TaxTMI 
TaxTMI 
2023 (5) TMI 255
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....see company filed its return of income on 30.09.2015 declaring income of Rs.90,62,200/-. The case was selected for limited scrutiny through CASS to verify interest expenses relatable to exempt income under section 14A, mismatch in sales turnover reported in audit report and ITR and mismatch in the amount paid to related persons under section 40A(2)(b) of the Act reported in audit report and ITR. The assessment was completed under section 143(3) of the Act on 22.09.2017 determining the income of the assessee at Rs.94,29,100/-. Subsequently a show cause notice was issued under section 263 of the Act as to why the assessment order passed under section 143(3) of the Act should not be treated as erroneous and prejudicial to the interest of Revenue as the Assessing Officer failed to refer the matter to the TPO for determining the Arm's Length Price (ALP) on the specified domestic transactions with "related persons" specified in section 40A(2)(b) of the Act. Assessee furnished its reply stating that assessment order passed by the Assessing Officer is not erroneous and prejudicial to the interest of Revenue as the same was passed after proper enquiry and verification. It was contended that....
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....as selected for "Limited Scrutiny" through CASS for the reason large interest expenses relatable to exempt income u/s 14A mismatch in sales turnover reported in Audit report and ITR and mismatch in amount paid to related person u/s 40A(2)(b) reported in Audit report and ITR. The order of assessment has been framed u/s 143(3) on date 22.09.2017 making following addition/disallowance. Disallowance of interest of Rs. 1,16,880/-. Payment to related party on account of rent Rs.2,50,000/-. Ld. Counsel submits that this is an appeal filed against the order of PCIT passed u/s 263, whereby ld. PCIT has cancelled the assessment order. According to the ld. PCIT reference was required to be made to TPO as only TPO is empowered to determine the arm's length price after due enquiry and verification and since reference had not been made to TPO and hence the provision of the Income-tax Act, 1961 had not been correctly applied by the AO. Therefore, the assessment order passed by Id. AO is erroneous and also prejudicial to the interest of revenue and directed the AO to pass a fresh assessment order. 7. Ld. Counsel for the assessee submits that section 92BA(i) has been repealed vide Finance....
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....artia-SMSIL (JV) Vs. ITO (ITA. No. 117/Gau/2019; (vi) M/s. Raipur Steel Casting India Pvt. Ltd. [(ITA. No. 895/Kol/2019 dated 10.06.2020]; (vii) M/s. Srinath Ji Furnishing Pvt. Ltd. [(ITA. No. 1035/Kol/2019]. 8. The ld. Counsel further placing reliance on the decision of the Kolkata Bench in the case of M/s. Raipur Steel Casting India Pvt. Ltd. (Supra) and M/s. Srinath Jiffect from 1st April2017 and the Furnishing Pvt. Ltd. (supra) submits that order under section 263 of the Act was passed on 26.03.2021 by the ld. Pr. CIT i.e. after the repeal of clause (i) of section 92BA and, therefore, in view of the judgements no action could have been taken as the section was repealed as if the law had never been engaged. 9. The ld. DR strongly supported the orders of the authorities below. 10. Heard rival submissions perused orders of the authorities below. In this case the ld. Pr. CIT held that the assessment order passed under section 143(3) of the Act as erroneous and prejudicial to the interest of Revenue for the only reason that the Assessing Officer failed to refer the specified domestic transactions to the TPO for determining the Arm's Length Price. It is observed that sub claus....
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....3 of the Act in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act. In other words, since the clause (i) of section 92BA was omitted with effect from 01.04.2017 by the Finance Act 2017 Therefore in the Act, clause (i) of section 92BA stood "omitted" from the Act as if it was never in the statute book. Therefore, "omission" means the above provisions was not in existence or never existed in the statute book. To support this we find useful a the judgment of the Hon'ble Supreme Court in the case of Rayala Corporation (PI Ltd (1970 AIR 494) wherein the Hon'ble Supreme Court has defined the terminology "omission" and "Repeal" and distinguished these terminologies also. The relevant para of the judgment is reproduced below: 13 Case before us is that the clause (i) of section 92BA is unconditionally omitted without a saving Clause in favour of pending proceedings therefore Id PCIT cannot exercise the jurisdiction under section 263 of the Act. 17.... Having gone through the concluding para, as mentioned above, we note that Hon'ble Supreme Court in the case of M/s. Shree Bhagwati Steel Rolling Mills [supra], has not decided the is....
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..... We note that Id PCIT issued the above show cause notice u/s 263 in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act which was omitted with effect from 01.04.2017 and effect of such "omission" of clause (i) of section 92BA means that this provision was never existed in the statute book, since clause (i) of section 92BA was never existed in the statute book therefore. Id PCIT cannot exercise his jurisdiction under section 26.1 of the Act in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act. In other words, since the clause (i) of section 92BA was omitted with effect from 01.04.2017 by the Finance Act 2017. Therefore, in the Act, clause (i) of section 92BA stood "omitted" from the Act as if it was never in the statute bonk. Therefore, "omission" means the above provisions was not in existence or never existed in the statute book ... Argument advanced by Shri Vijay Shankar. (CIT-DR) on behalf of the Revenue was that the prosecution/penalty in respect of clause (i) of section 92BA of the Act, was in force in assessment year 2014-15 and therefore it is valid even after 01.04.2017. [When the cla....
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....cts it is a clause that states that ambiguities should not render a contract void or voidable but the contract should be enforced in all other respects provided it can still exist as a valid and binding agreement" Thus, the saving clause means a clause which denotes a reservation or exception. As per Find Law Legal dictionary saving clause means a clause in a statute exempting something from statute's operation Having discussed the meaning of saving clause, it has become quite clear that at the time of omission of clause (i) of section 92BA with effect from 01.04.2017 the Legislature did not mention any terms and conditions to the effect that after omission of clause [1] of section 92B Apending proceedings/penalties etc. till the date of omission (01.04.20171 will survive. That is the Legislature did not insert new section in the Income Tax Act to the effect that pending proceedings/penalties etc in relation to clause (i) of section 92BA will survive even after omission [That is after 01.04.2017). Hence we note that these terms and conditions, as discussed above, are absent in case of omitted clause [1of section 92BA of the Act, therefore as per the law laid down by the Hon....