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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM
Per L.P.Sahu, AM : This is an appeal filed by the assessee against order of CIT(A)-2, Bhubaneswar, dated 18.04.2019 for the assessment year 2014-2015, on the following grounds :- A. For that the Learned Assessing Officer (Ld. AO) has initiated penalty proceeding on the behest of Ld. DCIT (TP)-II, Kolkata u/s.271BA of the Income Tax Act, 1961 (Act) in the assessment order dated29.12.2017 passed u/s. 143(3) of the Act . The impugned order of imposing penalty u/s.271BA of Act has been passed on 25.06.2018 by the Ld. A.O without affording reasonable opportunity to the appellant and without exercising his discretion as vested by the statute. However without adjudicating the appeal despite the fact that the particular provision of specified domestic transaction has been omitted from statute by the Finance Act, 2017 the Ld. CIT (A) is erred in upholding the penalty order. Therefore orders of forum below are unsustainable and impermissible under law.
2 B. For that the appellant craves leave to add, alter, amend, substitute any other grounds if so arises at the time of hearing of this appeal.
Brief facts of the case are that the assessee is a Joint Venture and engaged in the business of contract works and filed its return of income
electronically on 30.09.2014 showing total income at Rs.3,86,200/-,
which was selected for scrutiny under CASS. Subsequently, statutory
notices were issued to the assessee. During the course of assessment
proceedings, on being asked by the AO, the assessee filed report in prescribed Form No.3CEB in terms of provision of Section 92E of the Act, however, the AO found that the report filed by the assessee after
the due date of filing of return of income for the assessment year under consideration. Thereafter the AO sought approval to refer the matter to the TPO for computation of arm’s length price in relation to specified
domestic transactions u/s.92CA of the Act. Thereafter as per the order
of the TPO, the AO completed assessment making addition of Rs.55,43,224/-. Simultaneously, the penalty proceedings u/s.271BA of the Act was initiated against the assessee for failure to furnish the report in prescribed Form No.3CEB in terms of provision of section 92E
of the Act and penalty order was passed vide dated 25.06.2018. 3. Against the penalty proceedings initiated by the AO u/s.271BA of the Act, the assessee appealed before the CIT(A) and the CIT(A)
dismissed the appeal of the assessee.
3
Aggrieved further, the assessee is now in appeal before the Income Tax Appellate Tribunal.
Before us, ld. AR submitted that as required by the AO, the assessee has filed report in prescribed Form No.3CEB in terms of provision of Section 92E of the Act, though it was filed after the due
date of filing of return, however, there is no malafide intention behind
it and non-filing of audit report is only a technical default and,
therefore, no penalty can be levied. Further, ld. AR filed a copy of the order passed by the CIT(A), dated 30.07.2019 allowing the quantum
appeal of the assessee and submitted that the CIT(A) has deleted the addition made by the AO on account of adjustment to the total payment
of sub-contract amount, holding therein that the type of transactions
made by the assessee have been removed from the definition of ‘Specified Domestic Transaction’ w.e.f.01.04.2017. Further, the ld. AR No.1722/Bang/2017, order dated 22.12.2017. Therefore, ld. AR
submitted that when the CIT(A) has already deleted the addition, the penalty levied by the AO and upheld by the CIT(A) deserves to be deleted as the said provision has been omitted from the statute.
On the other hand, ld. DR relied on the orders of authorities
below.
4
After hearing both the sides and perusing the entire material
available on record, we find that due to late filing of audit report in the prescribed form, the AO levied penalty u/s.271BA of the Act and the CIT(A) has also went with the observations of the AO. On perusal of the assessment order and penalty order along with the appellate order, it is true that the assessee has submitted the audit report during the course
of assessment proceedings belatedly, which fact has not been disputed
by any of the authorities below, however, in this regard, the assessee
has substantiated that due to some technical default, the audit report
could not be filed within the prescribed time limit. It was further
submitted by the ld. AR of the assessee that the provision of clause (i)
of Section 92BA of the Act has already been omitted by the Finance Act,
2017 w.e.f. 01.04.2017, on which basis the CIT(A) has allowed quantum
appeal of the assessee deleting the addition made by the AO, therefore,
imposition of penalty is invalid. On perusal of the provisions of Section 92BA of the Act, we found that once the clause in the said section is omitted by the subsequent amendment, it would be deemed that clause(i) was never been on the statute and there is no specification in omitting the said clause by the statue as to whether the proceeding
initiated or action taken on this, shall continue or not. We have also perused the order of the CIT(A) dated 30.07.2019, copy of which is placed on record, thereby deleting the quantum addition in the case of 5 the assessee following the above amendment in the provisions and relying on the decisions of Kolhapur Canesugar Works Ltd. (AIR 200 SC
811), General Finance Co. 257 ITR 338 (SC), M/s GE Thermometric
India Pvt. Ltd., ITA No.424/2009, dated 22.03.2018(Karnataka High
Court) and Textport Overseas Pvt. Ltd., ITA No.1722/Bang/2017, order
dated 22.12.2017. Ld. DR also could not controvert the above findings
of the CIT(A) before us. The coordinate bench in the case of Texport
Overseas Private Limited (supra), has held as under :-
“7. Having carefully examined the orders of authorities below in the light of rival submissions and relevant provisions and various judicial pronouncements, we find that by virtue of the insertion of section 92BA on the statute as per clause (i), any expenditure in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A exceeds the prescribed limit, it would be a specified domestic ..transaction for which AO is required to make a reference to TPO under section 92CA of the Act for determination of the ALP. In the instant case, since the transaction exceeds the prescribed limit it becomes the specified domestic transaction for which reference was made by the AO to the TPO under section 92CA for determination of the ALP. Consequently, the TPO submitted a report which was objected to by the learned counsel for the assessee and filed a objection before the DRP. Having adjudicated the objections, the DRP has issued certain directions and consequently the AO passed an order. Subsequently, by Finance Act, 2017 w.e.f. 01.04.2017, clause (i) of section 92BA was omitted from the statute. Now the question arises as to whether on account of omission of clause (i) from the statute, the proceedings already initiated or action taken under clause (i) becomes redundant or otiose. In this regard, our attention was invited to judgment of the Apex Court in the case of Kolhapur Canesugar Works Ltd., (supra) in which the impact of omission of old rule 10 and 10A was examined. Having carefully examined the issue in the light of provisions of section 6 of the General Clauses Act, their Lordship has observed "that in such a case, the court is to look to the provisions in the rule which has been introduced after omission of the previous rule to determine whether a pending proceeding will continue or lapse. If there is a provision therein that pending proceedings shall continue and be disposed of under the old rule as if the rule has not been deleted or omitted then such a proceeding will continue. If the case is covered by Section 6 of the General Clauses Act or there is a pari-materia provision in the statute
6 under which the rule has been framed in that case also the pending proceeding will hot be affected by omission of the rule. In the absence of any such provisions in the statute or in the rule, the. pending proceeding will lapse under rule under which the notice was issued or proceeding being omitted or deleted".
In the case of General Finance Co., Vs. ACIT, their Lordship of the Apex Court has again examined the issue and held that the principle underlying section 6 as saving the right to initiate proceedings for liabilities incurred during the currency of the Act will not apply to omission of a provision in an Act but only to repeal, omission being different from repeal as held in different cases. Following the aforesaid judgments, the juri ictional High Court has also expressed the same view in the case of CIT Vs GE Thermometries India Pvt. Ltd. The relevant observation of the juri ictional High Court is extracted hereunder:
"
Admittedly, in the instant case, there is no saving clause or provision introduced by way of an amendment while omitting sub- section (9) of Section 1:0$, Therefore, once the aforesaid section is omitted from the statute book, the result is it had never been passed and be considered as a law that never exists and therefore, when the assessment orders were passed in 2006, the AO was not justified in taking note of a provision which was not in the statute book and denying benefit to the assesses. The whole object of such omission is to extend the benefit under Section 10B of the Act irrespective of the fact whether during the period to which they are entitled to the benefit, the ownership continues with the original assessee or it is transferred to another person. Benefit is to the undertaking and not to the person who is running the business. We do not see any merit in these appeals. The substantial question of law is answered in favour of the assesses and against the revenue. Accordingly, the appeals are dismissed."
From the aforesaid judgments, it has become abundantly clear that once a particular provision of section is omitted from the statute, it shall be deemed to be omitted from its inception unless and until there is some saving clause or provision to make it clear that action taken or proceeding initiated under that provision or section would continue and would not be left on account of omission.
In the instant case, undisputedly, by the Finance Act. 2017, clause (i) of section 9EBA. has been omitted w.e.f. .01.04.2017 Once this clause is omitted by subsequent amendment, it would be deemed that clause (i) was never been on the statute. While omitting the clause (i) of section 92BA, nothing was specified whether the proceeding initiated or action- taken on this continue. Therefore, the- proceeding initiated or action taken under that clause would not survive at all. In this legal position, the cognizance taken by the AO under section 92B(i) and reference made to TPO under section 92CA is invalid and bad in law. Therefore, the consequential order passed by the TPO and DRP is also not sustainable in the eyes of law.
7
Under these circumstances, where this clause (§ is omitted from the. statute since its inception, the AO ought have required to frame the assessment in normal course after making necessary enquiries of particular claim of expenditure in accordance with law. But this exercise could not have been done on account of provisions of section 92BA Clause (i) of the Act. Now when this clause (i) has been omitted from the statute by virtue of the aforesaid amendments, the AO is required to adjudicate the issue of claim of expenditures in accordance with law after affording opportunity of being heard to the assessee. We therefore set aside the orders of the AO and the DRP and restore the matter to the AO with the direction to readjudicate the issue of claim of expenditure incurred in respect of which payment has been made or is to be made to person referred to in clause (b) of sub section 2 of section 40A of the Act. Accordingly, since we have restored the matter to the AO, we find no justification to deal with the other issues on merit. Accordingly, appeal of the assessee stand allowed for statistical purposes.” In view of the above, we are of the considered opinion that when the transactions related to the assessee falls under the clause(i) of Section 92BA of the Act, which has already been removed by the Finance Act,
2017 w.e.f. 01.04.2017, therefore, the imposition of penalty u/s.271BA
of the Act for failure to furnish the report in prescribed Form No.3CEB
in terms of provisions of section 92E of the Act, does not survive at all.
Accordingly, we allow the appeal of the assessee and cancel the penalty
levied u/s.271BA of the Act by the AO and upheld by the CIT(A).
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 17/02/2020. (C.M.GARG) (L.P.SAHU) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनांक Dated 17/02/2020 Prakash Kumar Mishra, Sr.P.S.
8 आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीऱाथी / The Appellant-
M/s SKM-UMSL JV, At-IMFA Building, Bomikhal, Rasulgarh, Bhubaneswar प्रत्यथी / The Respondent-
ITO, Ward-4(3), Bhubaneswar आयकर आयुक्त(अऩीऱ) / The CIT(A), 3. आयकर आयुक्त / CIT 4. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT,
Cuttack गार्ग पाईऱ / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यावऩत प्रयत //// (Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक / ITAT, Cuttack