TaxTMI 
TaxTMI 
2020 (1) TMI 1198
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.... Enterprises (AE). On receipt of TPO, the assessing officer (AO) passed assessment order u/s 143(3) r.w.s. 144C(13) on 27-07-2015 determining income at Rs. 159.85 crores and after set off of brought forward losses of Rs. 159.85 crores, the income was assessed at Nil. 3. Thereafter, the case was reopened u/s 147 by issuing notice u/s 148 on 30-03-2016. The assessment was reopened on the basis of information from investigation wing of revenue Calcutta that assessee has taken accommodation entries from Tara Trading Company and Annapurna Company. The assessment was completed u/s 143(3) r.w.s. 147 on 29-12-2017 by making additions on account of the alleged bogus entry. Thereafter, the assessment order dated 29-122017 revised by Ld. CIT(LTU) vide order dated 25-06-2018. While revising the assessment order, the Ld. CIT(LTU) held that scrutiny of computation of deduction u/s 10B revealed that while computing profit of unit eligible, the assessee company had added back deemed mark up of Rs. 56.75 crores in respect of transaction with overseas related parties. This addition was on account of deemed mark up of 18% on non E&P services and P&T unit made by assessee to bring the international....
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....noting dated 07-12-2017 as well as show cause notice dated 08-12-2017 asked the assessee as to why tax holiday benefit claimed on suo moto transfer pricing adjustment should not be denied to the assessee. The said show cause notice was replied by assessee vide reply dated 18-12-2017. The assessee explained in its reply that in the draft assessment order held that the tax holiday benefit under section 10B should be restricted to the gross total business of the assessee. Accordingly the AO computed tax holiday benefit under section 10B. The assessee also filed copy of the reply dated 18.12.2017 and other related documents. In the reassessment order dated 29-12-2017, the contention of assessee with regard to the tax holiday benefit was accepted by AO. The assessee also stated that the order passed by AO is neither erroneous nor prejudicial to the interest of revenue. The order is passed in accordance with the provisions of law. The assessment order was passed after making necessary enquiries and verification of facts. It was specifically submitted that wherever two opinions are possible and the AO has taken a possible view, the same cannot be controverted u/s 263. The assessee prayed ....
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....n under section 1 OB of the Act is not allowable on suo-moto Transfer Pricing adjustments. 3.2 On the facts and in the circumstances of the case and in law, the learned CIT has erred in deciding the issue on the merits against the Appellant without dealing with the decision of CIT v. I-Gate Global Solutions Ltd. (ITA No. 453/2008) dated 17 June 2014 decided by the Hon 'ble Karnataka High Court. 3.3 The learned CIT has failed to appreciate that the decision of I-Gate (supra) has not been litigated further by the Income-tax department. 4. Initiation of penalty proceedings under section 271(l)(c) of the Act 4.1 On the facts and in the circumstances of the case and in law, the learned CIT has erred in directing the AO to initiate penalty proceedings under section 271(l)(c) for furnishing inaccurate particulars of income. 4.2 The learned CIT has further failed to appreciate the fact that the Appellant has not furnished inaccurate particulars of income in its Return of Income prejudicial to the interest of the revenue. The learned CIT failed to appreciate that the issue involved is debatable and has been examined by the AO. 1.3 On....
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.... was determined by AO, that mistake has been corrected by the Tribunal by setting aside the order passed by the commissioner as well as AO. 8. The Ld.AR further submits that besides the decision of Hon'ble Karnataka High Court in I.GATE Global Solutions Ltd (supra), there are several decisions of Tribunal in favour of assessee wherein similar relief was granted by Tribunal by taking view that provisions of section 92C(4) will not be applicable wherein the pricing adjustment has been made voluntarily by assessee and income has been offered to tax which forms part of profit of the business and deduction u/s 10B / 10A cannot be denied. In support of his submissions the ld AR for the assessee relied on the following decisions:- • A.T. Kearney India Pvt Ltd vs ACIT(ITA No.2623/Del/2015), • M/s Austin Medical Solutions Pvt Ltd vs ITO, I.T.(T.P.) A.No.542/Bang/2012, • Sumtotal System India (P) Ltd Vs DCIT [2017] 88 taxmann.com 897 (Hyd Trib), • Approva Systems Pvt Ltd Vs DCIT (ITA No.1051/PUN/2015) and • Karnataka High Court in CIT Vs I Gate Global Solution Ltd (ITA No. 452/2008 dated 17th June 2014) 9. The Ld. AR furt....
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....ng the explanation furnished by assessee, the contention of assessee was accepted by AO in re-assessment order as no adjustment was made by AO in assessment order dated 29-12-2017 passed u/s 143(3) r.w.s. 147. The Ld.AR submits that the AO, after considering the explanation furnished by the assessee has passed the assessment order after his full satisfaction though there is no reference about the examination of issue in the assessment order. The Ld.AR submits that once the AO raised query, queries raised by AO was duly replied and AO passed the assessment order, the assessment order cannot be branded as erroneous or not in accordance with law when it was passed after due enquiry and full satisfaction by AO. 13. In support of his submission, the Ld.AR of the assessee also relied upon the decision of Hon'ble Apex Court in case of Malabar Industrial Co. Ltd reported vide 243 ITR 83(SC); decision of Bombay High Court in CIT Vs Gabriel India Ltd reported vide 203 ITR 108 (Bom), decision of Karnataka High Court in CIT Vs M/s I.Gate Global Solutions (P) Ltd (supra). 14. On the other hand, the Ld. DR for the revenue supported the order of Ld. CIT (LTU). The Ld. DR further submits tha....
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.... • The Assessing Officer exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrives at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion. • The CIT, before exercising his jurisdiction under section 263 must have material on record to arrive at a satisfaction. • If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the Assessing Officer allows the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard." 16. In the light of aforesaid principals, now we shall examine the facts of the present case. During the course of hearing the ld AR for the assessee vehemently submitted the assessee made suo moto disallowance of the deduction under section 10B, the assessing officer while passing the assessment order AO computed tax holiday benef....
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....ra Trading Company & Annapurna Company about the accommodation entries provided by them. In the re-assessment order passed u/s 144 r.w.s.147, the AO made addition u/s 68 of Rs. 24,19,212/-. 18. At the cost of repetition, we may note that the Ld.AR of the assessee vehemently argued that during re-assessment, the AO made necessary enquiries with regard to the applicability of Proviso to section 92C(4) in respect of deduction u/s 10A / 10B / 10AA. We have noted that the AO vide question No.1 in Annexure to notice dated 08-12-2017 raised the similar question as raised by Ld.CIT(LTU) in her show cause notice u/s 263. The assessee filed its reply vide reply dated 08-122017, copy of which is filed at pages 264 to 270 of the paper book. In the reply, the assessee stated that in the draft assessment order, certain additions / disallowances were proposed, including transfer pricing adjustment to the total income of the assessee. In the draft assessment order it was held that tax holiday benefit u/s 10B should be restricted to the gross total business income. It was also explained that AO computed tax holiday benefit u/s 10B of Rs. 69.46 crores instead of Rs. 90.21 crores as claimed by the....
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....0A cannot be denied. Further, the Bangalore Tribunal in M/s Austin Medical Solutions Pvt Ltd (supra) while relying upon the decision of I Gate Global Solutions Ltd (supra) while referring the decision of Tribunal and Hon'ble Karnataka High Court held that once the assessee suo moto allowed the deduction u/s 10A in the return of income while determining the ALP, the revenue cannot deny the deduction u/s 10A. Similar view was taken by Hyderabad Tribunal in Sumtotal Systems India (P) Ltd Vs DCIT (2017) 88 taxmann.com 897 (Hyderabad-Trib.) while relying upon the decision of Karnataka High Court in I Gate Global Solutions Ltd (supra). 21. The Ld.CIT (LTU) revised the assessment order by referring the decision of Deloitte Consulting India Pvt Ltd (supra) and Agilisys IT Services India (P) Ltd Vs ITO (supra), in our view the said decision will not stand because of the decision of Hon'ble Karnataka High Court in CIT Vs I Gate Solutions (supra), on the similar issue on similar facts. We are conscious of the facts that the decision is of nonjurisdictional High Court is binding on Tribunal as held by Hon'ble Bombay High Court in CIT Vs Godavaridevi Saraf (1978) 113 ITR 589 (Bom). Now contr....