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2015 (9) TMI 1529 - HC - Income TaxValidity of re-assessment proceedings - reference made by the AO to the TPO - Held that - Section 92 CA (1) of the Act states that where any person being the assessee has entered into an international transaction in any previous year and the AO considers it necessary or expedient to do so he may with the previous approval of the Commissioner refer the computation of ALP to the TPO under Section 92 C. These provisions proceed on the premise that the AO is in seisin of assessment proceedings when he forms an opinion about referring the issue of determination of ALP to the TPO. They do not envisage the AO making a reference to the TPO the issue of determination of ALP when there is no assessment proceedings pending before him. In the present case the reference by the AO of the issue of determination of ALP to the TPO was itself without jurisdiction. The resultant report of the TPO could not be acted upon for issuance of the notice of re-assessment to the Assessee under Section 148 of the Act. Moreover in the present case the Court notices that the reasons for reopening were recorded by the AO subsequent to the reply received from the Assessee to the notice. Consequently the Court finds no legal infirmity in the impugned order of the ITAT holding that the re-assessment proceedings were legally unsustainable. - Decided in favour of assessee
Issues:
1. Condonation of delay in re-filing the appeal. 2. Jurisdiction of the Assessing Officer to issue notice under Section 148 of the Act. 3. Validity of the reference made by the Assessing Officer to the Transfer Pricing Officer. 4. Legality of the re-assessment proceedings. Condonation of Delay: The High Court condoned the delay of 49 days in re-filing the appeal based on the reasons stated in the application. The application was disposed of accordingly. Jurisdiction of Assessing Officer: The appeal was filed by the Revenue against the order passed by the Income Tax Appellate Tribunal regarding the Assessment Year 2007-08. The Assessee had initially filed its return of income for the said year, following which the Assessing Officer made a reference to the Transfer Pricing Officer for determination of the arm's length price of international transactions. Subsequently, the Assessing Officer proposed to reopen the assessment, leading to re-assessment proceedings. The issue raised was regarding the lack of jurisdiction of the Assessing Officer to issue notice under Section 148 of the Act, which was considered as a substitution of regular assessment proceedings. Validity of Reference to Transfer Pricing Officer: The Income Tax Appellate Tribunal referred to a judgment of the Karnataka High Court and held that unless an income tax return was pending before the Assessing Officer, no reference could be made to the Transfer Pricing Officer. The Tribunal highlighted the importance of assessment proceedings being in progress before such references could be initiated. The scheme of special provisions concerning the determination of arm's length price for international transactions was discussed, emphasizing the necessity of assessment proceedings for making references to the Transfer Pricing Officer. Legality of Re-assessment Proceedings: The High Court found that the reference of the issue of determination of arm's length price to the Transfer Pricing Officer by the Assessing Officer was without jurisdiction since there were no assessment proceedings pending before him. Consequently, the re-assessment proceedings were deemed legally unsustainable. The Court noted that the reasons for reopening the assessment were recorded after the Assessee's reply to the notice, further supporting the conclusion that the re-assessment proceedings were flawed. As a result, the High Court upheld the decision of the Income Tax Appellate Tribunal, dismissing the appeal and finding no substantial question of law to arise. This detailed analysis of the judgment showcases the various issues addressed by the High Court concerning the jurisdiction of the Assessing Officer, the validity of references made to the Transfer Pricing Officer, and the legality of re-assessment proceedings in the context of the Income Tax Act.
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