2023 (1) TMI 663 - AT - Income Tax

Validity of reassessment order - illegal and invalid order of the TPO without following the due procedure as laid down in the relevant provision of section 144C - HELD THAT - As in the case of Nomura Research Institute Financial Technologies India (P) Ltd. 2020 (3) TMI 1420 - ITAT KOLKATA wherein, the Tribunal in the almost exactly identical facts and circumstances, held that the Assessing Officer cannot pass final assessment order without making a valid reference to TPO and further that the TPO cannot initiate any proceedings against the assessee after passing of a final order by the AO as reference made by the AO to the TPO becomes infructuous after passing of final assessment order. Even the Dispute Resolution Panel, in this case, has also made the same observation. In view of this, the reassessment order, passed by the AO on the basis of illegal and invalid order of the TPO without following the due procedure as laid down in the relevant provision of section 144C of the Act, is not sustainable in the eyes of law and the same is, therefore, quashed.

Summary

Issues:
Appeal against assessment order u/s 147 due to transfer pricing adjustment.

Analysis:
The appeal was filed against the assessment order passed by the Assessing Officer u/s 147 of the Income Tax Act, 1961, following a transfer pricing adjustment. The counsel for the assessee argued that the order was wrong, illegal, and void ab initio. The sequence of events revealed that the Assessing Officer passed the final assessment order before waiting for the TPO's decision, leading to objections from the assessee regarding the validity of subsequent proceedings. Despite objections, the TPO passed a transfer pricing order, and the Assessing Officer reopened the assessment without a valid reference to the TPO during reassessment. The Dispute Resolution Panel found the Assessing Officer's order to be wrong and illegal due to the lack of a valid reference to the TPO during reassessment, rendering the proceedings void. The Panel declined jurisdiction as the assessee was not considered an "eligible assessee" as per the Act's provisions. The Tribunal, citing a similar case, held that the final assessment order without a valid TPO reference and subsequent invalid TPO order was unsustainable. Consequently, the reassessment order was quashed, and the appeal was allowed.