TaxTMI 
TaxTMI 
2021 (7) TMI 939
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....d 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 letter dated 22.11.2018. Copy of this letter has been placed on page no. 1 to 11 of ....
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....ing 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 or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functi....
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....r 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 the action of the CIT taken u/s. 263. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries ....
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....h 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 4,03,135/- 7. Subhochandra K Shah HUF Interest 3,63,631/- 10. At this stage, we would like to take note of the definition of expression "specified domestic transaction" provided under section 92BA, which reads as under: 92BA. For the purposes of this section and sections 92, 92C, 92D and 92E, "specified domestic transaction" in case of an assessee means any of the following transactions, no....
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....ill 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 you about background of business which is relevant to explain this point. Earlier in 1996 when the assessee started the business in the name of G.N. Textiles of trading in knitted fabrics, it used to source ready fabrics from Ludhiana and Tirupur. Thereafter, slowly he realized that it is beneficial to get the fabric manufactured and sell it. Hence, new unit viz. Global Enterprise in proprietorship of HUF of assessee was started in 2006 with its branch located at Ludhiana. It started to purchase yarn there, get it processed like dyeing, knitting, finishing etc. at premises of job workers and sell r....
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....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 nos. 2 to 6. Only transaction, which could be fallen in the definition of specified domestic transaction is transaction mentioned at Serial no. 1, and in the case of the assessee, that transaction could be purchase from the related parties. Now at the time of assessment proceedings, the ld. AO did not make reference to the TPO, but by the time, the ld. Commissioner took cognizance of the record for re-initiation of assessment order by exercising power under section 263. This clause has been omitted from the statute book. Therefore, the question before us is, whether in the absence of sub-clause (i) of section 92BA in the provision can still be transaction of the assessee regarding purchase made from the related party deserves to be re....
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....n 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 in a statute is omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonably inferred that the intention of the legislature is that the pending proceedings shall not continue but fresh proceedings for the same purpose may be initiated under the new provision." 6. In fact, Co-ordinate Bench under similar circumstances had examined the effect of omission of sub-section (9) to Section 10B of the Act w.e.f. 01.04.2004 by Finance Act, 2003 and held that there was no saving clause or provision introduced by way of amendment by omitting sub-section (9) of section 10B. In the matter of General Finance Co. v. ACIT, which judgment has also been ta....