TMI Blog2023 (6) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... case, in our view, clause (c) of Explanation 2 shall squarely apply to the facts of the present case. Decided against assessee. - I.T.A. No. 1096/Mum/2022 - - - Dated:- 12-5-2023 - Shri B. R. Baskaran ( AM ) And Smt. Kavitha Rajagopal ( JM ) For the Assessee : Shri Rajan Vora Shri Nikhil Tiwari For the Department : Ms.Surbhi Sharma ORDER Per B. R. Baskaran ( AM ) :- The assessee has filed this appeal challenging the revision order dated 17-03-2022 passed by Ld Commissioner of Income tax (IT), Mumbai for assessment year 2018-19. The contention of the assessee is that the impugned revision order is not valid. 2. The facts relating to the case are stated in brief. The assessment of the year under consideration was completed by the assessing officer u/s 143(3) r.w.s 144C(3) of the Act on 06-08-2021. The Ld CIT(IT) examined the assessment record and noticed the assessment of the year under consideration was selected for scrutiny under CASS for certain reasons, which inter alia, included TP Risk Parameter International Transactions . He also noticed that the assessee has entered into several international transactions amounting to Rs.279457.28 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CBDT circular cannot override above discussed express provisions of the Act and hence the Ld CIT(IT) was not justified in passing impugned revision order by placing reliance on the Circular issued by CBDT, which is contrary to the provisions of the Act. 3.1 We noticed earlier that the Ld CIT (IT) has placed reliance on an instruction issued by CBDT, which has stated that the Return of income of assessee involving T.P risk is required to be selected for scrutiny and be referred to the TPO. In this regard, it was submitted by Ld A.R that the assessee has complied with the requirements of sec.286 of the Act (provisions governing country-by-country reporting requirements) and accordingly filed Form 3CEAC in terms of Rule 10DDB. This form requires furnishing of basic details in relation to ultimate holding company. Accordingly, it was contended that there was no T.P risk in the assessee s international transactions and hence it cannot be said that the return of income of the assessee was selected on T.P risk parameters . Accordingly, it was contended that, in the absence of T.P risk parameter, there was no requirement, as per the CBDT circular, to refer the matter of determinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. It can be noticed that, as per clause (c) of the above said Explanation, if in the opinion of PCIT or CIT the order has not been made in accordance with any order, direction or instruction issued by the Board u/s 119 of the Act, then the said order is deemed to be erroneous in so far as it is prejudicial to the interests of revenue . 5.1 There should not be any dispute that the legal fiction introduced in the Statute by way of deeming provision may deviate from the general understanding of law. A thing which is not true may be deemed to be true under the law, by way of introducing a legal fiction. Hence, it is mandatory for Ld PCIT/CIT to examine the assessment records, inter alia, in terms of situations covered in Explanation 2 (supra) also. In the instant case, we notice that the Instruction no.3/16 issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary or expedient so to do, he may refer the computation of ALP in relation to an international transaction or specified domestic transaction to the TPO. For proper administration of the Income-tax Act, the Board has decided that the AO shall henceforth make a reference to the TPO only under the circumstances laid out in this Instruction. 3.2 All cases selected for scrutiny, either under the Computer Assisted Scrutiny Selection [CASS) system or under the compulsory manual selection system (in accordance with the CBDT's annual instructions in this regard for example, InstructionNo.6/2014 for selection in F.Y 2014-15 and Instruction No. 8/2015 for selection in F.Y 2015-16), on the basis of transfer pricing risk parameters [in respect of international transactions or specified domestic transactions or both] have to be referred to the TPO by the AO, after obtaining the approval of the jurisdictional Principal Commissioner of Income-tax(PCIT) or Commissioner of Income-tax(CIT). The fact that a case has been selected for scrutiny on a TP risk parameter becomes clear from a perusal of the reasons for which a particular case has been selected and the same are invariably av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions in the Accountant's report filed under Section 92E of the Act but has made certain qualifying remarks to the effect that the said transactions are not international transactions or specified domestic transactions or they do not impact the income of the taxpayer. In the above three situations, the AO must provide an opportunity of being heard to the taxpayer before recording his satisfaction or otherwise. In case no objection is raised by the taxpayer to the applicability of Chapter X [Sections 92to 92F] of the Act to these three situations, then AO should refer the international transaction or specified domestic transaction to the TPO for determining the ALP after obtaining the approval of the PCIT or CIT. However, where the applicability of Chapter X [Sections 92 to 92F] to these three situations is objected to by the taxpayer, the AO must consider the taxpayer's objections and pass a speaking order so as to comply with the principles of natural justice. If the AO decides in the said order that the transaction in question needs to be referred to the TPO, he should make a reference after obtaining the approval of the PCIT or CIT. 3.5 In addition to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue has not been examined at all. 7. This issues under Section 119 of the Income-tax Act, 1961 and replaces Instruction No. 15 of 2015 with immediate effect. References made to TPOs u/s 92CA of the Act after the issuance of Instruction No.15/2015, which are not in conformity with this Instruction, may be withdrawn by the concerned PCIT or CIT. [Sobhan Kar] Director (APA), Government of India 5.2 A careful perusal of the above said instruction would show that, as per paragraph 3.2 of the Instruction, the AO is required to refer the matter of determination of ALP of international transactions to the TPO after obtaining approval from PCIT/CIT, if the return of income of the assessee has been selected under T.P risk parameter. Further, following directions have also been in the above said Instruction no.3/2016:- For administering the transfer pricing regime in an efficient manner, it is clarified that though AO has the power under Section 92C to determine the ALP of international transactions or specified domestic transactions, determination of ALP should not be carried out at all by the AO in a case where reference is not made to the TPO. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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