TMI Blog2018 (11) TMI 1172X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 22-11-2018 - SHRI SHAMIM YAHYA, AM AND SHRI PAWAN SINGH, JM For The Appellant : Shri Jitendra Singh For The Respondent : Shri S. Padmaja ORDER Per Shamim Yahya, A. M.: This appeal by the assessee is directed against the order u/s. 263 of the Income Tax Act, 1961 (the Act for short) of the Pr. Commissioner of Income Tax, Mumbai ( Pr.CIT(A) for short) dated 22.03.2018 and pertains to the assessment year (A.Y.) 2015-16. 2. The grounds of appeal read as under: 1. On facts and in the circumstances of the case and in law, the notice issued under Section 263 of the Act and the order passed under Section 263 of the Act by the Principal Commissioner of Income Tax ( Pr. CIT ) are illegal, bad in law and without jurisdiction. The order passed by the learned Assessing Officer ( learned AO ) u/s 143(3) of the Act is neither erroneous nor prejudicial to the interest of Revenue. 2. On facts and in the circumstances of the case and in law, the exercise of jurisdiction by Pr. CIT u/s 263 is bad in law and without any basis as the same has been done on mere assumption and therefore, the assessment order under Section 143(3) of the Act issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as one of the CASS reasons in ITD system, thereto re, making this a fit case for reference to the Transfer Pricing Officer(TPO), The Transfer Pricing officer has been mandated by the Income Tax Act to check if the International Transactions were carried out at Arms Length Price or not, and has been empowered to make upward revision if he feels the transactions were not carried out at Arms Length Price. The powers of Assessing officer to determine Arms Length Price have been divested. Therefore, a show cause notice under section 263 of the Income Tax Act, 1961 was issued to the assessee on 30.01.2018 by the Pr. CIT calling for explanation as to why the assessment order under question being prejudicial and erroneous should not be set aside/cancelled. The hearing of the case was fixed on 06.02.2018. 5. The assessee responded as under: 6.1 The assessee officer has passed the order after due application of mind as during the course of the assessment proceedings the details with respect international transactions with Assosciated Enterprises were called for by the assessing officer and the same were examined by him. The assessing officer therefore has duly applied his mind in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue. 8. In light of the above facts and circumstances and after taking due cognizance of the submissions made by the assessee during the course of proceedings under section 263 of the Income Tax Act, 1961 it is held that the assessment order dated 13.10.2016 passed u/s 143(3) of the Act was erroneous and prejudicial to the interest of the revenue. Therefore the same is hereby set aside with direction to the assessing officer to pass an assessment order after making a reference to the Transfer Pricing officer for determining the ALP under section 92CA(3) of the Income Tax Act, 1961 with respect to the International Transactions carried out with AE, after taking the necessary administrative approval as prescribed by relevant provisions. 7. Against the above order, the assessee is in appeal before us. 8. We have heard both the counsel and perused the records. The ld. Counsel of the assessee referred to a CBDT Instruction No. 3/2016 [F.No.500/9/2015-APA-II], dated 10.03.2016. The learned ld. Counsel of the assessee further referred to the Delhi ITAT decision in the case of M/s. Amira Pure Foods Pvt. Ltd. vs. The Pr. CIT (in SA No. 451/Del/2017 ITA No. 3205/Del/2017 vide or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO, after obtaining the approval of the jurisdictional PCIT or CIT. 3.3 Cases selected for scrutiny on non-transfer pricing risk parameters but also having international transactions or specified domestic transactions, shall be referred to TPOs only in the following circumstances: ( a ) where the AO comes to know that the taxpayer has entered into international transactions or specified domestic transactions or both but the taxpayer has either not filed the Accountant'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 adjustment of ₹ 10 Crore or more in an earlier assessment year and such adjustment has been upheld by the judicial authorities or is pending in appeal; and ( c ) where search and seizure or survey operations have 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 recorded by the Investigation Wing or the AO. 11. In this regard, the ld. Counsel of the assessee has submitted that the CB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alling under para 3.2 above and reference to the TPO was mandatory. It is settled law that the CBDT Circulars are binding on Revenue authorities. The assessee s contention that in earlier years the matter was referred to the TPO, no transfer pricing adjustment was made, cannot at all be an excuse for the A.O. for not referring the matter to the TPO. As already explained herein above there is no discretion to the A.O. in this regard. Once it is so held the assessment order passed is clearly erroneous so as to be prejudicial to the interest of the Revenue. The case law from the Delhi ITAT referred by the ld. Counsel of the assessee as above is clearly not applicable here as in that case the ITAT had given a finding that the said case law was selected for scrutiny on non transfer pricing risk parameters. 13. In the background of the aforesaid discussion, in our considered opinion, in light of the CBDT Circular above, it was incumbent upon the A.O. to refer the transfer pricing matter to the TPO. The A.O. having failed to do so, the case admittedly falls under the jurisdiction of the Pr. CIT as an order by the A.O. which is erroneous so as to be prejudicial to the interest of the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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