TMI Blog2023 (5) TMI 696X X X X Extracts X X X X X X X X Extracts X X X X ..... tax act that the provisions of explanation 2 are applicable as the order of the assessment has not been made in accordance with any orders/directions or instruction issued by the board u/s 119 of the act. There is no allegation/assertion in the order under section 263 of the income tax act that the learned assessing officer has not followed the mandatory instructions issued by the central board of direct taxes of referring to the learned transfer-pricing officer. It is also clear that prior to The Finance Act 2022 amended with effect from 1/4/2022, the order of the learned transfer pricing officer were not subject to revision under section 263 of the income tax act by the principal Commissioner of income tax. By The Finance Act 2022, with effect from 1/4/2022 clause (iii) to explanation 1 inserts order under section 92CA by the transfer-pricing officer. Thus, it is clear that the order passed under section 92CA by the learned TPO was not subject to revision under section 263 of the income tax act by the principal Commissioner of income tax. The order of the learned principal Commissioner of income tax is indirectly revising the order of the learned transfer-pricing officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice and the reasons assigned for doing so are wrong and contrary to the facts and circumstances of the case, provisions of the Income Tax Act, 1961, and the Rules made there under. (b) The Id. Pr. Commissioner of Income Tax erred in invoking the revisionary powers under section 263(1) of the Income Tax Act, 1961 without appreciating the fact: (i). That the appellant had reported said transaction in Form 3CEB filed before the Income Tax Department. (ii). That the ld. Assessing Officer had referred to the TPO for determination of Arm's Length Price all international transactions entered into by the appellant including the said transaction. (iii). That the ld. Transfer Pricing Officer, after applying his mind to the Form 3CEB and Transfer Pricing Study Report, wherein a detailed note benchmarking the transaction is mentioned, determined the Arm's Length Price of said transaction at NIL and therefore, did not make any upward transfer pricing adjustment in respect of said transaction (iv). That even during assessment proceedings, the Id. Assessing Officer also asked for details regarding the said international transaction and after applying his mind to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter obtaining the approval of the Pr. Commissioner of Income Tax-15, Mumbai, the reference was made to The Jt. Commissioner of income Tax (Transfer Pricing)-4(1), Mumbai (the learned Transfer Pricing Officer), as per letter dated 22nd February, 2016 to determine the Arm's Length Price of International Transactions. The respective order of the learned Transfer Pricing Officer passed under Section 92CA (3) of the Act on 26th October, 2015, wherein transfer pricing adjustment of ₹27,84,86,725/- was made was added to the total income of the assessee. Several corporate tax additions were also made and the total income of the assessee was determined at a total loss of ₹673,51,82,759/- by an assessment order passed under Section 143(3) read with section 144C(3) of the Act on 31st January, 2017. 04. On examination of record, The learned PCIT found that in A.Y. 2014-15, the interest of ₹ 29.46 crores was added on accrual basis to the total income of the assessee under the head income from other sources. On further verification, it was found that in A.Y. 2013-14 the assessee s investment in redeemable preference shares in its associated enterprise 3I Infotech Holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5% and in his order under Section 92CA (3) has not discussed any arm s length adjustment on that count. The learned Assessing Officer categorically held that the learned Assessing Officer has not decided the Arm's Length Price of international transaction. 07. The learned PCIT examined the form no. 3CEB and noted that in that form at Para no.14, the assessee in reply to particulars of lending and borrowing money has stated yes , however, the amount is not reported. Therefore, the learned Transfer Pricing Officer has not decided the Arm's Length Price during the assessment year. He held that it is not proper to say that the learned Transfer Pricing Officer has accepted the Arm's Length Price of the international transaction without any adjustment. Therefore, he reached at the conclusion that the factual position is that the learned transfer-pricing officer has not decided the arm's-length price of the international transaction of interest on loan arising on conversion of redeemable preference shares in financial year 2012 13 relevant to assessment year 2013 14. Therefore he set-aside the assessment order and directed the learned assessing officer to refer the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to several judicial precedents. He specifically relied upon the decision of the coordinate bench in case of Essar steel Ltd versus additional Commissioner of income tax in ITA number 4007/M/2010 stating that in assessee's case assessing officer has passed the order under section 143 (3) read with section 144C (3) in conformity of the arm's-length price determined by the learned transfer pricing officer and therefore the learned PCIT does not have any power to hold that such an order is erroneous and prejudicial to the interest of revenue. 09. The learned CIT DR vehemently supported the order of the learned PCIT. It was submitted that on examination of the record it has come to the notice of the learned and PCIT that the order passed by the learned assessing officer is erroneous insofar as prejudicial to the interest of revenue as the learned assessing officer has not referred the matter of conversion of preference shares into unsecured loan and therefore the order of the learned assessing officer is erroneous so far as it prejudicial to the interest of revenue and sustainable in law. He further submitted that judicial precedents cited by the learned authorized repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational transaction to the learned TPO for determination of arm's-length price. We find that the original reference is already made by the learned assessing officer by obtaining the prior approval of the principal Commissioner of income tax 15, Mumbai. Such reference was made on 22/2/2016. It is also to be noted that reference was made for all the transactions reported in form number 3CEB filed by the assessee. We have also stated that in the transfer pricing study report of the assessee above transactions were clearly disclosed. Transfer pricing study report prepared by the assessee is nothing but a document prescribed under rule 10 D of the income tax rules. The learned transfer pricing officer was having form number 3CEB coupled with documents prescribed under rule 10D. Based on his examination, he passed an order under section 92CA (3) of the act. According to the provisions of section 92CA (4) of the act the learned assessing officer is duty-bound to compute the total income of the assessee in conformity with the arm's-length price so determined by the transfer pricing officer. It is an undisputed fact that conversion of redeemable preference shares into unsecured lo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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