TaxTMI 
TaxTMI 
2025 (8) TMI 961
X X X X Extracts X X X X
X X X X Extracts X X X X
....per TPO's order u/s 92CA(3) of the Act without going into the merits of the case. 2. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) was justified in deleting the addition made by the AO to the tune of Rs. 6,16,68,732/- by admitting additional evidences in contravention of Income Tax Rules 46A and there by ignoring the facts brought on the record by the AO. 3. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred while deciding the appeal in favour of the appellant, failed to allude to relevant facts on record, misread the evidence and its probative value thereby giving rise to perversity in the order of Ld. CIT(A), which itself gives rise to Question of Law as held in several case laws including in the case of Sudarshan Silk and Sarees 300 ITR 205 (SC)?" 3. Brief facts of the case, as described by the Ld. CIT(A) in his order are extracted as under: 1. Brief facts of the case: 1.1. The appellant is engaged in the business of manufacturing of structural steel products i.e., Angle, rail, beam and channel. The appellant has filed the return of income for the year unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....completeness: 7.1 Apart from above, vide letters dt. 24.08.2023 the appellant has also requested for admission of additional ground of appeal u/s 250(5) touching the validity of the assessment order inasmuch as provisions of sec. 92BA of Income Act, 1961 having been amended vide Finance Act, 2017 to exclude specified domestic transactions contained in sec. 92BA of the Act r.w.s 40A(2)(b) of the Act from the purview of Transfer Pricing Regulations and also for admission of additional evidence u/s 46A. 7.2 The request for admission of additional evidence u/r 46A was forwarded to the Id. AO for his comments against which the Id. AO submitted remand report dt.20.09.2024, objecting to the admission of additional evidence. In the remand report, the AO has requested this office not to admit the additional evidence produced during the appellate proceeding citing the reason that "the case of appellant does not fall within the exception provided in Rule 46A(1)(c), as claimed by the appellant." On the remand report of AO, comments of the appellant were called for which were submitted by the appellant vide its rejoinder dated 05.10.2024 which is reproduced below: - "....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d report of AO, comments of the appellant were called for which were submitted by the appellant vide its rejoinder dated 05.10.2024 which is reproduced below: - "This has reference to the remand report dt. 20.09.2024 submitted by the AO, a copy whereof has been provided to the appellant for offering its comments. In this regard, it is humbly submitted that: - 1. The additional evidence, referred to in para 2 of our letter dt. 24.08.2023, is the Transfer Pricing Documentation Report submitted by the appellant vide para 4.2 of the written submission dt. 24.08.2023 filed by the appellant before your honour, as Annexure I. It is through such Transfer Pricing Documentation Report that the appellant has established that the transactions undertaken by appellant are at arm's length price. 2 The above referred report could not be submitted before the TPO during the proceedings before him for the reasons which have been explained in para 2 of our request for admission of additional evidence dt. 24.08.2023. As per such request, the non-compliance before TPO was solely on account of the necessary compliance not made by the appellant's counsel at Ahme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....relied as above, it is most humbly requested that the additional evidence may kindly be admitted. 4 The appellant places reliance on the ratio laid down' in Shahrukh Khan vs DCIT (2006) 25 CCH 506 (Mum.); (2007) 13 SOT 61 (Mum.) in ITA No. 202/Mum/2003 dt. 20.07.2006 wherein it was held that once remand report as contemplated under sub- rule (3) of Rule 46A is called by Id. CIT(A), it is implied that the additional evidence is a relevant material and the CIT(A) entertained the additional evidence and thereafter, sent it to the AO. In view of this, the objection taken by the AO is not justified. 5 Without prejudice to above, it is humbly submitted that vide our submission in respect of additional ground of appeal, it has been submitted by us that clause (i) of sec. 92BA was omitted by Finance Act, 2017 w.e.f. 01.07.2017 and it has also been submitted by us that as a result of omission of clause 92BA(i), the legal position is that the law contained in sec. 92BA(i) was never there in the Statute and therefore, the Transfer Pricing provisions were not applicable to the impugned transactions. When the Transfer Pricing provisions were not applicable, there was no re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "Head Note: I. Section 251 of the Income-tax Act, 1961, read with rule 46A of the Income-tax Rules, 1962 - Commissioner (Appeals) - Powers of (Power to admit additional evidence) - In course of assessment, notice of hearing issued by Assessing Officer was received by assessee on date of hearing itself - Assessee thus could not produce necessary evidence on such date - Subsequently, when assessee attended office of Assessing Officer with necessary evidence, he learnt that order of assessment was already passed - In such circumstances, Commissioner (Appeals) permitted additional evidence to be produced before him and while doing so, he also called remand report from Assessing Officer - Whether on facts, admission of additional evidence could not be stated to be in breach of requirement of rule 46A particularly when interest of revenue was safeguarded by calling for remand report and permitting Assessing Officer to comment on such additional evidence - Held, yes [Para 4] [In favour of assessee]" 7.4 It is relevant to refer to decision of Hon'ble Punjab and Haryana High Court in case of PCIT vs. Daljit Singh Sra [2017] 80 taxmann.com 271 wherein it is hel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the appellant that the details of various accounts were submitted during assessment proceedings has no force because in the absence of books of account, the same could not verified by the Assessing Officer. In his affidavit dated 04.03.2010, the appellant has stated that about two years back he had undergone heart surgery and in the first week of December, 2009, he again got himself examined from Mohali where the doctors advised him bed rest and for that matter, necessary compliance regarding production of account books and bills/vouchers etc could not be made. This, circumstance also does not help the appellant because even prior to December, 2009, the Assessing Officer had specifically asked him to produce the books of account and other records which he did not comply. In such circumstances, it cannot be said that the appellant was prevented by sufficient cause from producing the evidence which was called upon to produce by the Assessing Officer. Further be that as it may, the appellant could very well ask the Accountant or his counsel or any other A/R for making compliance for producing the account books but he did not do so. Again, the Assessing Officer vide his report No. ACIT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ence which was called upon to produce by the Assessing Officer. Further be that as it may, the appellant could very well ask the Accountant or his counsel or any other A/R for making compliance for producing the account books but he did not do so. Again, the Assessing Officer vide his report No. ACIT/Circle-I/BTI/2010- 11/172 dated 03.05.2010 has also objected the admission of additional evidence by the appellant because ample opportunity to produce the account books and other bills/vouchers was afforded during assessment proceedings which was not availed of. The sequence of events and circumstances lead to an irresistible conclusion that the appellant intentionally avoided to produce books of account and other bills/vouchers so that the shortcomings in the accounts may not come to the notice of the Assessing Officer. As mentioned above, sufficient opportunity was afforded to the appellant but he did not avail of it. In this view of the matter, the application of the appellant under Section 250 of the Act read with Rule 46A of the Income Tax Rules cannot be entertained and the same is rejected.' In view of the above facts and circumstances, we find that no doubt assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he AO. The appellant has submitted that the additional ground is purely a legal ground, which goes to the root of the matter, and all facts relating to it are already on record and no new facts are required to be looked into. The Assessing Officer on the other hand has contended that additional ground should not be admitted, as it was not raised in assessment proceedings as well as in Form No. 35. The Appellant has contended that legal ground can be taken at any stage and appellate authorities are empowered to admit such legal ground for which. In this regard, it is relevant to go through the judicial pronouncement made by Hon'ble Gujarat High Court in the case of Mitesh Impex 46 taxmann.com 30. "38. It thus becomes clear that the decision of the Supreme Court in the case of Goetze (India) Ltd. (supra) is confined to the powers of the assessing officer and accepting a claim without revised return. This is what Supreme Court observed in the said judgment while distinguishing the judgment in the case of National Thermal Power Co. Ltd.(supra) and that is how various High Courts have viewed the dictum of the decision in the case of Goetze (India) Ltd.(supra). When it comes....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... necessary to examine such a claim are not placed before the assessing officer and, therefore, not on record, there would be no impediment in the Commissioner (Appeals) entertaining such a claim. Such an issue does not arise in these appeals. We would, therefore, reserve our opinion on this limited aspect of the matter if and when in future the question presents before us in such form. For the present, we answer Questions (3) and (4) against the Revenue and in favour of the assessees in manner described above. 42. In the result all appeals are dismissed." 9.1 As such additional ground of appeal, which is primarily connected with ground of appeal raised in Form No. 35 and being legal in nature, can be taken at any appellate stage. Hence relying upon binding decision of Hon'ble Gujarat High Court in the case of Mitesh Impex (supra), and theratio laid down by the Hon'ble Supreme Court in National Thermal Power Co. Ltd. vs CIT (1998) 29 ITR 3833 (SC), such additional ground of appeal is admitted for adjudication and decision on merits is given in subsequent paras. 9.2 I have gone through the order u/s 92CA(3) dt. 25.10.2017 passed by the Transfer Pric....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he definition of "specified domestic transaction" as per sec. 92BA of the Act, and therefore, no adjustment could be made under the said section. It has further been submitted that the proceedings already initiated on the basis of clause (i) of sec. 92BA becomes redundant. Therefore, impugned order u/s 92CA (3) dt. 25.10.2017 passed by TPO-2, Ahmedabad and the assessment order u/s 143(3) r.w.s. 144C dt. 28.12.2017 are illegal and bad in law. The appellant has placed reliance on the ratio laid down in the case of Pr. Commissioner of Income Tax-7 vs Texport Overseas (P) Ltd. (2020) 114 taxmann.com 568 (Kar.) wherein it was held as under: - " ... 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. vs ACIT, which judgement has also been taken note of by the Tribunal while repelling the contention raised by revenue with regard to retrospectivity of section 92BA(i) of the Act. Thus, when clause ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he contention raised by revenue with regard to retrospectivity of section 92BA(i) of the Act. Thus, when clause (i) of section 92BA having been omitted by the Finance Act, 2017 with effect from 01.07.2017 from the Statute, the resultant effect is that it had never been existed. Hence, decision taken by the Assessing Officer under the effect of section 92BA and reference made to the order of Transfer Pricing Officer-TPO under section 92CA could be invalid and bad in law." 9.4 The appellant has also placed reliance on similar ratio laid down in Nava Karnataka Steels (P) Ltd. vs DCIT (2022) 140 taxmann.com 513 (Bang.), Ammann India (P) Ltd. vs ACIT (2022) 134 taxmann.com 10 (Ahd.), Bhuwalka Steel Industries Ltd. vs ITO (2023) 152 taxmann.com 294 (Bang.), Raipur Steel Casting India (P) Ltd. vs Pr. Commissioner of Income Tax (2020) 117 taxmann.com 944 (Kol.) and Shree Shai Smelters (I) Ltd. vs ACIT (2020) 118 taxmann.com 350 (Gau.) to argue the point that once clause (i) of sec. 92BA was omitted from Statute without any saving clause, the effect is that it is to be considered that the said clause had never been there in the Statute and to be considered as a law which never exis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat case on 31.10.2017 and the assessment order was passed by AO on 29.12.2017, being both dates falling after 01.04.2017 and therefore, the issue is covered by the ratio of judgment rendered by Hon'ble Karnataka High Court in the case of M/s Texport Overseas. Hon'ble jurisdictional ITAT has held in that case that addition made on the basis of omitted provision of law is unsustainable and the addition was directed to be deleted in that case. The appellant has thus contended that jurisdictional Bench of ITAT having rendered a decision on the subject, such decision is binding. 9.8 For all the above reasons, respectfully following the judgment of Hon'ble Karnataka High Court, subsequent decisions following such judgment of Hon'ble Karnataka High Court and the decision of jurisdictional Raipur Bench of ITAT in the case of Goldbricks Infrastructure P. Ltd., I hold that the upward adjustment of Rs. 6,16,68,732/- made by TPO u/s 92BA(i) is contrary to law and is not sustainable. 9.9 Accordingly, I deem it proper to delete the same. The additional ground of appeal is allowed. 5. Aggrieved with the aforesaid relief granted by the Ld. CIT(A) to the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ricing Officer u/s 92CA(3) while determining arm's length price in relation to payments to related parties. The addition of Rs. 6,16,68,732/- made by AO is arbitrary, not justified and is liable to be deleted. 2. The assessing officer erred in disallowing Rs. 43,120/- on account of tax collected at . source. 3. The assessing officer erred in disallowing Rs. 71,758/- invoking sec. 36(1)(va) r.w.s. 2(24)(x) on account of delay in payment of employees contribution to PF and ESIC. The disallowance is not justified and is contrary to settled position of law. 4. The appellant reserves the right to add, amend or alter any ground or ground/s of appeal." 2. Decision of CIT(A) :- During the course of Appellant proceedings the Id. CIT(A)has carefully considered the facts of the case and vide its order dated 27-12-2024, partly allowed the appeal of the assessee with following observations :- 1. The Id. CIT(A) deleted the addition of Rs. 6,16,68,732/- by holding following observations :- 'I have considered the order of TPO, the assessment order and the submissions of appellant. It is undisputed that TPO is required to determ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the appellant had taken due care to intimate its counsel at Ahmedabad to do the necessary compliance. The said counsel failed in doing so. Subsequently during appellate proceedings, the counsel was changed and sufficient compliance as per TP guidelines could be made". Since, the reasonable cause furnished by the assessee is after thought without any evidences, therefore not found acceptable. However, Ld. CIT(A) accepted the same and rejected the request of the AO for not considering the additional evidence on the ground that the appellant has not provided any valid reason as provided under Rule 46A for non-submission of details during assessment proceedings. (vi) Further, the observation of Ld. CIT(A) that TPO is required to determine ALP in accordance with one of the methods prescribed i.e. Comparable uncontrolled price method, resale price method, cost plus method, profit split method, transactional net margin method or such other method as may be prescribed by the Board, is also not found acceptable in view of the non-compliance of the assessee during TPO proceedings. As the appellant failed to discharge its initial onus of providing the requisite details and informatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rovisions of Rule 46A of the Income Tax Rules. With such submission, it was the prayer by Ld. CIT-DR that the order passed by Ld. CIT(A) suffering with error that the same was passed without compliance of the Income Tax Rules and, therefore, the same is liable to be set aside, consequently the addition made on account of impugned upward adjustment deserves to be sustained. 8. On the other hand, Ld. AR on behalf of the assessee has placed his reliance on the decision of ITAT, Raipur in the case of Goldbricks Infrastructure Pvt. Ltd. vs. ACIT in IT(TP)A No. 1/RPR/2024 vide order dated 13.12.2024, wherein the tribunal had decided the similar issue in favour of the assessee following the judgment of Hon'ble Karnatka High Court in the case of PCIT vs. M/s Texport Overseas Pvt. Ltd. (2020) 271 Taxman 170 (Kar.). Fort the sake of interpretation, the relevant findings of the ITAT, Raipur in the case of Goldbricks Infrastructure Pvt. Ltd. (supra) are extracted hereunder: 14. Ground No. 1 & 2: Assailing the upward adjustment made by the Transfer Pricing Officer u/s 92CA(3), thereby disallowance made by the Ld. AO and confirmed by the Ld. CIT(A). 14.1 At the outset, i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce 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, Coordinate 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. vs. ACIT, which judgment has also been taken note of by the tribunal while repelling the contention raised by revenue with regard to retrospectivity of Section 92BA(i) of the Act. Thus, when clause (i) of Section 92BA having been omitted by the Finance Act, 2017, with effect from 01.04.2017 from the Statute the resultant effect is that it had never been passed and to be considered as a law never been existed. Hence, decision taken by the Assessing Officer under the effect of Section 92BI and reference mad....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Section 92CA could be invalid and bad in law". Therefore, the order passed by Ld. CIT(A) was justified, based on proper appreciation of the facts & law and well in accordance with the principle laid down in the jurisprudence referred to herein above, therefore, had rightly decided the issue in favour of the assessee, resultantly, the same deserves to be upheld. 10. We have considered the rival submissions, perused the material available on record and case laws relied upon by the assessee. On perusal of the facts of present case. It is noticed that the order of TPO u/s 92CA(3) of the Act was passed on 25.10.2017 and thereafter the order of Ld. AO u/s 143(3) r.w.s 144C(3) of the Act was passed on 28.12.2017, which was impugned before the Ld. CIT(A). Since both the aforesaid impugned orders are after 01.04.2017, the date effective from which the provisions of Section 92BA(i) have been omitted by Finance Act, 2017 from the Income Tax Act, therefore, the facts of present case are found to be identical with the facts in the case of Goldbricks Infrastructure (supra). Accordingly, respectfully following the principle of law interpreted by Hon'ble Karnatka High Court in the case of ....