Ashish Subodhchandra Shah (HUF) Vs. Pr. Commissioner of Income Tax-5, Ahmedabad - (Income Tax Appellate Tribunal) (29 Jun 2020)

Domestic transactions with an Associate Enterprise (AE) would not constitute “Specific Domestic Transactions” for the purpose of Section 92BA of IT Act

MANU/IB/0173/2020

Direct Taxation

The captioned appeal has been filed at the instance of the Assessee against the order of the Principal Commissioner of Income Tax, (‘Pr.CIT’), arising in the assessment order passed by the Assessing Officer (AO) under Section143(3) of the Income Tax Act, 1961 (IT Act). In the captioned appeal, the assessee has challenged the action of the Pr.CIT assumed under Section 263 of the IT Act whereby assessment order passed by AO under Section 143(3) of the IT Act was sought to be set aside for consequential enquiries on transactions undertaken by the assessee with sister concern having regard to provisions of Section 92BA of IT Act.

It is the case of the assessee that, the show cause notice issued by the Revisionary Commissioner seeking to displace the assessment order passed by the AO under Section 143(3) of IT Act in exercise of its statutory functions is not justified.

Supervisory jurisdiction vested under Section 263 of IT Act enables the concerned PCIT/CIT to review the records of any proceedings and order passed therein by the AO. The revisionary powers conferred on the PCIT/CIT under Section 263 of IT Act are of very wide amplitude with a view to address the revenue risks which are objectively justifiable.

Further, the consequential proceedings under Section 92BA of IT Act for referent to TPO and other enquiries contemplated in respect of SDT would trigger only when a stipulated transaction falls within the meaning of definition of SDT as provided under Section 92BA of IT Act.

In the facts and circumstances of the case, it is an admitted fact that the so called Specified Domestic Transaction (‘SDT’) under lens of the Pr.CIT primarily represents ‘sale’ made by the assessee to its sister concern. Naturally a ‘sale’ made by the assessee gets outrightly excluded from the ambit of clause (i) of Section 92BA of the IT Act which is meant to deal with ‘expenditure’ incurred by the assessee to the benefit of sister concern/AE. Various clauses of Section 92BA of the IT Act were not applicable in the factual matrix. As a corollary, merely because a prescribed Form No. 3CEB was filed in accordance with Rule 10E read with Section 92BA of the IT Act would not make an assessee susceptible to onerous investigation proceedings on such transactions, where the assessee prima facie demonstrates that Section 92BA of the IT Act is wholly inapplicable in any manner at the first instance. The Pr.CIT was seized with the relevant facts and could have easily satisfied himself of such prima facie assertions.

A lack of enquiry in a particular manner or as per certain procedures prescribed would possibly vitiate the assessment order only when it is found that the relevant provisions were applicable to the assessee and not otherwise. The allegations made by the Pr.CIT in the instant case have been successfully rebutted on behalf of the assessee. In view of the domestic transaction with AE not falling in the sweep of Section 92BA of the IT Act at the threshold, any alleged inaction attributable to the AO in this regard would not vitiate assessment order as erroneous nor did it cause any prejudice to the interest of the Revenue. The ingredients of Section 263 of the IT Act are thus clearly not fulfilled. Hence, revisional order passed under Section 263 of the Act seeking to set aside the assessment order passed under Section 263 of the Act requires to be quashed. Appeal of the assessee is allowed.

Tags : ASSESSMENT REVISIONAL ORDER LEGALITY