VERITAS (INDIA) LTD, MUMBAI V. DCIT - CC- 5(1), MUMBAI

ITA 1896/MUM/2019

AI Insights

M/s. Veritas (India) Ltd. appealed against the order of the CIT(A)-53, Mumbai, which confirmed the AO's order under sections 143(3), 153A, and 144C(3) of the Income Tax Act, 1961, for the Assessment Year 2012-13. The primary contention was regarding the legality of the TP adjustments made by the AO based on a TP order issued post-reference but prior to a search operation at the assessee's premises. The Tribunal examined the timeline of events, including the search and subsequent legal provisions that led to the abatement of the proceedings initially pending before the AO, including the TP order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299623 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: J
• Next Hearing Date: 30-03-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 31-03-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Search and seizure
• Section: 132; 143(3); 153A; 143(2); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI S. RIFAUR RAHMAN, AM आयकर अपील सं/ I.T.A. No.1896/Mum/2019 (निर्धारण वर्ा / Assessment Years: 2012-13) M/s. Veritas (India) Ltd. 701, Embassy Centre, Nariman Point, Mumbai- 400021. बिधम/ Vs. DCIT, Central Circle-5(1) Room No. 1928, 19 th Floor, Air India Building Nariman Point, Mumbai- 400021. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAACD1654J (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 31/03/2023 घोषणा की तारीख /Date of Pronouncement: 04/05/2023 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee company against the order of the Ld. CIT(A)-53, Mumbai dated 25.01.2019 for the AY. 2012-13. 2. The main grievance of the assessee is against the action of the Ld. CIT(A) confirming the order of the AO u/s 143(3) r.w.s 153A, r.w.s. 144C(3) of the Income Tax Act, 1961 (hereinafter “the Act”). 3. First of all, we will deal with the ground no. 2 & 3, wherein the assessee has challenged the action of the AO to have made an addition on account of Transfer Pricing Adjustment of Rs.1,93,43,532/- (on account of share application money) and Rs.1,32,99,750/- (on account of Guarantee Commission) and are noted to be emanating from the Transfer Pricing Order (TPO) dated 29.01.2016 passed u/s 92CA(3) of the Act. According to the Ld. AR, the TPO order is bad in law because the assessee has filed the original return of income on 29.12.2017 Assessee by: Shri Gaurav Kabra Revenue by: Shri Samuel Pitta (Sr. AR) ITA No.1896/Mum/2019 A.Y. 2012-13 Veritas (India) Ltd. 2 declaring total income of Rs.9,04,48,980/-. Later, the case of the assessee was selected for scrutiny and notice u/s 143(2) of the Act was issued. Thereafter, the AO made reference to the TPO on 16.03.2015. Thereafter, search and seizure action u/s 132 of the Act was made by the Department against the assessee on 10.09.2015 (AY. 2016-17) and the statement of the director Shri Nitin Kumar Dindayal Didwania was recorded on the same day (retracted on 02.11.2015). Thereafter, the TPO passed the order u/s 92CA(3) of the Act on 29.01.2016 ( pursuant to the reference made by AO dated 16.03.2015 i.e, before search). And thereafter, the AO issued notice u/s 153A of the Act on 09.11.2016. According to the Ld. AR, from the aforesaid facts itself it is clear that before the event of search happening on 10.09.2015, the AO had already made reference to the TPO on 16.03.2015 and consequently, the same was pending before the TPO on the date of search on 10.09.2015. Resultantly, the proceedings before the TPO got abated due to operation of law [ refer 2 nd Proviso to section 153A of the Act]. And the AO pursuant to search u/s 132 of the Act, after issuance of notice u/s 153A of the Act could not have made use of the TPO order dated 29.01.2016 emanating from AO’s reference to him dated 16.03.2015 which was made prior to date of search on 10.09.2015. Consequent to search, special provision of law gets triggered and AO is bound to act in accordance to section 153A of the Act and by virtue of 2 nd Proviso to section 153A of the Act, all the proceedings pending before the AO on the of search abate. So, by operation of law, all proceedings before the AO on the date of search 10.09.2015 which ITA No.1896/Mum/2019 A.Y. 2012-13 Veritas (India) Ltd. 3 included the reference made by AO to the TPO dated 16.3.2015 also abates. And, the AO in this case, after the search on 10.09.2015, had issued notice u/s 153A of the Act on 09.11.2016 and erroneously has taken note of TPO order dated 29.01.2016 [which has abated on 10.09.2015] and thus erroneously made both adjustment of Rs.1.93 crores and 1.32 crores (Rs. 3,26,43,282) Therefore, the entire addition made by the AO (i.e,TP Adjustment) is non-est in the eyes of law. 4. Per contra, the Ld. DR could not controvert the aforesaid facts. After hearing both the parties, it is noted that the AO has made TP adjustment/addition of Rs. 3,26,43,282/- based on TP order dated 29.01.2016 (which was pursuant to the reference made by the AO dated 16.03.2015, during the original assessment proceeding, which got abated in view of the search u/s 132 of the Act dated 10.09.2015 as per the 2 nd proviso u/s 153A of the Act) is per-se bad in law. For appreciating the factual matrix involved in respect of the legal issue, let us take, the aid of a chart which will give a bird’s eye view about the date of events. Sr. No. Date Event Remarks 1 20.09.2012 Rs.9,04,48,950/- assessee’s original Return of Income 2 Scrutiny notice u/s 143(2) issued 3 16.03.2015 AO’s reference to TPO 4 10.09.2015 Search 5 29.01.2016 Rs.3,26,43,282/- TPO order u/s 92CA(3) pursuant to reference to AO on 16.03.2015 6 09.11.2016 Notice u/s 153A of the Act issued. 7 09.12.2016 Assessee filed Return of income (declaring loss of Rs.1,88,92,238/-) 8 05.11.2017 Notice u/s 143(2) of the Act issued 9 29.12.2017 AO order u/s 153A/143(3)/144C(1) of the Act making T.P. adjustment of Rs. 3.26 cr based on TP order dated 29.01.2016 ITA No.1896/Mum/2019 A.Y. 2012-13 Veritas (India) Ltd. 4 5. From the aforesaid date of events, it is clear that assessee filed return of income (ROI) u/s 139(1) of the Act on 29.09.2019 for AY 2012-13, which was picked up for scrutiny and AO in the original assessment proceeding issued notice u/s 143(2) of the Act and made reference to TPO vide order dated 16.03.2015. And while the TPO order was pending before AO, search u/s 132 of the Act took place on 10.09.2015 at assessee’s premises. Consequently, as per section 153A of the Act, all pending proceedings before the AO as on 10.09.2015 got abated by operation of law (viz, the AO’s reference to TPO; and TPO order dated 29.01.2016 passed pursuant to AO’s reference made before search on 10.09.2015) is null/non-est in the eyes of law. And the AO having issued notice u/s 153A of the Act on 09.11.2016, erred in taking note of the TP adjustment of Rs. 3.26 Cr emanating from the TP order dated 29.01.2016 (which was non-est because earlier reference made by AO to TPO got abated after search) and thus the TP adjustment ordered by AO is bad in law. So assessee succeeds on the legal issue regarding AO’s action of making TP addition of Rs. 3.26 Cr and so it is directed to be deleted (G. No. 2 & 3 allowed) 6. No other grounds were argued/pressed by the Ld. AR of the assessee; And further we note that the Tribunal in assessee’s group cases (pursuant to search) had dismissed the ground of appeal of assessee i.e, ground no. (1) that no addition was warranted since no- incriminating material was discovered qua this year during search. Therefore, this ground of appeal of assessee stands dismissed. ITA No.1896/Mum/2019 A.Y. 2012-13 Veritas (India) Ltd. 5 7. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on this 04/05/2022. Sd/- Sd/- (S. RIFAUR RAHMAN) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 04/05/2022. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai