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2011 (10) TMI 262 - GUJARAT HIGH COURTPower of AO to make reference to TPO - opportunity to the assessee - Transfer Price - Associated Enterprise - Assessee contended, purchases exceeding 90% of the raw materials for manufacturing have not been made from one enterprise and thus, there is no requirement of filing report under Section 92E of the Act- AO referred the case to TPO - Held that:- we do not find that under the scheme of the provision contained in Section-X of the Act, the Assessing Officer is obliged to grant hearing to the assessee, invite and consider the objections with respect to the question whether during the previous year relevant to the assessment year under consideration, there had been any international transaction between the assessee and the associated enterprise before making a reference to the TPO. Such opinion the Assessing Officer would have to form on the basis of available material on record and such opinion would be having ad-hoc finality in the sense that for the purpose of reference to the TPO and till the stage that the TPO passes an order under sub-section (3) of Section 92CA of the At, such issue would be closed. - no need to give persoanl hearing to the assessee before referring case to TPO. Determination of transaction - statutory change to section 92CA - binding nature of opinion of TPO - held that:- By virtue of newly substituted sub-section (4) of Section 92CA of the Act, the Assessing Officer is now bound by the order of the TPO on the computation of the arm’s length price of an international transaction, the Assessing Officer is not and cannot be stated to be bound by the opinion of the TPO with respect to the question whether there had, in fact, been an international transaction between the assessee and the associated person during the period under consideration. The TPO is not called upon to and, as held by us, is not competent to decide this issue. This issue is within the sole jurisdiction of the Assessing Officer. Powers of DRP - The issue whether there was an international transaction or not can also be examined by the Dispute Resolution Panel at the instance of the assessee. There is nothing to limit the powers of Dispute Resolution Panel to completely nullify the variations arising out of the order of the TPO if it is found that there had, in fact, been no international transaction and that, therefore, the reference itself was invalid. Sub-section (5) of Section 144C of the Act empowers the Dispute Resolution Panel to issue such directions as it thinks fit for the guidance of the Assessing Officer. When sub-section (8) of Section 144C of the Act authorizes the Dispute Resolution Panel to confirm, reduce or enhances the variations proposed by the TPO, it can also annul any computations proposed on the basis of the order of the TPO. Reference of TPO - action of AO - held that:- This is not to suggest that the Assessing Officer can, without any basis or wholly arbitrarily at his whim or caprice, make a reference of any transaction to the TPO for computation of the arm’s length price. He is expected to exercise his discretion on the basis of available material on record. Such decision is subject to approval by the Commissioner. At the time of framing final assessment even the assessee will have right to point out that there had been, in fact, no international transaction between the assessee and the associated enterprise. - TPO is not authorized to judge whether there had been any international transaction or not. In other words, he has no competence to decide the validity of the reference itself. Such issue has to be decided by the Assessing Officer alone. Petition against the notice of TPO dismissed.
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