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2020 (2) TMI 947 - AT - Income TaxRevision u/s 263 - AO ought to have made mandatory reference to the TPO for determining arm s length price of the large specified domestic transactions(s) recorded in Form 3CEB - Scope of amendment - HELD THAT - We find that that this tribunal s co-ordinate bench s decision in AIC Iron Industries Pvt. Ltd., Principal Commissioner of Income Tax-1, Kolkata 2020 (2) TMI 897 - ITAT KOLKATA for very assessment year 2014-15 has held that such an in a claim at the Assessing Officer does not render the corresponding regular assessment to be erroneous causing prejudice to the interest of the Revenue as per statutory amendment in the Act. Since the Finance Act, 2017 omitted sec. 92BA(i) from retrospective effect, the Assessing Officer s inaction in not making reference to the TPO does not render the assessment erroneous causing prejudice to interest of the Revenue. The PCIT s revision directions under challenge are accordingly reversed. The Assessing Officer s regular assessment dated 23.11.2016 is restored - Decided in favour of assessee
Issues Involved:
1. Whether the Assessing Officer's failure to refer the case to the Transfer Pricing Officer (TPO) for specified domestic transactions rendered the assessment order erroneous and prejudicial to the interest of the Revenue under Section 263 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Failure to Refer to Transfer Pricing Officer (TPO): The Principal Commissioner of Income Tax (PCIT) invoked Section 263 of the Income Tax Act, 1961, arguing that the Assessing Officer (AO) failed to refer the case to the TPO for conducting a Transfer Pricing Audit. The PCIT contended that this omission rendered the assessment order erroneous and prejudicial to the interest of the Revenue. The PCIT emphasized that the AO did not conduct the necessary legal verification or investigation by referring the case to the TPO, despite the presence of large specified domestic transactions. 2. Assessee's Contestation: The assessee vehemently contested the PCIT's revision proposal, arguing that the assessment order was not erroneous or prejudicial to the interest of the Revenue. The assessee's submissions were rejected by the PCIT, who maintained that the AO's failure to refer the matter to the TPO necessitated a revision of the assessment order. The PCIT cited several judicial precedents to support the argument that the AO's failure to make necessary inquiries or verification rendered the assessment order erroneous and prejudicial to the Revenue. 3. Tribunal's Consideration: The Tribunal considered the rival contentions and examined the relevant facts and legal provisions. It was noted that the Tribunal's co-ordinate bench had previously held that the omission of Section 92BA(i) by the Finance Act, 2017, with retrospective effect, meant that the AO's failure to refer the case to the TPO did not render the assessment order erroneous or prejudicial to the interest of the Revenue. 4. Legal Precedents and Instructions: The Tribunal referred to the decision in Eveready Industries India Ltd. vs. PCIT, which held that the omission of Section 92BA(i) applied retrospectively to the assessment year 2014-15. The Tribunal also considered CBDT Instruction No. 3 of 2016, which mandated reference to the TPO for cases selected on transfer pricing risk parameters. However, it was clarified that the assessee's case was not selected on a transfer pricing risk parameter but on a mismatch in amounts paid to related persons under Section 40A(2)(b). 5. Tribunal's Conclusion: The Tribunal concluded that the PCIT erred in law and on facts by treating the regular assessment as erroneous and prejudicial to the interest of the Revenue due to the AO's failure to refer the case to the TPO. The Tribunal emphasized that the Finance Act, 2017, omitted Section 92BA(i) with retrospective effect, and therefore, the AO's inaction did not render the assessment erroneous or prejudicial to the interest of the Revenue. Consequently, the Tribunal reversed the PCIT's revision directions and restored the AO's regular assessment dated 23.11.2016. Order: The assessee's appeal was allowed, and the order was pronounced in the open court on 19/02/2020.
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