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

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.

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 2 A.Y. 2012-13 Veritas (India) Ltd. 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 2nd 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 2nd 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 3 A.Y. 2012-13 Veritas (India) Ltd.

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 2nd 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 4 A.Y. 2012-13 Veritas (India) Ltd.

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)

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.