2024 (9) TMI 533 - HC - Income Tax

TP Adjustment - AO has failed to bear in mind the Risk Parameters as framed - HELD THAT - We find ourselves unable to sustain the challenge which stands raised bearing in mind the undisputed fact that Section 92CA of the Act confers a statutory power on the AO to make a reference to the TPO. An Instruction of the Board and the Risk Parameters, which may have been framed, are merely to act as guides for the purposes of exercise of that power. We fundamentally bear in mind the fact that the petitioner seeks to invoke our extraordinary jurisdiction under Article 226 of the Constitution, and that too at the stage of a mere reference to the TPO. We consequently find no justification for continuing the writ petition on our board. This, since all contentions of the petitioner-assessee including the fact that any order that the TPO may pass with respect to Arm s Length Price ALP , or a Draft Assessment Order which may be framed, or even for that matter a direction by the Dispute Resolution Panel DRP , and ultimately by the Income Tax Appellate Tribunal would themselves be in accordance with the scheme of Section 144C of the Act, and in respect of which the petitioner has adequate and efficacious remedies under the Act.

Summary

Issues:
1. Challenge to the reference made under Section 92CA of the Income Tax Act.
2. Consideration of Instruction No. 03/2016 of the Central Board of Direct Taxes.
3. Failure to bear in mind the Risk Parameters as framed.
4. Invocation of extraordinary jurisdiction under Article 226 of the Constitution.

Analysis:
The petitioner filed a writ petition challenging the reference made by the Assessing Officer under Section 92CA of the Income Tax Act. The petitioner sought the quashing of the reference and the order disposing of objections against the reference. The main contention was that the AO failed to consider Instruction No. 03/2016 of the Central Board of Direct Taxes, specifically Para 4.1, which outlines the role of the Transfer Pricing Officer (TPO) in determining the Arm's Length Price (ALP) for international transactions. The petitioner argued that the AO did not bear in mind the Risk Parameters as framed.

The court noted that Section 92CA of the Act grants the AO the statutory power to make a reference to the TPO. While the Instruction and Risk Parameters serve as guides, they are not mandatory requirements for the exercise of this power. The court emphasized that the petitioner invoked Article 226 of the Constitution at the stage of a mere reference to the TPO, highlighting that remedies under the Act, such as appeal to the Dispute Resolution Panel and the Income Tax Appellate Tribunal, are available for any disputes regarding ALP determination.

Ultimately, the court found no justification to entertain the writ petition under Article 226, as the reference itself did not cause prejudice to the petitioner. The court dismissed the writ petition, emphasizing that the petitioner has adequate remedies under the Act for any future disputes regarding transfer pricing and ALP determination.