TaxTMI 
TaxTMI 
2025 (5) TMI 746
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....ot considering that the order u/s 143(3) r.w.s. 254, being passed by ACIT, Circle 1, Erode and not by the Faceless Assessment Unit, is violative of the provisions of Sections 144B and 151A, and as such, is null and void. 4. Without prejudice, the CIT (A) grossly erred in upholding the Assessment Order passed by the Assessing Officer, when it is passed beyond the time limit mentioned in Section 153(5), more particularly when its Second Proviso does not apply to the present case. 5. Without prejudice, the CIT (A) erred in not considering the violation of principles of natural justice, as the Assessing Officer did not provide a copy of the alleged Report of the Department of Economic Affairs under the Ministry of Finance, which was the sole basis for framing the impugned assessment. 6. Without prejudice, the CIT (A) erred in being indifferent towards the fact that the Assessing Officer did not establish or substantiate his opinion as to how and why the Report of the Department of Economic Affairs under the Ministry of Finance is relevant and justified. 7. Without prejudice, the disallowance under Section 40A(2)(b) is totally unwarranted, given that the prices of Palm Oil adopt....
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....Panel has rejecting the appeals Aggrieved by this order the assessee preferred further appeal before the Hon'ble ITAT D' Bench, Chennai. The Hon'ble ITAT has passed the order on 15.02.2023 restoring back to the file of the AO for examination of allowability of the expenditure in accordance with the provisions of sec. 40A(2)(b) of the Act, since these transactions would not fall under section 92BA(i) and reference to TPO is not valid. 5. The co-ordinate Bench of Tribunal in assessee's cases vide order dated 15.02.2023 in ITA No. 2608/Chny/2017 and IT(TP)A No. 21/Chny/2018 for AYs AY 2013-14 and 2014-15 respectively has passed the following order as under: "It has thus been held by Hon'ble Court that the reference made to Ld. TPO in respect of specified domestic transactions as mentioned in clause (i) of Sec. 92BA would be invalid since the provisions were omitted since inception. At the same time, Hon'ble Court confirmed the action of Tribunal in restoring the matter back to the file of Ld. AO to examine the claim of expenditure in accordance with the provisions of Sec. 40A(2)(b) of the Act. Similar is the decision of Mumbai Tribunal in Mahindra Two Wheelers Ltd. vs. ....
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.... Court in TCA No: 20 of 2004 dated 11/12/2006, where the words IS OF OPINION in Section 40A(2)(a) have been clearly explained. The assessee places reliance on, apart from the above, the decisions by Mumbai ITAT, in ITA Nos: 5090 and 5655 of 2005 dated 29/05/2008 and ITA Nos: 35/2016, 7171/2010, 7141/2011, 1576/2013 and 3949/2014 dated 24/10/2018. It is surprising to note that when the reference to TPO has been held to be not valid by the ITAT, how your office notice, in Page No:2, show-causes about the disallowance based on such materials, including the TPO report as such available with the Department. Assuming but not admitting your above reference is valid, then, as mentioned earlier, certified copies, as already asked for, and tangible materials, based on which THE ASSESSING OFFICER IS OF THE OPINION, may be supplied. As, right from the beginning in the present proceedings, the Revenue is reluctant or adamant in not meeting the requests by the assessee, the assessee may not be treated as non-co-operative and in default." 7. The AO, on the plea of assessee that the case is barred by limitation held as under: " The second proviso to section 153(5) clearly delineates" provided f....
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....ce to Ld. TPO was not valid and the consequential TP adjustments so made by the Ld.AO could not be sustained in the eyes of law. At the same time, respectfully following the cited decisions, the matter stand restored back to the file of the Ld.AO for examination of allowable of the expenditure in accordance with the provisions of sec. 40A(2) of the Act since these transactions would fall under those provisions. We order so" It is a matter of fact that the issue of applicability of section 40A(2) of the Act was never examined by the AO in the original assessment and this is the reason why the Hon'ble ITAT had set aside the issue for examination of related party transaction to the file of AO. Obviously, the examination requires submission by the appellant and then verification by the AO. Before examining the contention of the appellant, I would like to refer the provision of sec 153(5) of the Act, which is reproduced hereunder for ready reference: "(5) Where effect to an order under section 250 or section 254 or section 260 or section 262 or section 263, or section 264 is to be given by the Assessing Officer or the Transfer Pricing Officer, as the case may be, wholly or part....
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....usal of second proviso of sec 153(3) of the Act, it is clear that the assessment should be completed before expiry of twelve months from the end of the financial year in which order u/s 254 of the Act was received by the Pr. CIT. In this regard, it is seen that the ITAT has passed the order u/s 254 of the Act on 15.02.2023 and the set-aside assessment u/s 143(3) r.w.s. 254 of the Act was passed on 31.03.2024. Therefore, I am of the opinion that the provision of sec 153 are not violated in this case and the contention of the appellant that the assessment is barred by limitation is hereby rejected. Thus, ground no. 3 is hereby dismissed." 9. Aggrieved assessee filed appeal before us. During the course of hearing before us, both parties filed written submissions as under: Written submissions filed by the assessee: The chart showing chronological events starting from the Common Order of the ITAT dated 15/02/2023 in ITA No.2608/CHNY/2017 & IT (TP) A No.21/CHNY/2018 for the respective Assessment Years: 2013-14 and 2014-15, till the completion of assessment is as below. Assessment Year 2013-14 2014-15 Date of dispatch of order of the ITAT 21/02/2023 21/02/2023 Date of First H....
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....ectful submission of the Appellant is that even as per the Order of this Hon'ble ITAT dated 15/02/2023, there is nothing in respect of any verification of any issue by way of submission of any document by the assessee or any other person. In fact, the Appellant, admittedly, did not file any documents, since not warranted, besides there being no necessity for the Appellant to submit any document, as the Appellant had filed all those documents relating to Section 40A(2) before the Dispute Resolution Panel itself, which is a wing of the Income Tax Department. However, the Assessing Officer obtained the details SOME HOW, OF COURSE NOT FROM THE APPELLANT, BUT FROM THE CASE OF Smt. S. SAROJA (THE NAME IS SARADHA). Thus, in the absence of any direction or finding by the Hon'ble ITAT requiring submission of any document by the Appellant, resort to Second Proviso to Section 153(5) is not legally correct and hence, the respective Assessment Orders are barred by limitation. Further, it is surprising to note that the Learned First Appellate Authority in Para No. 4.3.1 held that the matter definitely required verification and that the examination requires submission by the Appe....
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...., it is pointed out that the word used in the aforesaid order by the Hon'ble ITAT is "examination". The dictionary meaning of this word "examination" describes the process of examination as a more thorough detailed inspection of something more than the process of verification. In other words, the word "verification" used is much simpler than the word "examination" used in the aforesaid Hon'ble ITAT's order. Thus, it is submitted that to examine the purpose for which the Hon'ble ITAT has remitted this issue back to the file of the AO, calls for deeper verification on the applicability of provisions of Sec. 40A(2) on the relevant transactions undertaken by the appellant and therefore, provisions of Sec. 153(5) r.w.s. 153(3) is applicable in this case and therefore the order passed on 31.03.2024 is valid and not time barred. In this regard, relevant discussions in assessment order in page No. 11 & 12, para 4.3.1 on page-14, 15 & 15 of the impugned CIT(A) order are relied upon. (ii) The next issue raised by the appellant is that no opinion has been recorded by the AO to invoke the provisions of Sec. 40A(2). In this regard, it is submitted that in the relevant aforesa....
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....nder section 92CA, as the case may be, may be made at any time before the expiry of nine months from the end of the financial year in which the order under 11[section 250 or] section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be] : Provided that where the order under [section 250 or] section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be,] on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "nine months", the words "twelve months" had been substituted. [(3A) Notwithstanding anything contained in sub-sections (1), (1A), (2) and (3), where an assessment or reassessment is pending on the date ....
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....may be". The first proviso to section 153(3) says after 01.04.2019 if any order u/s 254 is received by the PCCIT or Chief Commissioner or Principal Commissioner or Commissioner or as the case may be, the provisions of this sub-section shall have effect, as if for the words 'nine months', the words 'twelve months' has been substituted. Furthermore, the time limit for making appeal effect to an order u/s 254 by the AO "wholly or partly",............,"such effect shall be given within a period of three months from the end of the month in which order u/s 254 is received by the PCCIT or Chief Commissioner or Principal Commissioner or Commissioner or as the case may be". Further, second proviso to section 153(5) says that "where an order under section 254 require verification of any issue by way of submission of any documents by the assessee or any person or where an opportunity of being heard is to be provided to the assessee, the order giving effect to the said order under section 254 shall be made within the time specified in sub-section (3)". 14. The Tribunal restored back matter to the file of ld.AO for 'examination of allowability of the expenditure in accordance with the provisio....
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....f Finance, Government of India, for the fair market value of the Palm oil and this fact was not referred in the show cause notice issued. In this regard, it is observed that the appellant has considered not supplying of the report of the Department of Economic Affairs by the AO as the violation of principles of natural justice. On perusal of the assessment order, it is seen that the AO has collated the data of fair market value of the palm oil based on the report of the Department of Economic Affairs. In this regard, it is pertinent to note that this report was not formally supplied by any authorised agency to the AO. This is the AO who learnt and studied the issue in hand and laboured out to find the official data/report from the official site/public domain. In these circumstances, the appellant cannot argue that this data/report was not provided to it as it was available in the public domain which it would have itself found and present its case. Also, the appellant didn't ask for the same from the AO during the set-aside assessment proceedings. Therefore, I am of the opinion that enough opportunity was provided to the appellant by way of letters and show cause notice comprisi....