Action by the Taxpayer and the Assessing Officer on entering into an APA (Section 92CD) - International Taxation - Income Tax

Action by the Taxpayer and the Assessing Officer on entering into an APA ( Section 92CD ) Where in respect of an assessment year covered in the APA, a return of income has been filed prior to the date of entering into an APA, then within three months or entering into APA, the assessee is aquired to file a modified return in accordance with and limited to the APA. The modified return shall be deemed to be a return under section 139 and all the provisions of the Act shall apply accordingly. If the assessment or reassessment for the year's covered under APA is pending, the assessing officer is required to complete that assessment or reassessment in accordance with the APA taking into consideration the modified return so furnished. Where the assessment or the reassessment has already been completed the assessing officer shall reassess or recompute the total income of the relevant assessment year having regard to and in accordance with the APA. It may be kept in mind that a particular assessment year may involve many international transactions and not all international transactions may be covered international transactions under the APA. The assessment Of international transactions which are not covered international transactions under APA will not be affected by entering into of an APA. In case where a reference to TPO is pending with respect to any covered transaction of APA, the officer shall inform the TPO about the filing of modified return in respect of that transaction. This communication shall be sent immediately after filling of the modified return by the assessee with respect to such covered transaction. On receipt of such communication, the Transfer Pricing Officer shall not proceed further for auditing the covered transaction. Similarly, if the covered transaction is pending before the Dispute Resolution Panel (DRP), the assessing officer shall inform the DRP immediately after filing of modified return by the assessee. On receipt of communication from the assessing officer, the DRP shall not give any direction with respect to the covered transaction. In this regard the attention is invited to Rule 10P(6) which states that the regular audit of the covered transactions shall not be undertaken by the TPO if an agreement has been entered into under Rule 10L except where the agreement has been cancelled under Rule 10R . The procedures consequent to the filing of the modified return in relation to the covered transaction for the assessment years, included in the term of the APA, would include: (i) Withdrawal of any appeal pending before the CIT(Appeal) by the assessee with respect to the covered transaction(s); (ii) Withdrawal of appeal filed before the ITAT/ HC/ SC by the department as well as the assessee With respect to the covered transaction(s); (iii) Withdrawal of objections filed before the DRP by the assessee with respect to the covered transaction(s) as the assessing officer would not be required to make any adjustment for the covered transaction except in accordance with APA.