TaxTMI 
TaxTMI 
2025 (1) TMI 1621
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....oceedings and accordingly show cause notice u/s 263 of the Act dated 25.01.2019 was issued and called upon the assessee to file objections if any, for the proposed revision of assessment order. The Ld.PCIT proposed to revise the assessment order on the ground that the assessment order passed by the Assessing Officer u/s 143(3) r.w.s.144C of the Act dated 29.11.2016 is erroneous, in so far as it is prejudicial to the interest of the Revenue on the issue of failure on the part of the Assessing Officer to verify certain issues, which he ought to have verified, in terms of provisions of Explanation 2 to section 263 of the Act. The Ld.PCIT observed from the Profit & Loss account that the assessee has debited an amount of Rs.3,02,45,860/- towards impairment loss on assets. It is seen from the depreciation schedule as well as notes to account that the impairment loss on reusable components was arrived at after testing the carrying value of recorded cost. This was due to shift in the business focus and the change in industry trend. The reusable components developed earlier became almost obsolete and therefore, it has been decided to write off the same. The impairment loss pertains to intan....
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....rther, non disclosure of the transaction as required u/s 92D attracts penalty proceedings u/s 271AA. This point has not been considered by the Assessing Officer, which resulted in erroneous order passed by the Assessing Officer and caused prejudice to the interest of the Revenue. Therefore, issued show cause notice and called upon the assessee to file its objections, if any for the proposed revision of assessment order. 3. In response to the show cause notice, the assessee vide letter dated 14.02.2019 submitted that the assessment order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue, on the issue of deduction claimed towards impairment loss on absolute plant and machinery, reduction of prior period income, which was credited into Profit & Loss account and reduced while computing the tax liability, exclusion of notional gain on foreign exchange, while computing the income and also estimation of notional commission on corporate guarantee, because all these issues have been examined by the Assessing Officer/TPO while completing the assessment u/s 143(3) r.w.s. 144C of the Act. Therefore, it cannot be said that the assessment orde....
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....eceipt of directions issued by the DRP, the Assessing Officer, shall in conformity, with the directions complete the assessment without providing any further opportunity of being heard to the assessee. Therefore, the version of the Ld.PCIT is accepted that the Assessing Officer has not caused enquiries on the issues discussed in the notice, the same would be contrary to law as per section 144C(13) of the Act, because, the Assessing Officer does not have any power to go beyond the directions issued by the DRP. Therefore, there is no question of the Ld.PCIT, holding that the final assessment order is erroneous so as to come within the ambit of section 263 of the Act. In this regard, he relied upon the decision of ITAT Mumbai in the case of Barclays Bank PLC Vs CIT in ITA No.827/Mum/2021. 7. The learned counsel for the assessee further submitted that the Ld.PCIT erred in invoking jurisdiction u/s 263 of the Act, without appreciating the fact that during the assessment proceedings, the Assessing Officer has thoroughly examined all the issues, including the issues in question before the Ld.PCIT and passed assessment order, by duly applying his mind. In so far as the issue of impairme....
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....nternational transactions, being corporate guarantee given to its AE, either in Form 3CEB or in its TP study. Therefore, the arguments that the TPO had considered the issue while passing the order u/s 92CA(3) of the Act is devoid of merit and cannot be accepted. 9. The Ld.CIT-DR further submitted that in so far as the issue of impairment loss on assets, although, it is capital in nature, the Assessing Officer has not examined the issue, even though the assessee has debited into Profit & Loss account. Further, the assessee has deducted prior paid income credited to Profit & Loss account, while computing the income. Similarly, the assessee has reduced notional gain on foreign exchange, while computing the income, even though the gain on foreign exchange is in the nature of income like loss on foreign exchange is an expenditure. Although the assessee claims that the Assessing Officer has examined the issues while completing the assessment, the fact remains that on perusal of the assessment order, there is no evidence of any discussion on the issue. Therefore, the Ld.PCIT is right in setting aside the assessment order by exercising the powers conferred u/s 263 of the Act, therefore,....
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....section 263 of the Act. 11. The Ld.PCIT invoked jurisdiction and set aside the assessment order on four issues. The first and foremost issue considered by the learned PCIT is impairment loss on assets debited into Profit & Loss account in terms of Accounting Standards issued by the Institute of Chartered Accountants of India ("ICAI"). The assessee had debited impairment loss to Profit & Loss account and disclosed the reasons for ascertaining loss in notes to account in the financial statements. The assessee had also given the reasons for ascertaining the fair value of the asset as on date and according to the assessee, impairment loss on reusable components were arrived at after deciding the carrying value of recorded cost and this was due to shift in business focus and change in industry trend. Going by the Accounting Standards issued by ICAI, there is no dispute with regard to the fact that the assessee has to provide for impairment loss in respect of various assets in their books of accounts. The assessee had also reported the reasons in their financial statements. From the reasons given by the PCIT, in light of material available on record, we find that the PCIT referred to ....
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.... of benchmarking in terms of section 92B of the Act was debatable at that point of time when the Assessing Officer has passed final assessment order. There are divergent issues on this aspect, where some judicial forum has taken a view that it is not international transaction and does not require to be benchmarked. Further, when it comes to rate of interest also, there are divergent views. If we look at the issue on this perspective, we find that this issue is highly debatable and always two views are possible. Therefore, going by the proceedings for the year under consideration, including the proceedings u/s 92CA, in our considered view when the assessee has furnished relevant details including the financials for the year under consideration during the TP proceedings, we are of the considered view that the Assessing Officer has taken one plausible view on the issue by considering the explanation of the assesse, therefore, in our considered view, the PCIT, without giving any reasons as to how the assessment order passed by the Assessing Officer on the same issue is erroneous, cannot come to the conclusion that the assessment order is erroneous and prejudicial to the interest of the....
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....when the Assessing Officer could not have directly make any changes in the final assessment order after the directions of the DRP, then the PCIT cannot make any changes, so as to circumvent the provisions of section 144C(13) of the Act. Therefore, on this issue also Ld.PCIT erred in assuming jurisdiction u/s 263 of the Act and set aside the assessment order passed by the Assessing Officer. This issue is supported by the decision of ITAT Mumbai in the case of Barclays Bank PLC Vs. CIT, where in it is held as under : "26. The case of Devas Multimedia Pvt. Ltd.(supra) by the Hon'ble Karnataka High Court was in connection with the writ petition filed by the assessee, where assessee has objected to the notice issued u/s 263 of the Act. Furthermore, Hon'ble High Court has expounded that writ court cannot examine the validity of notice on merits. Furthermore, the said decision has distinguished following decision of Hon'ble Bombay High Court, i) Vodafone Services Pvt.Ltd.(supra) wherein Hon'ble Bombay Court has expounded that proceedings before the DRP is not on appeal proceedings, but correction mechanism in the nature of a second look at the proposed assessment ....