Kritika Wires Ltd., Kolkata V. Pr.C.I.T.-2, Kolkata

ITA 709/KOL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5185 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 08-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM BILASH MENA
• Assessee Lawyers: DILIP S DAMLE
• Keywords: Transfer pricing; Search and seizure; International transaction; Retrospective amendment; Assessment record; Set aside
• Section: 143(3); 92B; 92E; 44AB; 22; 92CA; 27; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 709 / KOL / 2019 ASSESSMENT YEAR :2014-15 KRITIKA WIRES LTD., 1A, BONFIELD LANE, KOLKATA-700 001 [ PAN NO.AACCK 5615 N ] V/S . PRINCIPAL COMMISSIONER OF INCOME TAX-2, 3 RD FLOOR, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI DILIP S. DAMLE, FCA /BY RESPONDENT SHRI RAM BILASH MENA, CIT-DR /DATE OF HEARING 27-01-2019 /DATE OF PRONOUNCEMENT 19-02-2020 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2014-15 , ARISES AGAINST THE PRINCIPAL COMMISSIONER OF INCOME TAX-2, KOLKATA S ORDER DATED 26.02.2019 PASSED IN CASE M.NO. PR.CIT-3/HQRS.-3/KO L/U/S.263/KRITIKA WIRES./2018-19/11146-49, INVOLVING PROCEEDINGS U/S 263 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD SHRI DAMLE; LEARNED AUTHORIZED REPRESENTATIVE AND SRI MEENA, LEARNED CIT-DR APPEARING AT THE REVENUES BEHEST. C ASE FILE PERUSED. 2. WE ADVERT TO THE BASIC RELEVANT FACTS. THIS ASSE SSEE IS A COMPANY MANUFACTURING AND TRADING IN WIRE RODS. IT FILED IT S RETURN ON 23.09.2014 STATING ITA NO.709/KOL/2019 A.Y. 2014-15 KRITIKA WIRES LTD. VS. PCIT-2, KOL. PAGE 2 NIL INCOME. THE ASSESSING OFFICER FRAMED HIS REGULA R ASSESSMENT ON 23.11.2016 MAKING VARIOUS DISALLOWANCE(S) / ADDITIO N(S). HE FURTHER OBSERVED IN ASSESSMENT ORDER THAT AS PER THE CBDTS INSTRUCT ION NO.3/2016, THE TRANSFER PRICE ISSUE HAD NOT BEEN EXAMINED AT ALL. 3. WE PROCEED FURTHER TO NOTICE THAT THE PCIT SOUGH T TO ASSUME HIS SEC. 263 REVISION JURISDICTION BY TREATING THE FOREGOING REGULAR ASSESSMENT AS ERRONEOUS CAUSING PREJUDICE TO THE INTEREST OF THE REVENUE AS FOLLOWS:- SUB: SHOW CAUSE NOTICE U/S 263 OF THE INCOME TAX AC T, 1961 IN THE CASE OF M/S KRITIKA WIRES PVT. LTD. (PAN: AACCK5615N) FOR THE A .Y.2014-15 MATTER REG. THIS REFERS TO THE ABOVE. ON EXAMINATION OF THE ASSESSMENT RECORDS OF ABOVE M ENTIONED ASSESSMENT YEAR 2014-15, IT TRANSPIRES PRIMA FACIE THAT THERE WAS F AILURE ON PART OF THE AO TO ASSESS THE INCOME CORRECTLY AND AS SUCH, THE INSTANT ORDER U/S 143(3) DATED 23.11.2016 APPEARS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE WITHIN THE AMBIT OF SEC. 263 OF THE INCOME TAX AC, 1961. IN THIS CASE ONE OF THE REASONS FOR SCRUTINY WAS LARGE SPECIFIED DOMESTIC TRANSACTION(S) (3CEB ). THEREFORE, IT WAS MANDATORY TO REFER THE MATTER TO THE TRANSFER PRICING OFFICER (TPO) FOR CONDUCTING TRANS FER PRICING AUDIT TO ASCERTAIN ALP ADJUSTMENT POTENTIAL. BUT THE AO COMPLETED ASSESSME NT WITHOUT NECESSARY LEGAL VERIFICATION OR INVESTIGATION BY WAY OF REFERRING T HE CASE TO TRANSFER PRICING OFFICER. 4. THE ASSESSEE APPEARS TO HAVE FILED ITS REPLY VEH EMENTLY CONTESTING THE PCITS REVISION PROPOSAL. THE SAME STANDS REJECTED IN THE PCITS ORDER UNDER CHALLENGE AS UNDER:- 5. THE ISSUE UNDER CONSIDERATION IN THIS CASE IS TH AT THE AO FAILED TO REFER THE MATTER TO THE TRANSFER PRICING OFFICER (TPO) FOR CONDUCTIN G TRANSFER PRICING AUDIT TO ASCERTAIN AS TO WHETHER THERE WERE ANY TRANSFER RIS K PARAMETERS. BUT THE AO COMPLETED ASSESSMENT WITHOUT NECESSARY LEGAL VERIFI CATION OR INVESTIGATION BY THE TRANSFER PRICING OFFICER. 6. THE ASSESSEE IN HIS SUBMISSION HAS FAILED TO PRO VIDE ANY CORROBORATIVE EVIDENCE IN SUPPORT OF HIS CLAIM THAT THE ASSESSMENT ORDER I S SNOT ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. AS NO PROPE R EXPLANATION HAS BEEN FURNISHED AND IT HAS BEEN STATED BY THE AO THAT THE MATTER SH OULD HAVE BEEN REFERRED TO THE TPO., I AM OF THE CONSIDERED OPINION THAT THE MATER NEEDS TO BE RESTORED BACK TO THE FILE OF THE AO SO THAT REFERENCE CAN BE MADE TO THE TPO AND CALCULATION OF TAX UNDER MAT-PROVISION CAN BE DONE AS PENALTY LAW. ITA NO.709/KOL/2019 A.Y. 2014-15 KRITIKA WIRES LTD. VS. PCIT-2, KOL. PAGE 3 6.1 IT IS IMPERATIVE ON THE PART OF THE ASSESSING O FFICER TO EXAMINE EACH AND EVERY DOCUMENT AND CONDUCT NECESSARY INQUIRY/SCRUTINY IN ORDER TO ASSESS CORRECT INCOME OF THE ASSESSEE. IN THIS CASE, THE ASSESSMENT ORDER WAS PASSED WITHOUT CONSIDERING THE CORROBORATIVE MATERIAL, AVAILABLE AT THE DISPOS AL OF THE AO AND ACCORDINGLY, THE AO FAILED TO CARRY OUT NECESSARY INQUIRY. 6.2 IN THIS CONNECTION IT IS PERTINENT TO NOTE THAT THE FAILURE ON THE PART OF THE ASSESSING OFFICER TO MAKE AN ENQUIRY ON A RELEVANT ISSUE/POINT WOULD RENDER THE ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE AS DECIDED IN THE FOLLOWING CASES BY VARIOUS COURTS: (1968) 67 ITR 84 (SC) RAM PYARI DEVI SARAOGI (1973) 88 ITR 323 (SC) TARA DEVI AGGARWAL (1975) 99 ITR 375 (DEL) GEE VEE ENTERPRISES (1966) 220 ITR 657 (MAD) K.A. RAMASWAMI CHEETTIAR & ANOTHER (1966) 220 ITR 456 (DEL) DUGGAL AND CO. (1966) 220 ITR 167 (MP) MAHAVAR TRADERS (1995) 213 ITR 843 (RAJ) EMERY STONE MFG. CO. (1992) 198 ITR 611 (KER) MALABAR INDUSTRIAL CO. - MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 ( SC) - CIT VS.MAX INDIA LTD. 268 ITR 128 (P&H) [AFFIRMED IN 295 ITR 282 (SC)] - CIT VS. KWALAITY STEEL SUPPLIERS COMPLEX 395 ITR - CIT VS. AMITABH BACHCHAN 384 ITR 200 (SC) - CIT VS. HINDUSTAN LEVER LTD. 343 ITR 161 (BOM) - CIT VS. VIKAS PLYMERS 341 ITR 537 (DEL) - CIT VS. SUNBEAM AUTO LTD 332 ITR 167 (DEL) - CIT VS. DEVELOPMENT CREDIT BANK LTD 323 ITR 206 ( BOM) - VIMGI INVESTMENT (P) TD 290 ITR 5050 (DEL) - HARI IRON TRADING CO. VS. CIT 263 ITR 437 (P&H) - CIT VS. GABRIEL INDIA LTD 203 ITR 108 (BOM) 6.3 IT MAY BE FURTHER NOTICED THAT IN ORDER TO PROV IDE CLARITY ON THE ISSUE OF ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE , A NEW EXPLANATION HAS BEEN INSERTED TO CLARIFY THAT AN OR DER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR A S IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, IF IN THE OPINION OF THE PRINCIPAL COM MISSIONER OR COMMISSIONERS. (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES O R VERIFICATION WHICH, SHOULD HAVE BEEN MADE, (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WI TH ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JURISD ICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OT HER PERSON. THIS AMENDMENT TAKES EFFECT FROM 1-6-2015. 7. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE AFORESAID DECISIONS OF HON'BLE SUPREME COURT AND HO N'BLE HIGH COURT AND IN ACCORDANCE WITH THE AMENDMENT MADE TO SECTION 263 O F THE ACT WITH EFFECT FROM 01.06.2015, I HOLD THAT THE IMPUGNED ASSESSMENT ORD ER DATED 23.11.2016 PASSED BY THE AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. THEREFORE, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD, THAT THE IMPUGNED ITA NO.709/KOL/2019 A.Y. 2014-15 KRITIKA WIRES LTD. VS. PCIT-2, KOL. PAGE 4 ASSESSMENT ORDER DATED 23.11.2016 IS QUASHED WITH T HE DIRECTIONS GIVEN IN THIS ORDER SEPARATELY. 8. ACCORDINGLY, IN VIEW OF THE FACTS AND CIRCUMSTAN CES OF THE CASE AS STATED ABOVE, AND ALSO RESPECTFULLY FOLLOWING THE JUDGMENTS CITED ABOVE, I AM OF THE CONSIDERED VIEW THAT IT IS DEEMED FIT AND APPROPRIATE IN THE I NTEREST OF JUSTICE TO RESTORE THE MATTER TO THE FILE OF THE AO FOR DE NOVO ASSESSMENT WITH A DIRECTION TO THE AO TO REFER THE CASE TO THE TRANSFER PRICING OFFICER FOR REQUIRED V ERIFICATION / INVESTIGATION AT HIS END. ACCORDINGLY, I DIRECT THE AO TO RE-ASSESS THE INCOM E OF THE ASSESSEE FOR THE RELEVANT AY 2014-15 ON THE ISSUES AS DISCUSSED SUPRA. THIS LEAVES THE ASSESSEE AGGRIEVED. 5. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS AGAINST AND IN SUPPORT OF THE PCITS REVISION DIRECTIONS UN DER CHALLENGE THAT THE ASSESSING OFFICER OUGHT TO HAVE MADE MANDATORY REFE RENCE TO THE TPO FOR DETERMINING ARMS LENGTH PRICE OF THE LARGE SPECIFI ED DOMESTIC TRANSACTIONS(S) RECORDED IN FORM 3CEB. WE FIND THAT THAT THIS TRIBU NALS CO-ORDINATE BENCHS DECISION IN ITA NO.1332/KOL/2019 AIC IRON INDUSTRIES PVT. LTD., PRINCIPAL COMMISSIONER OF INCOME TAX-1, KOLKATA DECIDED ON 31.12.2019 FOR VERY ASSESSMENT YEAR 2014-15 HAS HELD THAT SUCH AN IN A CLAIM AT THE ASSESSING OFFICER DOES NOT RENDER THE CORRESPONDING REGULAR A SSESSMENT TO BE ERRONEOUS CAUSING PREJUDICE TO THE INTEREST OF THE REVENUE AS PER STATUTORY AMENDMENT IN THE ACT AS FOLLOWS:- 4. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO R IVAL CONTENTIONS REITERATING BOTH THE PARTIES' RESPECTIVE STANDS AGAINST AND IN SUPPO RT OF THE IMPUGNED REVISION JURISDICTION. WE FIND THAT ID. PCIT HAS EXERCISED H IS SECTION 263 REVISION JURISDICTION ONLY ON ACCOUNT OF THE ASSESSING OFFICER'S ALLEGED INACTION IN NOT MAKING REFERENCE TO THE TPO FOR DETERMINING ARM'S LENGTH PRICE OF ASSES SEE'S SPECIFIC DOMESTIC TRANSACTIONS. THIS TRIBUNAL'S COORDINATE BENCH'S DE CISION IN EVEREADY INDUSTRIES INDIA LTD. VS. PCIT ITA NO.805/KOL/2019 DATED 13.12.19 HOLDS THAT SUCH A REFERENCE PRESCRIBED IN SECTION 92BA(I) REGARDING ' ANY EXPENDITURE IN RESPECT OF WHICH PAYMENT HAS BEEN MADE OR IS TO BE MADE TO A PERSON REFERRED TO IN CLAUSE (B) OF SUB- SECTION (2) OF SECTION 40A ' STANDS OMITTED BY THE FINANCE ACT 2017 W.E.F 01.04.17 AND THEREFORE, THE FOREGOING OMISSION IS A PPLICABLE WITH RETROSPECTIVE EFFECT IN THE IMPUGNED ASSESSMENT YEAR 2014-15 AS WELL. LE ARNED COORDINATE BENCH'S DECISION TO THIS EFFECT READS AS UNDER: ' 22 . IN GROUND NOS. 5 TO 7, THE ASSESSEE HAS OBJECTED TO LD. PR. CIT'S FINDING WITH REFERENCE TO REASONS SET OUT IN CLAUSE 3(B) OF THE SCN WHICH READ AS FOLLOWS: 'ONE OF THE REASONS FOR SELECTION OF SCRUTINY WAS M ISMATCH IN AMOUNT PAID TO RELATED PERSONS U/S 40A (2) (B) REPORTED IN AUDIT REPORT ( FORM 3CEB ) AND ITR. HOWEVER, THE CASE WAS NOT REFERRED TO TP O. AS PER PARA 3.2 OF CBDT'S. INSTRUCTION NO. 3 OF 2016, THE INSTANT CASE HAD TO BE MANDATORILY REFERRED TO THE TPO (THE TRANSFER PR ICING OFFICER) BY ITA NO.709/KOL/2019 A.Y. 2014-15 KRITIKA WIRES LTD. VS. PCIT-2, KOL. PAGE 5 THE A.O AFTER OBTAINING THE APPROVAL OF PRINCIPLE C IT. HOWEVER, THE A.O HAS COMPLETED ASSESSMENT U/S 143(3) OF THE ACT ON 29-12-2016 WITHOUT REFERRING THE MATTER TO TRANSFER PRICING OF FICER.' 23 . WE FIND THAT THE ASSESSEE'S CASE WAS SELECTED UND ER CASS INTER ALIA ON THE PARAMETER THAT ' MISMATCH IN AMOUNT PAID TO RELATED PERSONS U/S 40A (2) (B) REPORTED IN AUDIT REPORT AND ITR '. WE NOTE THAT WITH REFERENCE TO THIS CASS REASON THE ASSESSEE WAS REQUIRED TO PROVIDE IT S EXPLANATION ABOUT THE ALLEGED MISMATCH OF THE FIGURES REPORTED IN TERMS O F SECTION 40A(2)(B) IN ITR AND TAX AUDIT REPORT. WE NOTE THAT EXPLANATION IN T HAT REGARD WAS FURNISHED VIDE PARA 9 OF ASSESSEE'S LETTER DATED 09.12.2016 [ PAGE 109 OF PAPER BOOK ]. IT WAS EXPLAINED BEFORE THE LOWER AUTHORITIES AS AL SO BEFORE US THAT IN CLAUSE 9A OF PART A-01 OF THE INCOME-TAX RETURN IN ITR-6, THE ASSESSEE WAS REQUIRED TO SPECIFY THE QUANTUM OF THE AMOUNTS DEBITED TO TH E PROFIT & LOSS ACCOUNT TO THE EXTENT DISALLOWABLE U/S 40A, TO THE PERSONS SPE CIFIED IN SECTION 40A(2)(B) OF THE ACT. IN OTHER WORDS IN THE ITR THE ASSESSEE WAS EXPECTED TO SPECIFY THE AMOUNT WHICH WAS DISALLOWABLE IN TERMS OF SECTION 4 0A (2) (B) OF THE ACT. ON THE OTHER HAND, IN CLAUSE 23 OF THE TAR READ WITH A NNEXURE - IX THERETO, THE AUDITOR HAD REPORTED THE PAYMENTS ACTUALLY MADE BY THE ASSESSEE TO THE PERSONS SPECIFIED IN SECTION 40A(2)(B) OF THE ACT. IT WAS EXPLAINED THAT THE TAX AUDITOR, WHILE GIVING HIS REPORT IN CONFORMITY WITH THE FORM PRESCRIBED BY THE BOARD U/S 44AB OF THE ACT, WAS REQUIRED TO REPORT O NLY THE AMOUNTS PAID TO PERSONS SPECIFIED IN S 40A(2) DURING THE RELEVANT R EPORTING PERIOD AND HE WAS NOT REQUIRED TO EXPRESS HIS OPINION AS TO WHETHER T HE PAYMENTS TO THE SPECIFIED PERSONS WERE EXCESSIVE AND FOR THAT REASO N ANY PART THEREOF WAS DISALLOWABLE U/S 40A(2) OF THE ACT. THE ID. AR THER EFORE SUBMITTED THAT THE INTENT AND PURPORT OF INFORMATION DISCLOSED IN CLAU SE 9A OF PART A- 01OF THE INCOME-TAX RETURN IN ITR-6 AND CLAUSE 23 OF THE TAR BEING MATERIALLY DIFFERENT, AND THE FIGURES REPORTED IN ITR AND IN C LAUSE 23 OF TAR DID NOT MATCH. 24 . THE ID. AR SUBMITTED THAT THE CASS PARAMETER REFE RRED ONLY TO MISMATCH OF THE FIGURES REPORTED IN TAX AUDIT REPORT IN RELA TION TO PAYMENTS MADE TO PERSONS REFERRED 40A(2)(B) WITH THE FIGURES MENTION ED IN INCOME-TAX RETURN. THE CASS REASONS DID NOT MAKE REFERENCE TO THE ' TRANSFER PRICING AUDIT REPORT FURNISHED IN FORM 3CEB, AS WRONGLY ALLEGED BY THE LD. PR. CIT IN HIS SCN. HE THEREFORE SUBMITTED THAT WHEN THE REASON FO R SELECTION UNDER CASS WAS EXAMINED AND THE AD WAS SATISFIED WITH THE EXPL ANATION FURNISHED FOR THE SAME, THE LD. PR. CIT COULD NOT JUSTIFY INVOCATION OF POWER U/S 263 ON THE GROUND THAT BEFORE COMPLETION OF ASSESSMENT REFEREN CE TO TPO ON TRANSFER PRICING RISK PARAMETER WAS MANDATORY IN TERMS OF PA RA 3.2 OF THE CBDT INSTRUCTION NO. 3 OF 2016. 25 . HAVING CONSIDERED RIVAL SUBMISSIONS WE FIND MERIT IN THE ID. AR'S PRIMARY CONTENTION THAT THE SCN PROCEEDED ON THE WRONG PRES UMPTION THAT THE ASSESSEE'S CASE WAS SELECTED ON A TRANSFER PRICING RISK PARAMETER. WE NOTE THAT THE PARAMETER FOR SELECTION WAS AS FOLLOWS: ' MISMATCH IN AMOUNT PAID TO RELATED PERSONS U/S 40A (2) (B) REPORTED IN AUDIT REPORT AND ITR ' 26 . IT IS THUS NOTED THAT NOWHERE THE CASS REASON STA TED THE SELECTION OF THE ASSESSEE'S CASE WAS ON THE GROUND OF THERE BEING ' LARGE VALUE OF SPECIFIED DOMESTIC TRANSACTIONS ' OR ' LARGE VALUE OF INTERNATIONAL TRANSACTIONS ' SO AS TO WARRANT AN INFERENCE THAT THE CASE WAS SELECT ED ON TRANSFER PRICING RISK ITA NO.709/KOL/2019 A.Y. 2014-15 KRITIKA WIRES LTD. VS. PCIT-2, KOL. PAGE 6 PARAMETER. ON THE CONTRARY, THE CASS REASON MERELY CLAIMED THAT THERE WAS MISMATCH IN THE AMOUNT PAID TO RELATED PERSONS U/S 40A (2)(B) OF THE ACT REPORTED IN AUDIT REPORT AND ITR. FROM PLAIN READIN G OF THE SAID CASS REASON, WE ARE OF THE VIEW THAT NO PRUDENT PERSON PROPERLY INSTRUCTED IN LAW WOULD HAVE INFERRED THAT THE AFORESAID PARAMETER CONSTITU TED TRANSFER PRICING RISK PARAMETER ' SO AS TO WARRANT MANDATORY REFERENCE U/S 92CA OF THE ACT IN TERMS OF THE PARA 3.2 OF CBDT INSTRUCTION NO. 3 OF 2016 AND FAILURE TO MAKE TP REFERENCE MADE THE ASSESSMENT ORDER ERRONEOUS. W E FURTHER FIND THAT ONCE THE INCORRECT PRESUMPTION ON LD. PR. CIT'S PAR T WAS HIGHLIGHTED BY THE ASSESSEE IN IT'S SUBMISSION THEN IN THE IMPUGNED OR DER THE LD. PR.CIT HIMSELF COMPLETELY DIGRESSED FROM THE REASON SET OUT IN THE SCN BUT NONE THE LESS JUSTIFIED HIS ACTION ON THE GROUND THAT THE REFEREN CE TO TPO WAS NECESSARY BECAUSE THE ASSESSEE'S CASE WAS SELECTED FOR SCRUTI NY UNDER THE CATEGORY OF ' COMPLETE SCRUTINY '. WE ARE HOWEVER UNABLE TO ACCEPT AN ALTOGETHER NE W CASE MADE OUT BY THE LD. PR. CIT WHILE PASSING THE IMPUGNED ORDER, JUSTIFYING HIS INTERFERENCE THAT FOR NOT MAKING REFERENCE TO T HE TPO, ORDER OF ASSESSMENT WAS ERRONEOUS IN TERMS OF SECTION 263 OF THE ACT. IN THE FIRST INSTANCE, WE NOTE THAT THE LD. PR. CIT HIMSELF GAVE UP THE REASON SET OUT IN SCN VIZ., THAT ONE OF THE CASS REASON FOR SELECTION OF SCRUTINY ASSESSMENT WAS A TRANSFER PRICING RISK PARAMETER. ONCE IT IS E STABLISHED THAT THE TRANSFER PRICING RISK PARAMETER WAS NOT THE GROUND FOR SELEC TION OF SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT, THEN WE HAVE TO A GREE WITH THE ID. AR'S SUBMISSION THAT PARA 3.2 OF THE CBDT INSTRUCTION NO . 3 OF 2016 WAS NOT APPLICABLE IN THE GIVEN FACTS OF THE PRESENT CASE A ND THEREFORE THE AO'S ORDER COULD NOT HAVE BEEN HELD TO BE ERRONEOUS BY THE CIT FOR NOT MAKING REFERENCE TO THE TPO IN TERMS OF THE SAID CBDT INSTRUCTION 3 OF 2016. 27 . SO FAR AS THE LD. PR.CIT'S FINDING JUSTIFYING HIS CASE THAT THE AO'S ORDER BECAME ERRONEOUS AND PREJUDICIAL TO THE INTERESTS O F THE REVENUE FOR NOT REFERRING THE ASSESSEE'S CASE TO THE TPO U/S 92CA O F THE ACT ON THE GROUND THAT THE ASSESSEE'S CASE CAME WITH THE CATEGORY OF ' COMPLETE SCRUTINY ', WE NOTE THAT THIS CONTENTION OF THE LD. PR. CIT IS IN FACT CONTRARY TO THE EXTANT INSTRUCTIONS OF THE CBDT CONTAINED IN PARAS 3.2 TO 3.3 OF INSTRUCTION NO. 3/2016 WHEREIN THE BOARD HAVE SET OUT THE FOLLOWING SPECI FIC SITUATIONS/INSTANCES WHERE THE REFERENCE TO TPO HAS BEEN MADE MANDATORY: '3.2 ALL CASES SELECTED FOR SCRUTINY, EITHER UNDER THE COMPUTER ASSISTED SCRUTINY SELECTION [ CASS ] SYSTEM OR UNDER THE COMPULSORY MANUAL SELECTION SYSTEM (IN ACCORDANCE WITH THE CBD T'S ANNUAL INSTRUCTIONS IN THIS REGARD -FOR EXAMPLE. INSTRUCTI ON NO. 6/2014 FOR SELECTION IN F.Y 2014-15 AND INSTRUCTION NO. 8/2015 FOR SELECTION IN F.Y 2015-16), ON THE BASIS OF TRANSFER PRICING RISK PARAMETERS [IN RESPECT OF INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS OR BOTH] HAVE TO BE REFERRED TO THE TPO BY THE AO, AFTER OBTAINING THE APPROVAL OF THE JURISDICTIONAL PRINCIPAL COMMISSION ER OF INCOME-TAX (PCIT) OR COMMISSIONER OF INCOME-TAX (CIT). THE FAC T THAT A CASE HAS BEEN SELECTED FOR SCRUTINY ON A TP RISK PARAMETER B ECOMES CLEAR FROM A PERUSAL OF THE REASONS FOR WHICH A PARTICULAR CAS E HAS BEEN SELECTED AND THE SAME ARE INVARIABLY AVAILABLE WITH THE JURI SDICTIONAL AO. THUS, IF THE REASON OR ONE OF THE REASONS FOR SELECTION O F A CASE FOR SCRUTINY IS A TP RISK PARAMETER, THEN THE CASE HAS TO BE MAN DATORILY REFERRED TO THE TPO BY THE AO, AFTER OBTAINING THE APPROVAL OF THE JURISDICTIONAL PCIT OR CIT. ITA NO.709/KOL/2019 A.Y. 2014-15 KRITIKA WIRES LTD. VS. PCIT-2, KOL. PAGE 7 3.3 CASES SELECTED FOR SCRUTINY ON NON-TRANSFER PRI CING RISK PARAMETERS BUT ALSO HAVING INTERNATIONAL TRANSACTIONS OR SPECI FIED DOMESTIC TRANSACTIONS, SHALL BE REFERRED TO TPOS ONLY IN THE FOLLOWING CIRCUMSTANCES: (A) WHERE THE AO COMES TO KNOW THAT THE TAXPAYER HA S ENTERED INTO INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TR ANSACTIONS OR BOTH BUT THE TAXPAYER HAS EITHER NOT FILED THE ACCOUNTAN T'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 ADJUSTM ENT OF RS. 10 CRORE OR MORE IN AN EARLIER ASSESSMENT YEAR AND SUCH ADJU STMENT HAS BEEN UPHELD BY THE JUDICIAL AUTHORITIES OR IS PENDING IN APPEAL; AND (C) WHERE SEARCH AND SEIZURE OR SURVEY OPERATIONS H AVE 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 R ECORDED BY THE INVESTIGATION WING OR THE AO.' 28 . FROM PERUSAL OF THE ABOVE, IT IS NOTED THAT NONE OF THE CONDITIONS PRESCRIBED IN THESE PARAS NECESSITATING MANDATORY R EFERENCE TO TPO WERE SATISFIED IN THE INSTANT CASE. IN FACT, WE FIND THA T IN THE IMPUGNED ORDER, LD. PR. CIT HIMSELF DID NOT TO MAKE OUT A CASE THAT THE ASS ESSEE'S CASE JELL UNDER ANY OF THE SITUATIONS PRESCRIBED IN PARAS 3.2 & 3.3 REQUIRING MANDATORY REFERENCE U/S 92CA(2) OF THE ACT. THE ONLY GROUND O N WHICH THE LD. PR. CIT ULTIMATELY JUSTIFIED HIS ORDER REQUIRING AO TO MAKE REFERENCE U/S 92CA MANDATORILY WAS THAT THE ASSESSEE'S CASE WAS SELECT ED UNDER COMPLETE SCRUTINY CRITERIA AND THEREFORE ALL POSSIBLE ENQUIR IES SHOULD HAVE BEEN MADE BY THE AO INTER ALIA INCLUDING MAKING REFERENCE TO THE TPO. WE FIND THAT ALTHOUGH IN SUPPORT OF SUCH CONCLUSION THE LD. PR. CIT HAS PLACED RELIANCE ON THE CBDT INSTRUCTION NO. 3 OF 2016, THE SAID INSTRU CTION NOWHERE EVEN SUGGESTS LET ALONE PROVIDES THAT EVERY CASE OF AN A SSESSEE SELECTED ON NON- TRANSFER PRICING RISK PARAMETER BUT INVOLVING ' COMPLETE SCRUTINY ', THE REFERENCE MUST BE MADE TO THE TPO IF SUCH AN ASSESS EE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TR ANSACTIONS DURING THE RELEVANT YEAR. INSTEAD IN PARA 3.3 THE BOARD HAS EN UMERATED ONLY THREE SPECIFIC INSTANCES/ SITUATIONS WHEN THE REFERENCE T O TPO HAS BEEN MADE MANDATORY EVEN THOUGH AS PER THE CA SS, THE CASE OF AN ASSESSEE IS NOT SELECTED ON ' TRANSFER PRICING RISK PARAMETER '. WE FIND THAT IN THE IMPUGNED ORDER THE LD. PR. CIT HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THE AO HAD ACTED IN VIOLA TION OF THE CBDT INSTRUCTION NO. 3 OF 2016 AND FOR THAT REASON THE A O'S ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 29 . EVEN WITH REGARD TO CIT'S ALLEGATION THAT IN COMP LETE SCRUTINY CASE, THE AO DID NOT CONDUCT ANY ENQUIRIES WHATSOEVER WITH RE GARD TO TRANSACTIONS REFERRED TO IN SECTION 40A(2)(B) AS WELL AS SECTION 92CA OF THE ACT, WE FIND THAT PRIOR TO COMPLETION OF ASSESSMENT THE AO HAD I NDEED CONDUCTED ENQUIRIES WITH REGARD TO CASS REASON AS ALSO THE AS SESSEE'S INTERNATIONAL TRANSACTIONS WITH THE AES. WE NOTE THAT BEFORE COMP LETION OF ASSESSMENT, THE ASSESSEE WAS ASKED TO PROVIDE EXPLANATION EVEN WITH REGARD TO ITS INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTE RPRISES. BY ITS LETTER DATED ITA NO.709/KOL/2019 A.Y. 2014-15 KRITIKA WIRES LTD. VS. PCIT-2, KOL. PAGE 8 16.12.2016 [ PAGES 87 TO 89 OF PAPER BOOK ] THE ASSESSEE HAD FURNISHED ITS EXPLANATION IN RESPECT OF ITS INTERNATIONAL TRANSAC TIONS. IN THE SAID LETTER IT WAS PARTICULARLY BROUGHT TO THE AO'S ATTENTION THAT BAS ED ON THE TRANSFER PRICING AUDIT REPORT IN FORM 3CEB, WHEREIN THE AUDITORS HAD CERTIFIED ALP OF INTERNATIONAL TRANSACTIONS, THE ASSESSEE HAD SUO MO TO OFFERED ADJUSTMENTS IN THE COMPUTATION OF INCOME ON ACCOUNT OF CORPORATE G UARANTEE FEES AND INTEREST ON LOAN TO AES WHICH WERE NOT ACTUALLY CHA RGED. WE THEREFORE FIND THAT IT WAS NOT EVEN A CASE WHERE THE ORDER OF THE AD SUFFERED FROM THE CHARGE OF FAILURE TO CONDUCT ENQUIRY INTO THE RELEV ANT ISSUE AS ALLEGED BY THE LD. PR. CIT IN THE IMPUGNED ORDER. 30 . LASTLY, AS POINTED OUT BY THE ID. AR. IN THE SCN, THE LD. PR.CIT HAD JUSTIFIED INVOCATION OF POWER U/S 263 WITH REFERENC E TO ASSESSEE'S TRANSACTIONS WITH PERSONS SPECIFIED IN SECTION 40A(2)(B) OF THE ACT. IN OTHER WORDS IN CIT'S OPINION ASSESSEE'S SPECIFIED DOMESTIC TRANSACTIONS COMING WITHIN THE AMBIT OF SECTION 92BA(I) OF THE ACT SHOULD HAVE BEEN REFERRED FOR TRANSFER PRICING SCRUTINY. WE HOWEVER NOTE THAT THE RELEVANT PROVISI ONS OF SECTION 92BA WERE AMENDED BY FINANCE ACT. 2017 W.E.F 01.04.2017 WHEREBY CLAUSE (I) OF SEC. 92BA RELATING TO ANY EXPENDITURE IN RESPECT OF WHIC H PAYMENT HAVE BEEN MADE OR IS TO BE MADE TO A PERSON REFERRED TO CLAUS E (B) OF SUB- SECTION (2) OF SECTION 40A OF THE ACT WAS OMITTED. NOW THE QUESTION ARISES WH ETHER AFTER THE OMISSION OF CLAUSE (I) FROM THE STATUTE, THE CIT CA N JUSTIFIABLY SET ASIDE THE ORDER OF ASSESSMENT FOR NOT MAKING A REFERENCE TO T PO FOR EXAMINING TRANSACTIONS COMING WITHIN THE AMBIT OF SECTION 92B AM OF THE ACT. IN THIS REGARD. OUR ATTENTION WAS INVITED TO THE DECISION O F THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DVC EMTA COAL MINES LT D &ORS VS ACIT IN ITA NOS. 2430-2432/KOL/2017 DATED 01.05.2019 WHEREIN IT WAS HELD THAT THE LEGA L EFFECT OF CLAUSE (I) OF SECTION 92BA BEING OMITTED BY SUBSEQUENT AMENDMENT, WOULD MEAN THAT CLAUSE (I) NEVER EXISTED IN THE STA TUTE AND CONSEQUENTLY NO ADVERSE INFERENCE WITH REFERENCE TO OMITTED PROVISI ON CAN BE DRAWN AGAINST AN ASSESSEE. WHILE OMITTING THE CLAUSE (I) OF SECTI ON 92BA OF THE ACT. NOTHING WAS SPECIFIED WHETHER THE PROCEEDING INITIATED OR A CTION TAKEN ON THIS COUNT CAN CONTINUE. THEREFORE, THIS TRIBUNAL HELD THAT AN Y PROCEEDING INITIATED OR ACTION TAKEN UNDER THAT CLAUSE WOULD NOT SURVIVE AT ALL AND ANY REFERENCE MADE TO TPD UNDER SECTION 92CA IN RESPECT OF TRANSACTIONS REFERRED TO IN CLAUSE (I) OF SECTION 92BA OF THE ACT SHALL BE INVA LID AND BAD IN LAW. 31 . APPLYING THE RATIO LAID DOWN IN THE FOREGOING DEC ISION TO THE FACTS OF THE PRESENT CASE. WE NOTE THAT WHEN THE IMPUGNED ORDER WAS PASSED BY THE LD. PR. CIT. CLAUSE (I) OF SECTION 92BA OF THE ACT HAD ALREADY BEEN OMITTED BY THE FINANCE ACT. 2017 AND IN THAT VIEW OF THE MATTER TH E LD. PR. CIT COULD NOT SET ASIDE THE ORDER FOR ALLEGED NON-COMPLIANCE WITH PRO VISION OF LAW WHICH NO LONGER EXISTED IN THE STATUTE AS ON THE DATE OF ORD ER. THE LD. PR. CIT'S DIRECTION REQUIRING THE AD TO CONSIDER MAKING A REF ERENCE TO THE TPD IN THE SET ASIDE PROCEEDINGS IS ALSO CONTRARY TO THE VIEW EXPRESSED IN THE FOREGOING DECISION OF THE COORDINATE BENCH (SUPRA). FOR ALL T HE FOREGOING REASONS THEREFORE, WE HOLD THAT THE AO'S ORDER DID NOT SUFF ER FROM ANY ERROR FOR THE REASON THAT HE DID NOT MAKE REFERENCE TO THE TPO. A CCORDINGLY THE LD. PR. CIT'S ORDER FOR THE REASON SET OUT IN CLAUSE 3(B) O F THE SCN AND FOR THE ENTIRELY NEW SET OF REASONS CONTAINED IN THE IMPUGN ED ORDER, IS SET ASIDE . GROUND NOS. 5 TO 7 ARE ACCORDINGLY ALLOWED . ' 5. WE ADOPT THE ABOVE DETAILED DISCUSSION MUTATIS M UTANDIS AND CONCLUDE THAT THE PCIT HAS ERRED IN LAW AND AS WELL AS ON FACTS IN TE RMING THE ABOVE REGULAR ASSESSMENT DATED 19.12.16 AS ERRONEOUS CAUSING PREJ UDICE TO INTEREST OF THE ITA NO.709/KOL/2019 A.Y. 2014-15 KRITIKA WIRES LTD. VS. PCIT-2, KOL. PAGE 9 REVENUE QUA THE ASSESSEE'S SPECIFIED DOMESTIC TRANS ACTION NOT HAVING SUBJECTED TO SECTION 92CA REFERENCE TO THE TRANSFER PRICING OFFI CER. WE MAKE IT CLEAR THAT LEARNED COORDINATE BENCH HAS ALREADY HELD IN ASSESSMENT YEA R 2014-15 ITSELF THAT THE FINANCE ACT 2017'S OMISSION OF SECTION 92BA(I) CARR YING RETROSPECTIVE EFFECT AND THEREFORE, SUCH AN INACTION IN NOT MAKING REFERENCE TO THE TPO DOES NOT RENDER THE ASSESSMENT ERRONEOUS CAUSING PREJUDICE TO INTEREST OF THE REVENUE. WE ACCORDINGLY REVERSE THE PCIT'S REVISION DIRECTIONS THEREFORE. 6. WE ADOPT THE ABOVE EXTRACTED DETAILED DISCUSSION MUTATIS MUTANDIS AND HOLD THAT SINCE THE FINANCE ACT, 2017 OMITTED SEC. 92BA(I) FROM RETROSPECTIVE EFFECT, THE ASSESSING OFFICERS INACTION IN NOT MAK ING REFERENCE TO THE TPO DOES NOT RENDER THE ASSESSMENT ERRONEOUS CAUSING PR EJUDICE TO INTEREST OF THE REVENUE. THE PCITS REVISION DIRECTIONS UNDER CHALL ENGE ARE ACCORDINGLY REVERSED. THE ASSESSING OFFICERS REGULAR ASSESSMEN T DATED 23.11.2016 IS RESTORED. ORDERED ACCORDINGLY. 7. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 19/ 02/2020 SD/- SD/- ( &) (( &) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP SR.P.S. )- 19 / 02 /20 20 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-KRITIKA WIRES LTD., 1A, BONFIELD LANE, K OLKATA-700 001 2. /RESPONDENT-PCIT, CIR-2, 3 RD FL, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQ. KOL-69 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. 8 ((4, 4, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ 4,