2022 (12) TMI 1205 - AT - Income Tax

TP Adjustment - unauthorized reference to TPO u/s 92CA(3) - HELD THAT - AO in the instant case, made a reference to the TPO for computation of Arms Length Price with reference to the impugned domestic transactions entered into by the assessee as defined u/s 92BA - An order from the TPO was obtained u/s 92A(3) of the Act in pursuance of such reference. It is the case of the assessee that reference made to the TPO in the instant case without fulfilling the conditions of threshold of Rs.5 crore monetary limit is without the sanction of law in view of the Section 92BA - This being so, the assessee is not entitled for extension of time limit provided u/s 153(4) by extended period of another one year which is applicable only where the reference to the TPO has been validly made within the frame work of law. We find palpable merit in the plea expounded on behalf of the assessee. It has been demonstrated in the instant case that the threshold monetary limit of Rs.5 crore was not available to the Assessing Officer to characterize the transactions with AE as SDT to enable him to make a reference to the TPO. The order of the TPO u/s 92CA(3) is thus a nonest and a nullity in the eyes of law. Consequently, the extension of time under erstwhile provisions of Section 153 for passing the assessment order based on such nonest order from TPO is not available to the AO in the instant case. AO thus could not legitimise the assessment order passed beyond the ordinary time limit of 31.12.2016 available under Section 153 of the Act. The impugned assessment order passed is barred by limitation and hence bad in law and thus requires to be quashed - Appeal of the assessee is allowed.

Summary

Issues Involved:
- Challenge to the first appellate order concerning Assessment Year 2014-15 under Section 143(3) of the Act r.w. Section 144C r.w. Section 144B.
- Dismissal of grounds of appeal by the CIT(A) regarding assessment order being bad in law and nature, disallowances made under various sections, and confirmation of purchases as bogus.
- Challenge by the Revenue against deletion of additions made by the Assessing Officer related to vehicle maintenance expenses, delayed payment of employee's contribution, club fees of directors, and unexplained credits received as share application money and share premium money.
- Bar of limitation for passing the assessment order due to unauthorized reference to TPO under Section 92CA(3) of the Act.

Detailed Analysis:
1. The Assessee challenged the first appellate order, raising various grounds including the order being bad in law due to limitations, additions made without following natural justice, and the CIT(A) ignoring relevant provisions and instructions. The Assessee also contested disallowances under different sections and the confirmation of purchases as bogus, providing detailed explanations and submissions to support their case.

2. The Revenue contested the deletion of additions made by the Assessing Officer, including vehicle maintenance expenses, delayed employee contributions, club fees of directors, and unexplained credits as share application and premium money. The Revenue argued that the CIT(A) erred in deleting these additions without proper substantiation from the Assessee.

3. The main issue addressed was the bar of limitation for passing the assessment order due to an unauthorized reference to the Transfer Pricing Officer (TPO) under Section 92CA(3) of the Act. The Assessee contended that the reference to TPO was invalid as the transactions did not meet the threshold monetary limit of Rs.5 crore, rendering the TPO's order as null and void. The Tribunal found merit in the Assessee's argument, concluding that the assessment order was barred by limitation and should be quashed.

4. The Tribunal ruled in favor of the Assessee, allowing their appeal, while dismissing the Revenue's appeal. The assessment order was deemed bad in law due to the bar of limitation, making other grounds of challenges irrelevant. The decision was pronounced in open court on 26/05/2022.