ratio laid down in the foregoing decision to the facts of the present case. we note that when the impugned order was passed by the Ld. Pr. CIT. clause (i) of section 92BA of the Act had already been omitted by the Finance Act. 2017 and in that view of the matter the Ld. Pr. CIT could not set aside the order for alleged non-compliance with provision of law which no longer existed in the statute as on the date of order. The Ld. Pr. CIT's direction requiring the AD to consider making a reference to the TPD in the set aside proceedings is also contrary to the v....