Ashish Subodchandra Shah Vs PCIT (ITAT Ahmedabad)
Facts- Assessee declared the total income under ROI as INR 33,98,080. However, AO passed the assessment order and determined the taxable income as INR 57,75,980. The Commissioner found that one of the specific domestic transaction was undervalued and hence he referred the same to TPO and issued a notice under section 263.
Conclusion- On the facts of the present case, when the 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.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
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 2014-125.
2. Sole grievance of the assessee is that the ld. Commissioner has erred in taking cognizance under section 263 of the Income Tax Act and setting aside the assessment order dated 17.11.2016 and directing the AO to pass fresh assessment order.
3 Brief facts of the case are that the assessee is an individual and running proprietorship concern in the name and style of “G.P. Textiles”. He has filed his return of income for the Asstt.Year 2014-15 on 11.11.2014 declaring total income at Rs.33,98,080/-. This return was selected for scrutiny assessment and ultimately, the ld.AO has passed assessment order under section 143(3) of the Act on 17.11.2016. The ld.AO has determined taxable income of the assessee at Rs.57,75,980/-. He made the following additions to the total income of the assessee:
i) Disallowance of commission Rs.13,81,400-expenses
ii) Disallowance of interest expenses Rs.5,80,490/-
iii) Disallowance u/s.14A Rs.32,386/-
iv) Disallowance of labour expenses Rs.3,83,630/-
4. The ld.Commissioner while going through the assessment order formed an opinion that in Form No.3CEB the assessee has shown a domestic transaction of Rs.19,44,64,576/-. According to him, it is a specified domestic transaction and its value is more than Rs.5 crores. Therefore, this transaction should have been referred to the TPO by the AO for determining arm’s length price, and only thereafter the assessment order should have been framed. This action of the AO is erroneous which has caused prejudice to the interest of the Revenue. Accordingly, he issued a notice under section 263 of the Act.
5. In response to the notice, the assessee has filed detailed submission vide letter dated 22.11.2018. Copy of this letter has been placed on page no.1 to 11 of the paper book. Broadly the assessee raised four fold of submissions. He contended that during course of the assessment proceedings, he has explained that the alleged specified domestic transaction to the AO vide letter dated 3.8.2016 and 10.8.2016. Copies of these letters have also been placed on paper book on page no.20 to 26; (b) the AO gone through these transactions and arrived at a conclusion that no reference to the TPO is required under section 92BA. This section provides definition of “specified domestic transaction”. At the most in 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:
