TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 741
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....toring back to the AO to pass fresh assessment order with the following direction: (a) To make reference to TPO for computation of ALP after approval of PCIT as required U/s 92CA in respect of International Transactions of Rs. 7.11 Crore and obtain report from him, thereafter modify the assessment order by making such addition. (b) To make addition to the total income and / or to the book profit U/s 115JBwherever required in accordance with the provision of Income Tax as discussed in para 10 of assessment order. 3. That the order passed originally by the assessing officer under section 143(3) of the Income tax was neither erroneous nor prejudicial to the Interest of Revenue, therefore the impugned order passed U/s 263 by the Ld. Principal Commissioner of Income Tax, Udaipur is bad in law and clearly beyond the ambit of section 263 of the IT Act and liable to be quashed. 4. The appellant craves leave to add, alter, amend and modify any grounds of appeal on or before the date of hearing." 2. The assessment for the AY 2016-17 was completed u/s 143(3) by ACIT, circle 2, Udaipur vide order dated 14.12.2018. The PCIT issued notice dt. 17.11.2020 & 7.12.2020 u/s 263 of the Income....
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....sessing Officer has not made proper inquiries during the course of assessment proceedings without bringing on record any finding or pointing out any material as to how the assessment order is erroneous and has caused loss to the revenue. 5. The assessee further pleaded that a bare statement to the effect that the AO has not done proper inquiries per se doesn't constitute a valid basis for assuming jurisdiction u/s 263 of the Act. It is a settled law that the provisions of section 263 cannot be invoked on mere presumptions or suspicion that an inquiry might have unearthed any escaped taxable income as held by the Hon'ble Delhi High Court in its judgment in the case of CIT vs. Leisure Wear Exports Ltd. (2010) 46 DTR (del) 97wherein the Hon'ble Court while relying upon the principle laid down by the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd 243 ITR 83 (SC) has held that in the entire order emphasis laid by the CIT is that in respect of four issues mentioned by him, no queries were raised by the AO. On this premise, though it is observed that there was no application of mind on the part of the AO and the AO has not recorded any reasons to justify the omission to con....
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.... of the AO, but neither the query nor the answer was reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. 9. The assessee further relied on the case CIT v. Sunil Sankhla (2019) 411 ITR 437 (Raj.)(HC), the Hon'ble Jurisdictional High court where it was observed that theCommissioner passed the revision order on the ground that the AO has passed the order without verification. Tribunal held that the AO has passed the order after examining the details and the financial statements had accepted the business profit declared by the assessee and had adopted a view that the order passed by the Assessing Officer was not prejudicial to the interests of the Revenue and that the Principal Commissioner was not justified to replace the Assessing Officer's view. High Court up held the order of the Appellate Tribunal. The assessee contended that in the present case also the order was made after due verification of the details submitted. 10. The assessee also relied on the following cases with regard to the very jurisdiction invoked under section 263 and submits that in absence of the twin conditions being ....
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....fied domestic transactions or both] have to be referred to the TPO by the AO, after obtaining the approval of the jurisdictional Principal Commissioner of Income-tax (PCIT) or Commissioner of Income-tax (CIT). The fact that a case has been selected for scrutiny on a TP risk parameter becomes clear from a perusal of the reasons for which a particular case has been selected and the same are in variably available with the jurisdictional AO. Thus, if the reason or one of the reasons for selection of a case for scrutiny is a TP risk parameter, then the case has to be mandatorily referred to the TPO by the AO, after obtaining the approval of the jurisdictional PCIT or CIT. 12. The assessee referred to clause 3.2 of the CBDT circular and mentioned that the aassessee case was not selected for scrutiny based on Transfer price risk parameter. In this regard the assessee mentioned that provisions of section 92CA which also says that where it is necessary or expedient to do so the AO may refer to the TPO, which also indicates that the reference to the TPO is not mandatory, and it is the judicial decision of the AO to make such a reference. 13. The assesseefurther mentioned that the assessee ....
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....e very premise that large outward remittance have been made attracting the provision of transfer pricing does not apply and the assessment order cannot be said to be erroneous and prejudicial to the interest of revenue. 17. The assessee further submitted that PCIT's observation that the gross total income is less than the value of foreign remittance sent, it was submitted that the total Foreign remittance to both AEs and Non AEs was Rs. 277,590,658, and the total income was Rs. 139,853,150/-, it was submitted that the foreign remittance made during the year were for purchase of raw material, investment in WOS, consultancy etc. and in regard to the Specified domestic transactions (SDT), a report in form 3CEB is on record. The same has no correlation with the income of the year under consideration. 18. On the other hand, the ld. CIT DR relied on the PCIT's order and submitted that in view of the Explanation 2 inserted in section 263, the PCIT has a vide power u/s 263, and where ever it is found that due enquiry as required has not been made, such order can be directed to be reframed in accordance with the law. The contention of the CIT DR was that if the due enquiry as required was....
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....essee, and report was submitted and also during the assessment the same was submitted. The second situation where in previous assessments if any addition on account of transfer pricing adjustment of more than ten crores and addition being upheld in appellate proceedings is also not applicable in the case of the assessee, and this is not a case where search or seizure or survey operations had been carried out. In such a situation it cannot be said that the assessment is erroneous as reference to TPO was not made. 20. We also find that on similar issue the Delhi Bench of ITAT had occasion to examine this issue in the case of M/s Amira Pure Foods Private Limited vs. PCIT in ITA No. 3205/Del/2017, in which following the decision of Hon'ble Delhi High Court in the case of Delhi Airport Metro Express Ltd. reported in (2017) 398 ITR 8 (Delhi) in which it has been held as under : It is seen, in the order dt. 30th March 2016, the Principal CIT has proceeded by setting out the contents of the show-cause notice and the contents of the reply given by the assessee. It appears that no inquiry, as such, was undertaken by the Principal CIT to come to the conclusion that the original assessment ....
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.... its case does not fall under the conditions referred to in the instruction No. 3 of 2016 and as such it wasn't obligatory for the AO to make a reference to TPO. The learned Principal CIT has not dealt with this contention of the assessee and has given a bald finding that AO should have referred to TPO as per instruction No. 3 of 2016. The learned Principal CIT has not specified under which condition of instruction No. 3 of 2016, the AO should have referred to TPO. The argument of the learned Departmental Representative that selection under CASS was made because of mismatch in foreign remittent and Form 15CA, also doesn't help the cause of the Revenue. As per r. 37BB, the reporting in Form 15CA is in respect of payment made to non-resident not being a company or to a foreign company. The reporting is not limited or is not particularly in respect of payment made to associated enterprise. We are of the view that the CASS selection was not on the basis of TP risk parameters as envisaged in instruction No. 3 of 2016 and as such the AO was not bound to make a reference to the TPO. 30. The assessee had filed various replies to the learned PCIT in response to notice under s. 263 of the ....