2016 (10) TMI 1318 - AT - Income Tax

Revision u/s 263 - additions on account of TP adjustment in relation to transaction with AE - The order passed by the CIT u/s. 263 of the act has been challenged by the assessee before the Tribunal in 2016 (7) TMI 1587 - ITAT BANGALORE quashed the order of the CIT passed u/s. 263 - HELD THAT - Having carefully examined the order of Tribunal passed in appeal filed against the order of CIT u/s. 263 of act. We are the view that once the order of CIT passed u/s. 263 is quashed, consequential proceedings are not sustainable in the eyes of law. We therefore set aside the order of Assessing Officer as well as CIT(A). Accordingly the appeal of assessee is stands allowed.

Summary

Issues:
1. Validity of order under section 143(3) r.w.s 263 & 144C(13) of the Act
2. Validity of reference u/s. 144C without meeting appellant's arguments
3. Applicability of section 144C to an Indian/Domestic company
4. Jurisdiction of DRP u/s. 144C on orders merged in the order u/s. 263
5. Reference to DRP on issues considered by CIT u/s. 263
6. DRP's jurisdiction to decide disputes arising from CIT's orders u/s. 263
7. Barred by limitation under sections 144C(12) and 153
8. Approval of Assessing Officer's order by JCIT
9. Application of Transfer Pricing (TP) provisions
10. Determination of Arms Length Price (ALP)
11. Disallowance of payments/expenses u/s.37(1)
12. Excess stock explanation
13. Initiation of penalties afresh

Analysis:
1. The appeal challenges the order under section 143(3) r.w.s 263 & 144C(13) of the Act, contending it is opposed to law, facts, and circumstances, seeking cancellation. The appellant argues against the validity of the reference u/s. 144C without addressing their objections, claiming the assessment is invalid due to the absence of meeting arguments. Furthermore, the appellant asserts that being an Indian/Domestic company, they are not an 'ELIGIBLE ASSESSEE' under section 144C(15)(b), thus, the provisions of section 144C do not apply.

2. The appellant raises concerns regarding the jurisdiction of the DRP under section 144C on orders merged in the order u/s. 263, arguing that the reference to DRP is invalid. Additionally, the appellant contends that the DRP lacks jurisdiction to decide disputes arising from the findings and orders of the CIT u/s. 263, emphasizing that the DRP cannot make a reference under section 144C when passing the assessment order post the order u/s. 263.

3. The appellant asserts that the order under section 144C is time-barred under sections 144C(12) and 153, seeking its cancellation. Moreover, the appellant challenges the approval of the Assessing Officer's order by JCIT, arguing that the orders/directions of the DRP under section 144C are binding and cannot be approved by a non-superior authority.

4. The appellant extensively discusses the application of Transfer Pricing (TP) provisions, emphasizing the absence of an Associated Enterprise (A.E.) and the misapplication of deeming provisions. The appellant argues that the TP provisions do not apply to their situation due to the lack of an A.E. as defined in section 92A, questioning the jurisdiction of the TPO and disputing the findings of the DRP regarding the application of TP provisions.

5. The appellant challenges the determination of the Arms Length Price (ALP), highlighting discrepancies in the ALP calculation and the failure to consider contractual terms. The appellant argues for the inclusion of a 5 percent standard deduction in ALP determination and emphasizes the unique circumstances of their transactions with M/s. GLA Ltd. to support their ALP calculation.

6. Additionally, the appellant disputes the disallowance of payments/expenses u/s.37(1), the alleged excess stock, and the initiation of penalties afresh, presenting arguments to counter these claims. The appellant seeks to add, alter, amend, or delete grounds during the hearing, emphasizing the need for a comprehensive review of all issues raised.