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TMI Blog2021 (7) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... his clause, on the strength of which this reference was made to the TPO, stand omitted w.e.f. 1.4.2017. The case of the assessee was that after April, 2017 this proceeding would lapse, which was not accepted by the AO as well as TPO, but the Tribunal accepted the stand of the assessee. When the ld. Commissioner issued a show cause notice under section 263 and ultimately passed impugned order; by that time the alleged domestic transaction of purchase from related party was not required to be considered as a specified domestic transaction under section 92BA of the Act. It has been omitted, and therefore, no proceedings under section 263 should have been undertaken by the ld. Commissioner. - Decided in favour of assessee. - ITA No. 530/Ahd/2019 - - - Dated:- 16-7-2021 - Rajpal Yadav , Vice President And Amarjit Singh , Member ( A ) For the Appellant : M. S. Chhajad , AR For the Respondents : O. P. Sharma , CIT - DR ORDER Per Rajpal Yadav , Vice President Present appeal is directed at the instance of the assessee against order of the ld. Pr. Commissioner, Ahmedabad dated 11.03.2019 passed under section 263 of the Income Tax Act, 1961 for the Asstt. Year 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the assessee only definition provided under sub-clause (1) could be attracted, and this clause has been deleted w.e.f 1-4-2017, therefore, the ld. Commissioner cannot take cognizance under section 263 of the Act on the strength of omitted provision of law. The assessee has relied upon the judgment of Hon'ble Supreme Court in the case of General Finance Company Vs. ITO, 257 ITR 338 (SC); in the case of Kolhapur cane Sugar Works Ltd. UOI as well as orders of ITAT, Bangalore and the judgments of Hon'ble Karnataka High Courts. The ld. Commissioner was not satisfied with the contentions of the assessee and set aside the assessment order. The ld. counsel for the assessee while impugning the order of the CIT has placed before us the bifurcation of the transaction, which could be required to be referred to the TPO at the most. Such bifurcation red as under: Sr. No. Date Particulars Amount Remarks 1 AY 2014-15 Transactions entered with related parties is as under: Transaction with related par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various judgments relevant for judging the action of the CIT taken u/s. 263. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy Vs. ITO, Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263. (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest 2,063/- 3. Diptiben D Shah Interest 3,095/- 4.SwatibenSShah Interest 3,095/- 5. Neenben KShah Interest 3,095/- 6. Subhodchandra K Shah Interest 4,03,135/- 7. Subhochandra K Shah HUF Interest 3,63,631/- 10. At this stage, we would like to take note of the definition of expression specified domestic transaction provided under section 92BA, which reads as under: 92BA. For the purposes of this section and sections 92, 92C, 92D and 92E, specified domestic transaction in case of an assessee means any of the following transactions, not being an international transaction, namely:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill clarify that during the year under assessment, commission as % of sales has reduced but sales is much dependent upon commission agents. Financial Year Commission Expenses (Amount Rs.) Sales as per Audit Report (Amount Rs.) Net Profit as per Audit Report (Amount Rs.) Commission as a % of sales 2013-14 23,46,917/- 22,34,96,914/- 32,43,340/- 1.05% 2012-13 26,21,040/- 16,64,70,249/- 26,24,854/- 1.57% 2011-12 18,35,747/- 11,70,91,114/- 22,15,512/- 1.57% b. Justification of large specified domestic transaction (form 3CEB) In this connection, we would like to brief you about background of business which is relevant to explain this point. Earlier in 1996 when the assessee started the business in the name of G.N. Textiles of trading in knitted fabrics, it used to source ready fabrics from Ludhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongoing scrutiny as required by you. 1. Working of Domestic Arm Length transaction along with copy of purchase invoices: With regard to our major purchase from related party viz. Global Enterprise, you have asked to justify purchase prices with those of other unrelated suppliers. In this regard, please find herewith enclosed detailed working of purchase price comparison in respect of material purchased from Global Enterprise with other unrelated party either on same day or nearby date along with few sample purchase bills of Global enterprise i.e. related party as well as of other unrelated parties. List of unrelated suppliers of which copies of bill are produced: a) Dewan Knitwear b) Sweety fabrics Pvt. Ltd. c) Amit enterprise Kindly note that there is difference in prices on account of different material also. 12. On the basis of the explanation given by the assessee during the course of scrutiny assessment, the ld. AO did not refer this transaction to the TPO for determination of ALP. Now reverting back to section 92BA, it reveals that transaction mentioned at Sr. No. 2 to 6 are not attracted in the case of the assessee; because he has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronouncement of Hon'ble Apex Court in the matter of Kolhapur Canesugar Works Ltd. v. Union of India AIR 2000 SC 811 whereunder Apex Court has examined the effect of repeal of a statute vis- -vis deletion/addition of a provision in an enactment and its effect thereof. The import of section 6 of General Clauses Act has also been examined and it came to be held: 37. The position is well known that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute-book as completely as if it had never been passed, and the statute must be considered as a law that never existed. To this rule, an exception is engrafted by the provisions of section 6(1). If a provision of a statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions must stop where the omission finds them, and if final relief has not been granted before the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in section 6 or in special Acts may modify the position. Thus the operation of repeal or deletion as to the future and the past largely depends on the savings applicable. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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