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2023 (6) TMI 623 - HC - Income TaxReopening of assessment u/s 147 - reference made to the TPO for determining the arms length price of the international transaction - HELD THAT - AO can make reference to the TPO u/s 92CA of the Act only after selecting the case for scrutiny assessment. The instructions of CBDT is also a pointer to the legislative import that the reference to the TPO for determining the arm s length price in relation to an international transaction is envisaged only in the course of the assessment proceedings, which is the only process known to the Act, whereby the assessment of total income is done. Therefore, Tribunal was correct to hold that when reference was made to the TPO by AO for determination of arm s length price in relation to the international transaction, no assessment proceedings were pending and hence it was invalid reference. The subsequent order passed by the TPO determining the assessment to the international transaction was a nullity in law and void ab initio. AO could not have relied upon an order of the TPO which is a nullity to form a belief that certain income chargeable to tax has escaped the assessment for the relevant Assessment Year. No substantial questions of law arise.
Issues involved:
The issues involved in the judgment are: 1. Whether the Tribunal was correct in holding that the reasons recorded by the assessing officer do not meet the requirements of Section 147 of the Income Tax Act 1961? 2. Whether the Income Tax Appellate Tribunal was correct in holding that the Assessing Officer had no jurisdiction to issue notice under Section 148 of the Act? 3. Whether the Income Tax Appellate Tribunal was justified in quashing the order passed under Section 143(3) r/w Section 147 and 144C of the Act? 4. Whether the Income Tax Appellate Tribunal was correct in holding that the order of the Transfer Pricing Officer is null & void ab initio? Comprehensive Details: 1. The respondent is involved in manufacturing diapers, sanitary napkins, and consumer tissue products. The return of income was processed under Section 143(1) of the Income Tax Act, 1961. The Assessing Officer made a reference to the Transfer Pricing Officer (TPO) under Section 92CA of the Act, leading to adjustments in international transactions. Subsequently, the Assessing Officer issued a notice under Section 148 of the Act for re-opening the assessment, which was objected to by the respondent. 2. The validity of the assessment proceedings initiated under Section 147/148 of the Act was questioned due to the lack of a notice under Section 143(2) before the reference to the TPO. The Assessing Officer's ability to refer to the TPO without pending assessment proceedings was challenged, indicating a lack of independent application of mind. 3. The relevant provisions of the Income Tax Act regarding transfer pricing assessment were discussed, emphasizing the need for determination of arm's length price during assessment proceedings. The process involves references to the TPO under Section 92CA for such determinations, which should occur within the context of ongoing assessment procedures. 4. Instructions from the Central Board of Direct Taxes highlighted the requirement for selecting cases for scrutiny assessment before referring to the TPO for arm's length price determinations. The Tribunal's decision to invalidate the reference to the TPO due to the absence of pending assessment proceedings was upheld, rendering subsequent orders based on such references null and void. 5. The judgment concluded that no substantial questions of law arose, leading to the dismissal of the appeal.
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