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TMI Blog2011 (5) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... ted:- 16-5-2011 - A.K. SIKRI AND M.L. MEHTA, JJ. Rajan Bhatia for the Appellant. N.P. Sahni for the Respondent. JUDGMENT M.L. Mehta, J. Admit. The following substantial questions of law arise for consideration: (i) Whether the ITAT was correct in law and on the facts of the case in upholding the action of the CIT under section 263 whereby the learned CIT directed reference to Transfer Pricing Officer (TPO) even though the value of international transactions was below 5 crores and when the Assessing Officer had merely followed DBDT's circular No. 12/2011 dated 23-8-2001 and instruction No. 3 of 2003 dated 20-5-2003 in accepting such transactions without reference to TPO? (ii) Whether the ITAT was correct in law and on facts of the case in upholding the action of the CIT under section 263 in setting aside the assessment in respect of (A) "commission expenses" (b) "general charges" even though the Assessing Officer had framed an assessment under section 143(3) after issue of questionnaire under section 142(1) and even though full details had been filed by the assessee and material was placed on record? 2. With the consent of the learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erage - It is contended that a part of the expenditure has already been disallowed under section 40(a)(i). However, the disallowance under section 40(a)(i) was for non-deduction of tax at source. It is not evident from the record if the Assessing Officer examine the reasonableness of the total brokerage, payment of Rs. 11,52,195. The Assessing Officer is, therefore, directed to examine the terms and conditions of the agreement under which the brokerage payment has been made. General charges - It is argued that the details of general charges amounting to Rs. 11,20,500 was submitted vide letter dated 14-9-2006 to the Assessing Officer. However, it is not clear from the record if the Assessing Officer verified the nature and allowability of the general charges. ** ** ** From the terms of the above contract, it will be seen that the assessee is incurring almost the entire expenses of the Chennai premises of the agent. If all these expenses are added to the amount of commission paid, the rate of the commission would work out to be very substantial and not 5 per cent as mentioned in the agreement. It is clear therefore that even though some details abou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consequently Question No. 1 is answered against the assessee and in favour of the revenue. 9. With regard to commission and general charges, it is a matter of fact that the assessee did supply the required information to the Assessing Officer in response to the questionnaire. This is also so recorded by the Commissioner that even in the submissions filed vide letter dated 10-2-2009 in response to the notice under section 263 of the Act, it has been stated that the details of commission payment were submitted by the assessee vide letter dated 25-8-2006. A copy of the same was also presented during proceedings under section 263 of the Act. It was also submitted that the payment of commission has also been made in the earlier years and was considered allowable expenditure in the assessment proceedings. Similarly, with regard to the claim towards general charges also, it was recorded by the Commissioner that the same were submitted by the assessee vide letter dated 14-9-2006 to the Assessing Officer. The reasons given by the Commissioner for de novo enquiry in this regard was that it was not clear from the record if the Assessing Officer verified the nature and allowability of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. In Gabriel India Ltd. (supra), law on this aspect was discussed in the following manner: ' From a reading of sub-section (1) of section, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is "erroneous insofar as it is prejudicial to the interests of the Revenue". It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous insofar as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st has been imposed. ** ** ** We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard.' " 10. In view of aforesaid, it is reiterated that the Assessing Officer called for certain clarifications through the questionnaire of the assessee and that the same were furnished with the required details. This fact is even taken note of by the Commissioner himself in his order. The only grievance of the Commissioner was that the Assessing Officer should have made further enquiries rather than accepting the explanation given by the assessee. It cannot be said to be a case of lack of enquiry. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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