TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 389
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....ssessment and an assessment order was passed under section 143(3) on 22.12.2016. 4. The ld. Pr. CIT has perused the assessment order as well as the record carefully and formed an opinion that the assessment order is erroneous and has caused prejudice to the interest of revenue. Accordingly he issued a show-cause notice u/s 263 of the Income Tax Act. Copy of show-cause notice is available on pages no. 360 to 361 of the paper book. A perusal of this showcause notice would indicate that it is based on two-fold of reasoning, namely- (a) the ld. Assessing Officer was required to disallow expenditure attributable to earning of tax-free income as provided in Section 14A read with Rule 8D of the Income Tax Rules, 1962. According to him, the ld. Assessing Officer has made disallowance under section 14A of the Income Tax Act read with Rule 8D only on one of the limbs provided in Rule 8D. The ld. Assessing Officer failed to explore the other conditions enumerated in this Rule, namely the ld. Assessing Officer failed to verify the details of loans, if any, taken by the assessee for making investment, which has resulted tax-free income in the shape of dividend. (b) There is a domestic tran....
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.... 133 crores whereas reserve & surplus with the assessee is of Rs. 381 crores. He further pointed out that in earlier year, i.e. on 31.03.2013, the total investment was Rs. 152 crores, which has gone down to Rs. 133 crores in this year. Therefore, there is no fresh borrowing in the hands of the assessee, which can goad the ld. Assessing Officer to form an opinion that interest expenditure deserves to be disallowed. He factually demonstrated that no interest expenditure is attributable towards investment made, which has generated tax-free income and, therefore, ld. Assessing Officer did not make any disallowance under Rule 8D(i) read with 14A. Therefore, according to the ld. Counsel for the assessee, the ld. Pr. Commissioner has committed an error by not construing the facts in right perspective. 8. With regard to his second-fold of reasoning given by the ld. Pr. Commissioner, the ld. Counsel for the assessee drew our attention towards the CBDT Circular No. 3/2016, which has been referred by the ld. Pr. Commissioner also, taking us through paragraph no. 3.2 and 3.3. He submitted that this Circular contemplated two conditions. The first condition is that if the case is being selected....
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....; (b) "record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunit....
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....he order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law. (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of ....
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....er under the Computer Assisted Scrutiny Selection [CASS] system or under the compulsory manual selection system (in accordance with the CBDT's annual instructions in this regard - for example. Instruction No. 6/2014 for selection in F.Y 2014-15 and Instruction No. 8/2015 for selection in F.Y 2015-16), on the basis of transfer pricing risk parameters [in respect of international transactions or specified 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 invariably 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. 3.3. Cases selected for scrutiny on non-transfer pricing risk parameters but also having international transactions o....
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....d such adjustment has been upheld by the Judicial Authorities or is pending in appeal. Now in the case of assessee, this adjustment was not made in earlier year therefore, this condition is not applicable. 17. As far as clause (c) is concerned, in the third condition it has been provided if a search and survey operation has been carried out upon the assessee but in this case, no search and seizure operation has been carried out upon the assessee. Therefore, it was not mandatorily required at the end of the ld. Assessing Officer to make a reference to the ld. TPO for determining the Arm's Length Price or Domestic Transaction with related parties, which is covered under section 40A(2)(b) of the Income Tax Act. Thus we are of the view that ld. Pr. Commissioner has misread the facts and misconstrued the proposition of law. He failed to apply the Circular in its true spirit. Apart from the above, ld. Counsel for the assessee has further pointed out that Section 92BA(i) provides that if an assessee has a transaction with the persons specified in section 40A(2(b) of the Income Tax Act i.e. related person, then, Arm's Length Price of such transaction was required to be determined. This cl....