TaxTMI 
TaxTMI 
2021 (7) TMI 939
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....assessment and ultimately, the ld. AO has passed assessment order under section 143(3) of the Act on 17.11.2016. The ld. AO has determined taxable income of the assessee at Rs. 57,75,980/-. He made the following additions to the total income of the assessee: i) Disallowance of commission expenses : Rs. 13,81,400/- ii) Disallowance of interest expenses : Rs. 5,80,490/- iii) Disallowance u/s. 14A : Rs. 32,386/- iv) Disallowance of labour expenses : Rs. 3,83,630/- 4. The ld. Commissioner while going through the assessment order formed an opinion that in Form No. 3CEB the assessee has shown a domestic transaction of Rs. 19,44,64,576/-. According to him, it is a specified domestic transaction and its value is more than Rs. 5 crores. Therefore, this transaction should have been referred to the TPO by the AO for determining arm's length price, and only thereafter the assessment order should have been framed. This action of the AO is erroneous which has caused prejudice to the interest of the Revenue. Accordingly, he issued a notice under section 263 of the Act. 5. In response to the notice, the assessee has filed detailed submission vide lette....
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....IT-DR relied upon the order of the ld. Commissioner. 7. We have duly considered rival submissions and gone through the record carefully. Section 263 of the Income Tax Act has direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under: "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner o....
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....e an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s. 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging ....
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....erroneous simply because in his order he does not make an elaborate discussion in that regard. 9. In the light of the above, let us examine the facts of the present case. A perusal of the transactions entered with the related parties whose value at the most could be determined at arm's length, are the transactions with related parties. We have noticed the break-up of such transactions (supra) and at the cost of repetition, we take this transaction again below: Sr. No. Date Particulars Amount Remarks 1 AY 2014-15 Transactions entered with related parties is as under: Transaction with related parties are duly disclosed in Form 3CEB Particulars Nature 1. Global Enterprise (Prop. Ashish S Shah HUF) Purcha se 19,36,86,462/- 2. Amiben P Shah Interest 2,063/- 3. Diptiben D Shah Interest 3,095/- 4.SwatibenSShah Interest 3,095/- 5. Neenben KShah Interest 3,095/- 6. Subhodchandra K Shah Interest 4,03,13....
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.... to prepare and submit as much details and now we are submitting those as below: 1. Point no. 1 of notice It seems that scrutiny is attracted due to following 3 broad points on which you sought to file a. Large commission expense and low net profit Kindly note that assessee deals in knitted fabrics and much of the sales is done through commission agents and brokers and hence, commission expenses is found to be high. For the sake of comfort, we attempt to give comparative list of past 2 years also which will clarify that during the year under assessment, commission as % of sales has reduced but sales is much dependent upon commission agents. Financial Year Commission Expenses (Amount Rs.) Sales as per Audit Report (Amount Rs.) Net Profit as per Audit Report (Amount Rs.) Commission as a % of sales 2013-14 23,46,917/- 22,34,96,914/- 32,43,340/- 1.05% 2012-13 26,21,040/- 16,64,70,249/- 26,24,854/- 1.57% 2011-12 18,35,747/- 11,70,91,114/- 22,15,512/- 1.57% b. Justification of large specified domestic transaction (form 3CEB) In this connection, we would like to brief....
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....transaction along with copy of purchase invoices: With regard to our major purchase from related party viz. Global Enterprise, you have asked to justify purchase prices with those of other unrelated suppliers. In this regard, please find herewith enclosed detailed working of purchase price comparison in respect of material purchased from Global Enterprise with other unrelated party either on same day or nearby date along with few sample purchase bills of Global enterprise i.e. related party as well as of other unrelated parties. List of unrelated suppliers of which copies of bill are produced: a) Dewan Knitwear b) Sweety fabrics Pvt. Ltd. c) Amit enterprise Kindly note that there is difference in prices on account of different material also." 12. On the basis of the explanation given by the assessee during the course of scrutiny assessment, the ld. AO did not refer this transaction to the TPO for determination of ALP. Now reverting back to section 92BA, it reveals that transaction mentioned at Sr. No. 2 to 6 are not attracted in the case of the assessee; because he has not undertaken any of the transaction mentioned in serial....
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....atter of Kolhapur Canesugar Works Ltd. v. Union of India AIR 2000 SC 811 whereunder Apex Court has examined the effect of repeal of a statute vis-à-vis deletion/addition of a provision in an enactment and its effect thereof. The import of section 6 of General Clauses Act has also been examined and it came to be held: "37. The position is well known that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute-book as completely as if it had never been passed, and the statute must be considered as a law that never existed. To this rule, an exception is engrafted by the provisions of section 6(1). If a provision of a statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In a case where a particular provision i....