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TMI Blog2024 (4) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... to sec. 153A(1) and, therefore, is non-est. Since the assessment order passed by the AO u/s. 143(3) is held to be non-est, the instant appeal by the revenue is infructuous. Appeal by the revenue is dismissed as infructuous. Assessment proceedings u/s. 153A r.w.s. 143(3) by the AO after the transfer of file from Bengaluru jurisdiction to Kolkata jurisdiction, pursuant to conduct of search are based on the original assessment made by the AO u/s. 143(3) even though it got abated - As assessee propounded that the case is squarely covered by the decision of Abhisar Buildwell [ 2023 (4) TMI 1056 - SUPREME COURT] by referring to non-availability of incriminating material for the addition/disallowance made in the said assessment. The said proposition of the Ld. Counsel is rejected at the threshold because the impugned assessment year is an abated assessment year as already observed and held while disposing the appeal of the revenue dealt above. Disallowance made u/s. 14A read with Rule 8D - As argued AO without any discussion on the said disallowance has borrowed the same from the order passed u/s. 143(3) and, therefore, no such disallowance is warranted as the assessment u/s. 143(3) is h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DCIT, Central Circle-XVI, Kolkata u/s. 153A/143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ), dated 31.03.2014 for AY 2008-09. ITA No. 785/Kol/2018 filed by the revenue is against the order of Ld.CIT(A)-22, Kolkata vide Appeal No. 173/CIT(A)-22/Kol/0809/14-15/Kol, dated 30.01.2018 passed against the assessment order by Addl. CIT, Range-11, Bangalore u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ), dated 03.01.2012 for AY 2008-09. 2. Grounds raised by the assessee in IT(SS)A No.17/Kol/2018 are reproduced as under: On the facts and circumstances of the case and in law: 1. The order of the learned CIT(A) is based on incorrect interpretation of law and facts, and therefore bad in law; 2. The learned CIT(A) has erred, in law and in facts, by confirming with the learned Assessing Officer ('AO')/Transfer Pricing Officer ('TPO') on the disallowance of expenditure u/s 14A read with Rule 8D of the Act for earning exempt income of Rs. 32,84,540/-. 3. The learned CIT(A) has erred, in law and in facts, by confirming with the AO/TPO in disallowing the interest in spite of the fact that no borrowed funds were used for acquiring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of corporate guarantee provided by the assessee company to its AE and hence, the provision of corporate guarantee is not a shareholder activity and an arm's length charge needs to be determined in relation to the said transaction. 7) That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in not appreciating that the receipt of loan by the AE from an independent lender by virtue of the corporate guarantee provided by the assessee company to its AE increases the profit potential of the AE thereby generating substantial benefit for the business of the AE and hence, the provision of corporate guarantee is not a shareholder activity and an arm's length charge needs to be determined in relation to the said transaction. 8) That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in law as well as on facts to hold that disallowance under section 14A read with rule 8D will not apply, thus ignoring the provisions of Rule 8D that provides for computation of expenditure in respect of not only those investments, which actually yielded dividend income but also those investments, income from which shall not form part of total income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment years, pending on the date of initiation of the search u/s. 132 of the Act shall abate. According to this second proviso to section 153A(1), the pending assessment proceedings before the Addl. CIT, Range-II, Bengaluru stood abated. However, the said AO completed the assessment and passed an order u/s. 143(3) of the Act on 03.01.2012. Subsequent to the passing of this assessment order u/s. 143(3) even though abated, the file of the assessee was transferred to Kolkata jurisdiction by the order of CIT-1, Bengaluru u/s. 127 of the Act dated 20.03.2012. After the transfer of files to Kolkata jurisdiction, notices u/s. 153A were issued on the assessee on 15.05.2012. In compliance of the said notices, assessee filed its return on 12.06.2012 and the assessment was completed vide order dated 31.03.2014 u/s. 153A read with section 143(3). 4.1. Against both the assessment orders for the same impugned assessment year, assessee went in appeal before the Ld. CIT(A). Ld. CIT(A)-22, Kolkata disposed of both the appeals vide two separate orders on the same date i.e. 30.01.2018. 4.2. First we deal with appeal of the revenue in ITA No. 785/Kol/2018 filed against the appellate order of ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Supreme Court in the case of Abhisar Buildwell [2023] 149 taxmann.com 399 (SC) by referring to non-availability of incriminating material for the addition/disallowance made in the said assessment. The said proposition of the Ld. Counsel is rejected at the threshold because the impugned assessment year is an abated assessment year as already observed and held while disposing the appeal of the revenue in ITA No. 785/Kol/2018, dealt above. 7. For ground nos. 2 and 3 raised by the assessee in respect of disallowance made u/s. 14A read with Rule 8D, ld. Counsel submitted that AO without any discussion on the said disallowance has borrowed the same from the order passed u/s. 143(3) dated 03.01.2012 and, therefore, no such disallowance is warranted as the assessment u/s. 143(3) is held to be non-est. 8. Per contra, Ld. CIT, DR referred to ground no. 2 dealt by Ld. CIT(A) in his order from para 07 to 09. Ld. CIT(A) has made detailed observations and discussion on the ground raised by the assessee. He thus, submitted that Ld. CIT(A) has co-terminus powers of the AO and, therefore, what AO could not do has been done by the Ld. CIT(A) on the disallowance made u/s. 14A read with Rule 8D. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee s own case dated 07.02.2023 passed in ITA Nos.2142 2143/Kol/2018 in relation to Assessment Years 2013-14 2014-15, wherein, the identical ground raised by the department has been dismissed by the Tribunal relying upon the earlier decision of the Tribunal in the own case of the assessee. The relevant part of the order of the Tribunal dated 07.02.2023 (supra) is reproduced as under: Revenue s common Ground no. 9 for AY 2013-14 2014-15 relating to the upward adjustment made to book profit for disallowance computed u/s 14A r.w. Rule 8D of the Rules: 16. We have heard rival contentions and perused the records placed before us. We find that this Tribunal in assessee s own case for AY 2011-12 201213 dealt with this issue and decided in assessee s favour observing as follows: 17. The eighth common ground of the Department s appeal is against the deletion of upward adjustment made to book profit on account of the disallowance computed under section 14A read with rule 8D. The assessee had disallowed a sum of Rs. 6,40,792/- in the computation of its book profit in terms of clause (f) of Explanation 1 to section 115JB of the Act on account of expenditure relatable to exempt dividend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Karnataka High Court in Gokaldas Images case (supra) is extracted hereinbelow: 10. The Commissioner of Income-tax (Appeals) has held that as per section 115JB of the Act, the assessee being a company is liable to tax on book profits in accordance with the aforesaid provision and there is no exemption granted to the non-dividend company in this regard. However, the tribunal by placing reliance on decision of the Supreme Court in Apollo Tyres v. CIT [2002] 122 Taxman 562/255 ITR 273 has held that Assessing Officer while determining book profits under section 115JB of the Act cannot tamper with the profits as per profit and loss account prepared in accordance with the Companies Act except in the manner provided in Explanation 1 to section 115JB of the Act. Thus, it has been held that the additions made by the Assessing Officer while determining the book profits under section 115JB of the Act cannot be sustained. Any disallowance computed under section 14A of the Act pertain to computation of income under normal provisions of the Act and cannot be read into the provisions of section 115JB of the Act pertaining to computation of book profits by levy of Minimum Altern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 115JB of the Act without resorting to section 14A or Rule 8D. (Emphasis provided) 31. We have considered the rival submissions and gone through the record. The ld. DR has placed reliance on Explanation 1 Clause (f) to section 115JB of the Act, which reads as under: Explanation [1] For the purposes of this section, book profit means the [profit] as shown in the [statement of profit and loss] for the relevant previous year prepared under sub-section (2), as increased by (f) the amount or amount of expenditure relatable to income to which [section 10 (other than the provisions contained in clause (3*) thereof) or [***] section 11 or section 12 apply; or] 32. The ld. counsel for the assessee, in this respect, has submitted that the provisions of section 115JB are complete code in itself and therefore, the Assessing Officer cannot tinker with the book profits. However, we do not find force in the aforesaid contention of the ld. counsel for the assessee in this respect. It is to be pointed out that as per Explanation 1(f), the book profit means the profit shown in the statement of profit and loss account as increased by the amount of expenditure relatable to the exempt income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding u/s. 143(3) stood abated and the assessment order held to be non est, the order of Transfer Pricing Officer passed pursuant to reference made by the AO in that assessment proceeding also stands non-est. Reference to the adjustments suggested by the Transfer Pricing Officer pursuant to those non-est proceeding cannot be verbatim borrowed into the present assessment proceedings which in the present case are pursuant to search operation and made u/s. 153A read with sec. 143(3). 12.2. Section 92CA requires that where the AO considers it necessary or expedient so to do for international transactions or specified domestic transactions entered into by the assessee, he may with the previous approval of Pr. Commissioner or Commissioner, refer the computation of arms length price in relation to such transactions u/s. 92C to the Transfer Pricing Officer. Further, sub-section (2) of section 92CA requires that Transfer Pricing Officer shall serve a notice on the assessee requiring him to produce or caused to be produced any evidence in support of the computation made by him of the arms length price in relation to the said transactions referred in sub-section (1), where a reference is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or one of the reasons for selection of a case for scrutiny is a TP risk parameter, then the case has to be mandatorily referred to the TPO by the AO, after obtaining the approval of the jurisdictional PCIT or CIT. 3.3. Cases selected for scrutiny on non-transfer pricing risk parameters but also having international transactions or specified domestic transactions, shall be referred to TPOs only in the following circumstances: (a) where the AO comes to know that the taxpayer has entered into international transactions or specified domestic transactions or both but the taxpayer has either not filed the Accountant s report under Section 92E at all or has not disclosed the said transactions in the Accountant s report filed; (b) where there has been a transfer pricing adjustment of Rs.10 Crore or more in an earlier assessment year and such adjustment has been upheld by the judicial authorities or is pending in appeal; and (c) where search and seizure or survey operations have been carried out under the provisions of the Income-tax Act and findings regarding transfer pricing issues in respect of international transactions or specified domestic transactions or both have been recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been fully or partially set-aside by the ITAT, High Court or Supreme Court on the issue of the said adjustment shall invariably be referred to the TPO for determination of the ALP. 3.6. Since the provisions of Section 92CA of the Act, inter-alia, refer to the computation of the ALP of the international transaction or specified domestic transaction, it is imperative for the AO to ensure that all international transactions or relevant specified domestic transactions or both, as the case may be, are explicitly mentioned in the letter through which the reference is made to the TPO. In this regard, guidelines as under may be followed: (a) If a case has been selected for scrutiny on a TP risk parameter pertaining to international transactions only, then the international transactions shall alone be referred to the TPO: (b) If a case has been selected for scrutiny on a TP risk parameter pertaining to specified domestic transaction- only, then the specified domestic transactions shall alone be referred to the TPO; and (c) If a case has been selected for scrutiny on the basis of TP risk parameters pertaining to both international transactions and specified domestic transactions, then th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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