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2020 (6) TMI 629 - AT - Income TaxChallenged the correctness of the order passed by the learned Principal Commissioner of Income Tax ( PCIT ) u/s 263 - erroneous and prejudicial to interest of revenue - meaning of omission - meaning of '' saving clause '' - Effect of omission of clause (i) of Section 92BA by Finance Act, 2017 - Impact of non-referral of specified domestic transactions to the Transfer Pricing Officer - Applicability of Section 6 of the General Clauses Act to omissions. The assessees s primary argument is that the omission renders the provision either nonexistent or not in force within the statute. Consequently, they assert that the jurisdiction exercised by the Principal Commissioner of Income Tax (PCIT) u/s 263 is invalid. As a result, the order issued by the assessing officer, u/s 143(3) is neither erroneous nor prejudicial to the Revenue s interest . HELD THAT - It is a very well-recognized rule of interpretation of statutes that where a provision of an Act is omitted by an Act and the said Act simultaneously reenacts a new provision which substantially covers the field occupied by the repealed provision with certain modification, in that event such re-enactment is regarded having force continuously and the modification or changes are treated as amendment coming into force with effect from the date of enforcement of the reenacted provision. We are of the view that at this juncture it is necessary to examine, the meaning of saving clause, As Per the law.Com Law Dictionary Black's Law Dictionary 2nd Ed, the saving clause has been defined as follows A saving clause in a statute is an exception of a special thing out of the general things mentioned in the statute; it is ordinarily a restriction in a repealing act which is intended to save rights pending proceedings penalties etc. from the annihilation which would result from an unrestricted repeal. In contracts it is a clause that states that ambiguities should not render a contract void or voidable but the contract should be enforced in all other respects provided it can still exist as a valid and binding agreement. Thus, the Saving clause means a clause which denotes a reservation or exception. As per Find Law Legal dictionary, saving clause means a clause in a statute exempting something from statute s operation. Having discussed the meaning of saving clause , it has become quite clear that at the time of omission of clause (i) of section 92BA with effect from 01.04.2017 the Legislature did not mention any terms and conditions to the effect that after omission of clause (i) of section 92BA, pending proceedings/penalties etc, till the date of omission (01.04.2017) will survive. That is, the Legislature did not insert new section in the Income Tax Act to the effect that pending proceedings/penalties etc in relation to clause (i) of section 92BA will survive even after omission, (that is, after 01.04.2017). Hence, we note that these terms and conditions, as discussed above, are absent in case of omitted clause (i) of section 92BA of the Act, therefore as per the law laid down by the Hon ble Supreme Court in the case of Rayala Corporation 1969 (7) TMI 109 - SUPREME COURT and Kohlapur Cane Sugar 2000 (2) TMI 823 - SUPREME COURT , it will be presumed that clause (i) of section 92BA never existed in the Statute Book, meaning thereby it is obliterated from the very beginning and hence the jurisdiction exercised by the Ld. PCIT u/s. 263 of the Act invoking clause (i) of section 92BA, for reference by A.O. to TPO is null in the eye of Law, as clause (i) of section 92BA is omitted and not repeated and there is no provision in any other section of the Income Tax Act saving the pending proceedings initiated under the omitted provision (clause (i) of sec, 92BA) as the said clause (i) was omitted on 01.04.2017, therefore, subsequent revision proceedings by ld. PCIT u/s. 263 on dated 08.03.2019 would be invalid. As we noticed above that an omission of a provision is different from a repeal and section 6 of the General Clauses Act applies to a repealed law and not to omission of law, therefore section 6 of the General Clauses Act does not apply. So in the assessee s case it is noted that in the Income Tax Act, clause (i) of section 92BA was omitted from the Act and not repealed, hence pending proceedings/ prosecution could not have been launched or continued by invoking section 6 of the General Clauses Act after its omission. In this case, Clause (i) of section 92BA was omitted w.e.f 01.04.2017, and after its omission the ld. PCIT passed order u/s. 263 on 28.03.2019. Since clause (i) of section 92BA was unconditionally omitted without a saving clause in favour of Pending Proceedings therefore ld. PCIT ought not to have proceeded u/s. 263 of the Act, since the omission took place prior to 08.03.2019 and such omission in clause (i) of section 92BA is unconditional, that is, it does not say that Pending Proceedings under clause (i) of section 92BA would continue in future, even after its omission on 01.04.2017. Therefore, Ld. PCIT erred in exercising his jurisdiction u/s. 263 of the Act, so far clause (i) of section 92BA is concerned, reason being, in the eyes of law after omission of clause (i) of section 92BA, it would be treated as if it never existed in the Statute Book. In other words, clause (i) of section 92BA, was omitted w.e.f 1.4.2017 unconditionally and without a saving clause therefore section 6 of the General Clauses Act has no application. We note that ld PCIT issued the above show cause notice u/s 263 in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act which was omitted with effect from 01.04.2017, and effect of such omission of clause (i) of section 92BA means that this provision never existed in the statute book, since clause (i) of section 92BA never existed in the statute book therefore, ld PCIT cannot exercise his jurisdiction under section 263 of the Act in respect of specified domestic transactions referred to in clause (i) of section 92BA of the Act. Therefore, the action of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances as narrated above. Thus, the usurpation of jurisdiction of exercising revisional jurisdiction by the Principal CIT is null in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 of the Act by the Principal CIT. Therefore, we quash the order of the Principal CIT dated 08.03.2019 being ab initio void. Since we allowed both the appeals on the technical ground, as narrated above, therefore we do not adjudicate the grounds raised by the assessees on merits. In the result, both the appeals of the assessees are allowed.
Issues Involved:
1. Jurisdiction under Section 263 of the Income Tax Act. 2. Effect of omission of clause (i) of Section 92BA by Finance Act, 2017. 3. Validity of the Principal Commissioner's order under Section 263. 4. Impact of non-referral of specified domestic transactions to the Transfer Pricing Officer. 5. Applicability of Section 6 of the General Clauses Act to omissions. Detailed Analysis: 1. Jurisdiction under Section 263 of the Income Tax Act: The assessees challenged the jurisdiction assumed by the Principal Commissioner of Income Tax (PCIT) under Section 263 of the Income Tax Act, 1961. They contended that the PCIT erred in assuming jurisdiction without first satisfying that the assessment order was erroneous and prejudicial to the interest of revenue. 2. Effect of Omission of Clause (i) of Section 92BA by Finance Act, 2017: The core issue revolved around the omission of clause (i) of Section 92BA by the Finance Act, 2017, effective from 01.04.2017. The assessees argued that the omission of this clause without any saving clause meant that it was as if the clause never existed in the statute. Thus, the jurisdiction exercised by the PCIT under Section 263 was void. The Tribunal noted that the omission of a statutory provision without a saving clause implies that the provision was never in existence. 3. Validity of the Principal Commissioner's Order under Section 263: The Tribunal examined whether the PCIT's order under Section 263, issued after the omission of clause (i) of Section 92BA, was valid. The Tribunal concluded that since clause (i) of Section 92BA was omitted without a saving clause, the PCIT could not exercise jurisdiction under Section 263 for a provision that was never in existence. The Tribunal relied on the Supreme Court's judgments in Rayala Corporation P. Ltd. and Kolhapur Canesugar Works Ltd., which distinguished between "omission" and "repeal," and held that Section 6 of the General Clauses Act applies only to repeals, not omissions. 4. Impact of Non-referral of Specified Domestic Transactions to the Transfer Pricing Officer: The PCIT had initiated proceedings under Section 263 because the Assessing Officer (AO) did not refer specified domestic transactions to the Transfer Pricing Officer (TPO) as required by Section 92CA. The Tribunal noted that the omission of clause (i) of Section 92BA meant that the requirement to refer such transactions to the TPO was no longer valid. Therefore, the AO's action could not be deemed erroneous or prejudicial to the interest of the revenue. 5. Applicability of Section 6 of the General Clauses Act to Omissions: The Tribunal addressed the argument that Section 6 of the General Clauses Act, which saves certain rights and proceedings, does not apply to omissions but only to repeals. The Tribunal reiterated that the omission of a statutory provision without a saving clause results in the provision being treated as if it never existed. Consequently, the PCIT's jurisdiction under Section 263, based on the omitted clause (i) of Section 92BA, was invalid. Conclusion: The Tribunal quashed the PCIT's order under Section 263, holding that the omission of clause (i) of Section 92BA meant that the provision was never in existence, and thus, the PCIT could not exercise jurisdiction based on it. The Tribunal allowed the appeals of the assessees on this technical ground without addressing the merits of the case. The judgment emphasized that the effect of an omission without a saving clause is that the omitted provision is treated as if it never existed in the statute book.
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