2024 (10) TMI 246 - AT - Income Tax

Revision u/s 263 - TP Adjustment - who will have real revisionary powers u/s 263 qua orders passed by the TPO? - HELD THAT - The principle chief commissioner or chief commissioner or commissioner having jurisdiction over transfer pricing matters has been specifically empowered, w.e.f 01.04.2022, to invoke revisionary action u/s 263 in respect of TPOs working under their administrative command and control. In this regard, we are fully in agreement with legislative intent embedded in the impugned amendment that there did existed a confusion as to who will have real revisionary powers u/s 263 qua orders passed by the TPO. A resolution to this controversy was necessary particularly in view of the notification dated 03.11.2014 which elaborately defined the chain of command right from Principal Chief Commissioner of Income Tax(International Taxation) at the top and the Deputy / Assistant Commissioner of income tax(Transfer Pricing) at the base of pyramid. Consequently, the law makers proceeded to include a Transfer Pricing Officer alongside an assessing officer for authorities in respect of whom revisionary orders can be invoked by the respective principle chief commissioner or chief commissioner or commissioner. It is trite law that when the provisions of the statute are unambiguously clear and do not afford divergent meanings, no interpretation of the same is permissible. As categorically mandated that w.e.f 01.04.2022 only a principle chief commissioner or chief commissioner or commissioner can exercise revisionary authority in respect of orders passed by TPO under their command and control. In this view of the matter, the order passed by Ld. PCIT, Madurai-1 can be taken as an order passed without having any valid lawful jurisdiction. Consequently, the same deserves to meet the fate of getting quashed. We are also not inclined to subscribe to the view of the Ld. DR that the order passed by Ld. PCIT, Madurai-1 was not against TPO s order but was against the assessment order passed by the Ld.AO. The show cause notice issued by Ld. PCIT, Madurai-1 referred herein above as well as his order u/s 263 clearly indicates that he is assailing the order of the TPO and the revision of order u/s 143(3) was merely an offshoot of this activity. The order u/s 143(3) r.w.s. 144B passed by the Ld. AO did not suffer from any deficiency so as to classify into the category of an order which is erroneous in so far as it is prejudicial to the interest of revenue . No mistake whatsoever has been indicated in the impugned order. Therefore, order u/s 143(3) r.w.s. 144B passed by the Ld. AO did not have any ingredients for any justified exercise of revisionary powers. Thus, we hold the view that the order passed by Ld. PCIT, Madurai-1 u/s 263 has been passed without any valid jurisdiction and is void ab initio and therefore we quash the impugned order. Decided in favour of assessee.

Summary

Issues Involved:

1. Jurisdictional Authority of the Principal Commissioner of Income Tax (PCIT) under Section 263.
2. Validity of Revisionary Proceedings under Section 263.
3. Evaluation of Transfer Pricing Order and Assessment Order.

Issue-wise Detailed Analysis:

1. Jurisdictional Authority of the Principal Commissioner of Income Tax (PCIT) under Section 263:

The key issue in this case was whether the PCIT, Madurai-1, had the jurisdiction to pass a revisionary order under Section 263 of the Income Tax Act. The assessee argued that the PCIT lacked jurisdiction because the order involved was related to transfer pricing, which should fall under the jurisdiction of the Commissioner of Income Tax (Transfer Pricing), Chennai. The assessee relied on the CBDT notification dated 03.11.2014, which outlined the hierarchical structure and command chain for transfer pricing matters. The Tribunal agreed with the assessee, noting that the Finance Act 2022 clarified that only the Principal Chief Commissioner or Chief Commissioner or Commissioner with jurisdiction over transfer pricing matters could invoke Section 263 with respect to Transfer Pricing Officers (TPOs). Therefore, the PCIT, Madurai-1, did not have the lawful jurisdiction to pass the order, rendering it void ab initio.

2. Validity of Revisionary Proceedings under Section 263:

The assessee challenged the revisionary proceedings initiated by the PCIT, arguing that the proceedings were without jurisdiction and lacked authority. The Tribunal emphasized that jurisdiction is a sine qua non for any order passed by any authority. The law mandates that only specific authorities have the power to revise orders under Section 263. Since the PCIT, Madurai-1, did not possess the lawful jurisdiction over the TPO's order, the revisionary proceedings were deemed invalid and void from the outset.

3. Evaluation of Transfer Pricing Order and Assessment Order:

The Tribunal examined whether the assessment order passed by the Assessing Officer (AO) under Section 143(3) read with Section 144B was erroneous and prejudicial to the interest of the revenue. The PCIT had argued that the order was erroneous due to deficiencies in the TPO's report. However, the Tribunal found no deficiencies in the assessment order that would classify it as erroneous or prejudicial to the revenue. The Tribunal noted that the assessment order did not suffer from any deficiencies that would justify the exercise of revisionary powers. Consequently, the Tribunal quashed the PCIT's order under Section 263, as it was passed without valid jurisdiction.

In conclusion, the Tribunal allowed the appeal of the assessee, holding that the order passed by the PCIT, Madurai-1, under Section 263 was without jurisdiction and void ab initio. Therefore, the other grounds of appeal raised by the assessee became academic and were not adjudicated separately.