TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1678
X X X X Extracts X X X X
X X X X Extracts X X X X
.... income declaring an income of Rs. 9,20,96,252/- on 07.10. 2010. Thereafter the assessee filed revised return declaring NIL Income on 28.11.2011. Thereafter, the assessee once again revised its return and claimed an adjustment of brought forward loss of Rs 9,63,61,489/- which has been disallowed by the AO and the returned income has been taken by the AO at Rs 9,63,61,489/- Be that as it may be it is not the issue before us as to which return is to be taken into consideration, neither this issue was there before the Lower authorities. The case of the assessee was thereafter selected for scrutiny and the matter was referred to the TPO, observing international transactions between the assessee and its AEs abroad. Thereafter, the Ld. TPO made certain adjustments with respect to the international transactions and sent back the matter to the file of AO. Thereafter, the Assessing Officer vide its order dated 02.02.2015 framed the assessment. The following issues are involved in these appeals. Transfer Pricing Adjustment Domestic issues Addition of notional interest in respect of the loans advanced by the assessee with its AE. Common in both years Disallowance of Rs. 29,07,45,593/- on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sale, the claim for profits and tax realized therefrom had been accepted. The assessee had shown that for some of the years, the net gain/losses had been accepted. That for FY 2006-07, the net profit or gain of Rs. 3.72 crores; for FY 2007-08, the net profit of Rs. 1.34 crores had been taxed as business profit. On this ground, the ITAT, applying the rule of consistency [accepted by this Court in CIT v. New Poly Pack (P) Ltd. (2000) 245 ITR 492 (Del)] accepted the assessee's contentions. The ITAT also held, while allowing the appeal, as follows: - "54. We have heard both the sides on this issue. We have also gone through the records available in the paper book. We have also taken into consideration the written submissions from both the sides on this issue. The assessee is engaged in the export of rice and other processed goods. The assessee also deals in agro commodities which are imported for domestic consumption. Assessee also involved in import of machinery for processing of rice and also units for food processing. Thus, assessee is exposed to the risk of fluctuation in foreign exchange. The assessee is eligible to cover the risk by following the RBI guidelines in this reg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty of circumstances and the fact that there is nothing to show that the assessee was in any manner disentitled to claim the loss, the correctness of which was never doubted, we are of the opinion that ITAT's findings cannot be faulted." 7.1 Respectfully following the above decision of the Hon'ble High Court, we hereby allow this ground of appeal of the assessee and direct the AO to delete the addition of Rs 29,07,45,593 in AY 2010-11 and Rs 54,05,44,972/- in AY 2011-12. 8. Now coming to the issue of addition on account discrepancy in closing stock, the Ld. Counsel for the assessee contended that this issue has also been decided by the Co-ordinate Bench of ITAT in assessee's own case in ITA No.3869/Del/2012 dated 21st July, 2014 and the said decision of the ITAT vis-à-vis this issue has been affirmed by the Hon'ble High Court in ITA No.79/2015. 9. Ld. DR relied upon the orders of the authorities below. -: Finding of the Bench:- 10. We have heard the rival submissions and perused the materials available on record. We observe that similar issue has come up for consideration in assessee's own case in ITA No.3869/Del/2012 for Assessment Year 2008-09, which year has alrea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....circumstances, it cannot be held that the assessee's book results are unsatisfactory. Merely because a search is carried on it is not automatically meant that assessee is indulging in some nefarious activities. This is the burden of the revenue to prove in this behalf with material and cogent reasons. Rejection of audited books of account otherwise properly maintained cannot be recourse to by Assessing Officer in a casual and wishy vice manner. The ad hoc disallowance, rejection of books and taking support of this fact which we are not able to subscribe the ad hoc addition of 1% of sales is again without any basis whatsoever. Stock tally cannot lead to an ad hoc assumption that 1% of sales are liable to be added in the income of the assessee. Our findings are supported by Hon'ble Rajasthan High Court judgment in the case of CIT vs. Gotan Lime Khanji Udyog and ITAT, Amritsar Bench in the Mehra vs. ACIT, cited supra. In view thereof, we delete the ad hoc addition of 1% sal This ground of assessee is allowed. " The Hon'ble jurisdictional High Court vide its order dated 20.04.2015 (supra) has upheld the order of the Tribunal in the appeal preferred by the Revenue. Respectfull....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Lahmeyer Holding reported in (2015) 59 taxman.com 336(Del) has held that DRP has all the powers of enhancement. This decision has been relied upon by the Ld DRP in the present proceedings. We have perused the decision of Lahmeyer(supra) carefully and observe that it was a case of 147 proceedings, challenged by the assessee before the Hon'ble High Court in writ petition. It is one of the contention of the assessee's counsel that the aspect on which jurisdiction has been assumed by the AO u/s 147 has been discussed by the DRP and hence it is a case of change of opinion. The contention of the counsel for revenue was that the DRP cannot touch those issues which were not subject matter of the assessment. The relevant observations of Hon'ble Delhi High Court are reproduced hereunder for the sake of convenience. "23. One more aspect which needs some discussion is with regard to the submission that the DRP had no occasion to consider the issue of taxability of the transaction involving the transfer of the expired value of the contract in exchange of shares as no variation had been suggested by the Assessing Officer on this aspect of the matter in his draft assessment order. It was subm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ins tax and, to contend otherwise, in the purported reasons for re-opening of the assessment, would be nothing but a 'change of opinion' which is not permissible in law. 15. Perusal of the above factual observations as taken note by the Hon'ble High Court would show that the issue on which DRP has taken cognizance was subject matter of assessment proceedings and the AO and DRP has ultimately not made any addition qua such issue. Facts of the present case are not similar to that of Laheymer (Supra). Here is a case where the issue on which the DRP has made an addition was not the subject matter of assessment proceedings. Therefore, in our view the DRP has acted beyond jurisdiction. It is settled position of law that there has to be finality of proceedings and if the AO has not touched certain issues, the appellate authorities are not allowed to look into those issues the powers of appellate authorities/ DRP is limited to the extent of those matters which have been discussed during assessment. It is also settled law that if an AO commits an error by not examining the facts and issues which are involved in a given case, then there are other remedies such as 147 and 263 as the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of the earliest decisions on the point was in CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC) : TC 7R.576. The matter related to corresponding provisions of the IT Act, 1922 (in short, 'the old Act'). It was held inter alia that in an appeal filed by the assessee, AAC has no power to enhance the assessment by discovering a new source of income not considered by the ITO in the order appealed against. A similar view was expressed in CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC) : TC 7R.590. That also related to a case under s. 31(3) of the old Act. It was held that the power of enhancement under s. 31(3) of the old Act was restricted to the subject-matter of assessment or the source of income, which had been considered expressly or by clear implication by the AO from the point of view of taxability and that AAC had no power to assess the source of income, which had not been taken into consideration by the AO...... 8. Looking from the aforesaid angles, the inevitable conclusion is that whenever the question of taxability of income from a new source of income is concerned, which had not been considered by the AO, the jurisdiction to deal with the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Id. TPO has erred in relying upon the data provided by CRISIL, and in applying rate of 17.24% to determine the arm's length interest income, on the loan given by assessee its AG by failing to appreciate that the interest rate on Joan by appellant to its foreign associated enterprises, could not have been determined by relying upon the data provided by CRISIL in respect of corporate bonds. Further, the interest rate in Indian market and foreign market could not be compared for determining arm's length interest income as a loan has been given in foreign currency. In alternative the ld. AR [ground No. 5 (e)] submitted that the authorities below have erred in calculating the interest on the amount, the opening balance for the purpose of making adjustment on account of interest without appreciating that the opening balance cannot be treated as international transaction for the relevant assessment year. He referred page Nos. 135 to 148 of the order of the ld. TPO, page Nos. 85 to 88 of the order of the Id. DRP, both placed in the appeal as well as page Nos. 275 to 278 of the P.B.-1 i.e. the relevant order of the Tribunal on the issue for assessment years 2002-03 to 2008-09 (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ns as international transactions, and, hence, the TPO and DRP have acted without jurisdiction in making adjustment with respect to outstanding receivables. Alternatively, the Counsel for the assessee pointed out that assessee has not charges any interest from its non AE with respect to outstanding and, therefore, no adjustment can be made with respect to this transaction. 24. Ld. DR relied upon the orders of authorities below. -: Finding of the Bench:- 25. After considering the rival submissions, we hereby observe that similar issue has been decided by both of us in assessee's own case while deciding the appeals of Assessment Year 2012-13, 2014-15 and 2016-17 wherein it has been observed as under: "11. We have heard the rival submissions and perused the materials available on record. So far as Assessment Year 2012-13 is concern the transaction of notional interest on delayed receivables was out of the purview of section 92B explanation. This issue has been thread barely examined by the Co-ordinate Bench in the case of SIRO (supra) and KGK Enterprises vs. ACIT, reported in 88 taxmann.com 264. Therefore, we are of the firm view that for Assessment Year 2012-13 amendment brought ....