2023 (12) TMI 455 - AT - Income Tax

Revision u/s 263 - Validity of order passed under section 92CA (3) of the act by the transfer pricing officer question - as per CIT AO failed to examine the arm s-length price of international transaction of export sales - As argued revision u/s 263 for TP Adjustment can be taken only with effect from 1/4/2022 - HELD THAT - As per provisions of section 263 of the income tax act several authorities are authorized to call for and examine the record of any proceedings under the income tax act and if they consider that any order passed therein by the respective authorities including the learned transfer pricing officer is erroneous insofar as it is prejudicial to the interest of the revenue, such authority may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as deems necessary, passed such order thereon as the circumstances of the case justify. In this case as per the order of the learned transfer pricing officer under section 92CA (3) of the act dated 27/1/2021 says that reference u/s 92C (1) was received from the learned assessing officer on 31/12/2019 - Thereafter the learned transfer-pricing officer noted that assessee has not submitted form number 3CEB for the year under consideration. There was no reference that how transactions of export sales, import were benchmarked by the assessee by adopting which method, and how ALP of such transactions was determined. Thus, it is correctly held by CIT that the TPO has passed the order without taking any cognizance of making any inquiries with respect to transaction of export and import. Therefore, such an order is erroneous and prejudicial to the interest of revenue. It is also the fact that the CIT (TP) did not invoke the provisions of explanation 2 of section 263 of The Income Tax Act because of the reason that the order passed is without making any enquiry and therefore such an order is erroneous and prejudicial to the interest of revenue as there was no case to consider it under the deeming fiction of explanation 2 of that section. It is a case complete absence of inquiry in any manner. Therefore, it is erroneous and prejudicial to the interest of revenue u/s 263(1) itself. The income tax act authorizes the authority to revise the order if at the time of examination, such orders are on record. Thus, the date of passing of the order, which is subject to revision, is irrelevant but what is relevant is the date of examination of such record. If on the date of examination of such record. The revisionary authority is vested with powers to revise such orders i.e. after 1/4/2022 the date on which such order subject to revision is passed is immaterial. Further if we take a view as canvassed by the learned authorized representative that any order passed by the learned transfer pricing officer on or after 1/4/2022 only can be revised, perhaps it will tantamount to putting the powers given to the revisionary authority in abeyance till that time. If we agree to such a view than, we are putting the powers of the revisionary authority in abeyance for further, at least 11 months. Therefore, such a view deserves to be rejected at threshold. No hesitation in holding that the learned PCIT (TP) is correct in holding that the order of the learned transfer pricing officer passed on 27/1/2021 is erroneous and prejudicial to the interest of the revenue as it was made without making any enquiry with respect to the export sales and import purchases from associated enterprises qua their arm s-length price. Decided Against assessee.

Summary

Issues Involved:

1. Validity of the revisionary order under section 263 of the Income Tax Act.
2. Whether the Transfer Pricing Officer (TPO) conducted adequate inquiries.
3. Applicability of amendments to section 263 retrospectively.

Issue 1: Validity of the Revisionary Order under Section 263

The assessee contested the revisionary orders passed by the CIT(TP)-4, Mumbai, which directed the TPO to make fresh orders under section 92CA of the Income Tax Act for A.Y. 2012-13, 2017-18, 2018-19, and 2019-20. The assessee argued that any order passed by the TPO prior to 1/4/2022 is not subject to revision under section 263. The Tribunal, however, upheld the CIT's authority to revise such orders, emphasizing that the date of examination of the record by the revisionary authority is what matters, not the date of the TPO's order. The Tribunal rejected the assessee's argument, stating that the powers of the revisionary authority cannot be put in abeyance.

Issue 2: Adequacy of Inquiries Conducted by the TPO

The CIT observed that the TPO did not conduct adequate inquiries regarding several international transactions, including export sales and import purchases, despite having information on record. The TPO's order was deemed erroneous and prejudicial to the interest of the revenue as it was passed without proper inquiries. The Tribunal agreed with the CIT, noting that the TPO failed to benchmark transactions and determine the arm's-length price, thus justifying the revisionary order.

Issue 3: Applicability of Amendments to Section 263 Retrospectively

The assessee cited several judicial precedents to argue that amendments to section 263, including explanation 2, do not apply retrospectively. The Tribunal clarified that the issue at hand was not about the retrospective application of explanation 2 but rather the complete absence of inquiry by the TPO. The Tribunal concluded that the CIT did not invoke explanation 2 but relied on section 263(1) itself, making the revisionary order valid.

Conclusion:

The Tribunal dismissed all four appeals filed by the assessee, affirming the CIT's revisionary orders. The Tribunal held that the TPO's orders were erroneous and prejudicial to the interest of the revenue due to the lack of adequate inquiries into international transactions. The Tribunal also confirmed that the CIT had the authority to revise the TPO's orders under section 263, regardless of the date the TPO's orders were passed. All appeals were dismissed, and the revisionary orders were upheld.