2013 (12) TMI 547 - HC - Income Tax

Transfer pricing adjustments - arm's length price - draft assessment order - Jurisdiction under Chapter X - opportunity of being heard before referring to TPO - writ petition - alternative remedy - Solicitor General submitted that the action of AO in referring the international transaction to TPO is a mere administrative act, because as per CBDT Instruction No.3 dated 20 May 2003, AO is to exercise powers under Section 92C where the value of the transaction is upto Rs.5 crores (now revised to Rs.15 crores) and AO is required to refer the transaction to TPO where even the value of the international transaction exceeds Rs. 5 crores (now exceed Rs.15 crores). It is, therefore, submitted that in view of the above Circular, AO has no discretion in the matter and , therefore, AO hearing the assessee before making reference to TPO would be an empty formality and a futile exercise.

Held that:- it is necessary for the Assessing Officer to decide the issue of objection to applicability of chapter X , if raised by the assessee, before referring the transaction to the TPO as it is a basic issue and would prevent loss of man hours on both sides in computing the ALP if it is finally concluded that Chapter X is not applicable. - this exercise could also be done by the Assessing officer before he determines the ALP in exercise of his powers under Section 92C(3)

The petitioner shall within two weeks from today submit before the DRP its preliminary objections to Draft Assessment Order and the TPO's order by raising jurisdictional issues. - The DRP shall decide the issue of jurisdiction before considering issue of valuation / quantification raised by the petitioner in its objections filed before the DRP, this of course subject to the additional grounds on jurisdiction being filed by the Petitioner within two weeks from today. The DRP shall decide the issue of jurisdiction as a preliminary issue within two months from the date on which the petitioner files its objections on the question of jurisdiction. - Decided in favor of assessee.