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TMI Blog2023 (2) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is bad in law since it is in contravention of the provisions of the Act namely. Faceless Assessment Scheme, 2019 read with the corresponding Standard Operating Procedure (the SOP') and as a result the entire proceeding based on such invalid draft assessment order is bad in law. 3. The Assessing Officer, under the directions of the Dispute Resolution Panel (DRP), has erred in law and on facts in adding Rs. 1,98,42,000/- u/s 68 of the Act while computing income under normal provisions of the Act. 4. The Assessing Officer, under the directions of the DRP, has erred in law and on facts in adding Rs. 1,98,42,000/- u/s 68 of the Act while computing income u/s 115JB of the Act. 5. The Assessing Officer, under the directions of the DRP, has erred in law and on facts in disallowing a sum of Rs. 1,19,90,747/- u/s. 14A of the Act r.w.r. 8D of I.T. Rules while computing income under normal provisions of the Act. 6. The Assessing Officer, under the directions of the DRP, has erred in law and on facts in disallowing a sum of Rs. 1,19,90,747/- u/s. 14A of the Act r.w.r. 8D of IT. Rules while computing income u/s 115JB of the Act. 7. The Assessing Officer, under the dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment made by the Learned Authorised Representative for the Appellant during the course of the hearing. Ground No. 3 6. Ground No. 3 pertains to addition of INR 1,98,42,000/- made by the Assessing Officer under Section 68 of the Act under normal provisions of the Act. 6.1. During the assessment proceedings, the Assessing Officer noted that the Appellant had deposited cash during the demonetization period, the details of which are as under: Period Inward Cash Outward Cash 16.11.2016 to 30.11.2016 2,18,72,186 2,35,63,828 16.02.2017 to 28.02.2017 12,60,50,000 10,96,19,326 01.03.2017 to 15.03.2017 9,75,50,000 11,20,79,490 16.03.2017 to 31.03.2017 10,02,00,000 11,19,75,362 6.2. The Assessing Officer noted that the Appellant had received cash of INR 1,98,42,000 from M/s Gupta Suppliers Company. In response to the query raised by the Assessing Officer in relation to the aforesaid cash deposit, the Appellant submitted that M/s Gupta Suppliers Company acted as an agent for procurement of raw material from the farmers. Just before demonetization funds were transferred through banking channels to M/s Gupta Suppliers Company for procurement of raw material and maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of INR 1,98,42,000/- under Section 68 of the Act under normal provisions of the Act and for the purpose of computing Book Profit and Section 115JB of the Act. The DRP rejected the objections raised by the Appellant against the proposed addition of INR 1,98,42,000/- and therefore, in the Final Assessment Order, the Assessing Officer made the addition as proposed in the Draft Assessment Order. 6.3. In appellate proceedings before us the Learned Authorised Representative for the Appellant reiterated the submissions made before the Assessing Officer and the DRP. He vehemently contended that the Assessing Officer had failed to appreciate that the all the relevant details/documents including PAN of M/s Gupta Suppliers Company, ledger account maintained by the Appellant showing transactions with M/s Gupta Suppliers Company during the relevant previous year through normal banking channels, as well as the confirmation issued by M/s Gupta Suppliers Company, were furnished by the Appellant. The Appellant had thereby, discharge the initial onus cast upon the Appellant under Section 68 of the Act. Merely because notice issued under Section 133(6) of the Act were not complied with by M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- and INR 65,60,000/- are reflected in the ledger account which show that aggregate cash of INR 19,84,200/- has been deposited by M/s Gupta Suppliers Company in cash in the bank account of the Appellant. The Assessing Officer has held that the Appellant has failed to explain, inter alia, the genuineness of the transaction of deposit of cash in the bank account of the Appellant during the demonization period. Whereas, the Appellant has sought to explain the deposit of cash in the Appellant‟s bank account by M/s Gupta Suppliers Company as being money transferred to M/s Gupta Suppliers Company for purchase of raw material which was withdrawn by M/s Gupta Suppliers Company, but could not be used for making payments to farmers on account of demonetization and was, therefore, deposited back in the bank account of the Appellant. The Appellant has filed a confirmation issued on the letter head of M/s Gupta Suppliers Company (placed on page 58 of the paper-book) and is dated 19.11.2016. It has been signed by "Authorised Signatory‟. However, the name and details of the authorized signatory are not stated therein. The notice issued by the Appellant under Section 133(6) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer is directed to consider the details/documents furnished by the Appellant and gather such further information/documents from M/s Gupta Suppliers Company or any other source as it may deem fit, and decide the issue afresh as per law; (5) The Assessing Officer shall grant sufficient opportunity of being heard to the Appellant. In terms of the above, Ground No. 3 raised by the Appellant is allowed for statistical purposes. Ground No. 4 7. Ground No. 4 is directed against the increase of the Net Profits as per Profit & Loss Statement of the Appellant by INR 1,98,42,000/, being addition made under Section 68 of the Act, for computing "Book Profit‟ under Section 115JB of the Act. 7.1. We have remitted the issue related to addition of INR 1,98,42,000/- made under Section 68 of the Act while computing income under normal provisions of the Act back to file of the Assessing Officer with directions in paragraph 6.6 above while disposing off Ground No.3. The issue raised in Ground No. 4 relating to computation of "Book Profits‟ as per Section 115JB of the Act. We note that the transactions related to deposit of cash of INR 1,98,42,000/- is recorded in the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance were rejected by the DRP by issuing directions dated 22.06.2022. 8.2. Being aggrieved, the Appellant is before us. The Ld. Authorised Representative for the Appellant submitted that it is settled legal position that disallowance made under Section 14A of the Act cannot exceed the amount of exempt income earned by the Appellant during the relevant previous year. Further, he submitted that in view of the decision of the Special Bench of the Tribunal in the case of Assistant Commissioner of Income Tax - Circle 17(1), New Delhi vs. Vireet Investment Private Limited: [2017] 188 TTJ 1 (Delhi - Trib.) (SB), only income yielding exempt income are to be considered while computing disallowance in terms of Section 14A of the Act read with Rule 8D of the Rules. 8.3. Per contra, Ld. Departmental Representative relied upon the Draft Assessment Order and the directions issued by the DRP on this issue. The Learned Departmental Representative relied upon the amendments to Section 14A introduced by the Finance Act 2022, and submitted that the law stands amended retrospectively and therefore, the provisions contained in Section 14A of the Act are now to be interpreted taking into accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act it is clear that the computation under clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under Section 14A of the Act read with Rule 8D of the Rules. Therefore, the Assessing Officer erred in adding INR 1,19,90,747/- to the Net Profits while computing 'Book Profits‟ under Section 115JB of the Act. Accordingly, we remand this issue back to the file of Assessing Officer for determining the amount of expenditure deductible to earning exempt dividend income of INR 96,031/- which is to be added to the Net Profits while computing Book Profit as per Clause (f) of Explanation 1 to Section 115JB(2) of the Act having regard to the provisions contained in Section 14A the Act (without resorting to the computation as contemplated under Rule 8D of the Rules). Accordingly, in terms of the aforesaid, Ground No. 6 raised by the Appellant is allowed for statistical purposes. Ground No. 7 10. Ground No. 7 pertains to making transfer pricing adjustment of INR 2,87,575/-. 10.1 The relevant facts for adjudication of the issue under consideration are that as per Form 3CEB, the Appellant had Units eligible for deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that the TPO has ignored the transactions where difference in the rates were favourable to the Appellant while making the transfer pricing adjustment. 10.4 Per contra, Ld. Departmental Representative supported the order passed by TPO and submitted that Appellant had failed to provide any reason for adopting weekly average either before the TPO or before DRP. She submitted that under CUP method selected by the Appellant each transaction is to be considered separately and therefore, the TPO was justified in taking the adopting the highest price for the particular product prevailing on date of transaction. 10.5 We have heard the rival contentions and perused the material on record. The grievance of the Appellant is that the TPO has, while computing the transfer pricing adjustment, not taken weekly average, and without prejudice to the aforesaid, the TPO has erred in only taking into account the variations in favour of the Revenue while ignoring the variations in favour of the Appellant. As pointed out by the Ld. Departmental Representative no case has been made out on behalf of the Appellant for adopting weekly average. Further, we note that the rate at which the product ..... X X X X Extracts X X X X X X X X Extracts X X X X
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