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TMI Blog2014 (2) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... 004-2005 and applied the same criteria for the purpose of determining the arms length price - the Assessing Officer should have given further opportunity to the assessee to provide necessary clarifications and replies so that the assessment can be completed under section 143(3) read with section 147 and not section 144 of the Act. Relying upon CIT v. Kelvinator India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA] – re-assessment beyond four years is a condition precedent i.e., failure to disclose material facts necessary for assessment by the assessee - When the assessee made full disclosure and the A.O. examined the issue by raising queries, the assessment cannot be reopened - the information that payment was made to a non-resident partner was available before the Assessing Officer and at the time of completion of regular assessment, a reference was not made to the TPO and consequently, the said amount was disallowed by applying the provisions of section 40(a)(i) of the I.T. Act – thus, there is no escapement of income or non-furnishing of any particulars by the assessee – thus, the AO is not justified in initiating the proceedings under section 147 of the I.T. Act – Decided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see submits that the TPO has no jurisdiction to hold that the transaction is sham. His jurisdiction is limited to the provisions u/s 92CA(1), the Assessing Officer may refer the determination of ALP in relation to the international transaction u/s 92C of the I.T.Act. According to sub section (3), the TPO is empowered to determined the ALP by passing an order. Therefore, the TPO is empowered only to determine the ALP in accordance with the rules framed thereunder. A reference may kindly be made to Sec.92C of the I.T.Act. It is mentioned that the ALP in relation to international transaction shall be determined by any of the methods mentioned thereunder. The word used is "shall" and the TPO has no other job to be performed. The said section also prescribes the methods which are - CUP method Resale price method: (a) Cost plus method (b) Profit split method (c) Transactional net margin method (d) Such other method as may be prescribed by the Board. 4. The assessee submits that such determination should be in accordance with Rule 10(B) of the I.T.Rules. The TPO has no authority to travel beyond the provisions u/s 92C of the I.T.Act. It mentions that the ALP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icability of respective methods, computation of price under a given method will all be subjected to judicial scrutiny. It is, therefore, necessary that the order of the TPO contains adequate reasons on all these counts. Copies of the documents or the relevant data used in arriving at the arm's length price should be made available to the Assessing Officer for. his records and use at subsequent stages of appellate or penal proceedings. 7. We heard both parties and perused the material available on record. We are of the opinion that the TPO is empowered only to determine the ALP as per the provisions u/s. 92C by applying any one of the methods stipulated in sub section (1) of Sec.92C and by applying the most appropriate method. It has been submitted by the learned Counsel that the TPO can not determine whether a transaction is sham and in support of his contention the following cases were relied upon. (a) Pvt.Ltd.,vs. Addl.CIT reported in 16 ITR (Tribunal) 240 held that the TPO can not direct himself to examine the genuineness of the transaction and the necessity of making payment or the validity of the same. (b) The Mumbai Bench-K of the ITAT in the case of Thyssen K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of notice u/s 148 on 27.2.2010. The reason for reopening appears to be that the payment of Fees for technical Services to one of the members was held to be a sham in the course of assessment for 2004-05. 12. The Assessee has questioned the validity of reopening of assessment. Notice u/s 148 was dated 27.2.2010. As payment to the member of AOP was considered as an international transaction, reference was made to the TPO for determining the ALP. The TPO seems to have observed that the AO himself can determine the ALP based on the discussions made for AY 2004-05. A letter was issued to the Assessee dated 27.10.2010 as to why the return filed on 28.11.2003 should not be treated as that filed in response to the notice u/s 148. A questionnaire was issued on 12.10.2010. Reason for reopening was furnished by letter dated 14.10.2010. Subsequently the Assessee filed their objection for reopening vide his letter dt 22.11.2010. This was rejected by the AO. The Assessee was asked to file details about the International transaction by the Assessing Officer vide his letter dated 12.10.2010 and 15.11.2010. Assessee filed a letter on 22.12.2010. The Assessing officer completed the assessment u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04. We are of the opinion that the Assessing Officer should have given further opportunity to the assessee to provide necessary clarifications and replies so that the assessment can be completed under section 143(3) read with section 147 and not section 144 of the Act. 17. The appeal is filed aggrieved by the initiation of proceedings under section 147 of the Act we find that all the information necessary has been submitted before the Assessing Officer and there is no lapse on the part of the assessee. The Assessing Officer has also not brought on record any fresh data or information to prove that there is an escapement of income. Therefore, the initiation of proceedings under section 147 after a period of 4 years is not valid. In the case under consideration, in original assessment order dated 6.3.2006 the Assessing Officer has examined the issue in detail and the assessee has disclosed full particulars for the purpose of computation of total income. The Assessing Officer reopened the assessment beyond 4 years, which is not in accordance with law and issued notice under section 148 on 27.02.2010. 18. Section 147 of the Act reads as follows: "Income escaping assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too Iowa rate; or (iii) such income has been made the subject of excessive relief under this Act; or (d) where a person is found to have any asset (including financial interest in any entity) located outside India. (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. Explanation 3. For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. Being so, a period of four years from the end of relevant assessment year is normally the period during which the AO can issue a notice unless the case falls under clauses (b) and (c) of section 149 of the Act which gives extended period of 6 years from the end of the relevant assessment year. Now the argument of the AR before us is that the Department has no material to show that the income which is said to have been escaped is on account of failure on the part of the assessee so as to reopen the assessment when the original assessment was completed u/s. 143(3) of the Act. Provisions of section 147 prescribed that no action should be taken u/s. 147 after the expiry of four years from the end of the relevant assessment year, unless income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to make a return u/s. 139 or in response to notice issued under sub-section (1) of section 147 or section 148 or to disclose fully and truly all material facts necessary for its assessment for that assessment year. The DR was not able to point out applicability of these provisions to assessee's case. Unless these conditions are fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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