9911796707
TMI Blog2014 (4) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... en the proposal by the TPO itself is for initiating the proceedings u/s 263 on the TPO order u/s 92CA(3) - Therefore, the order passed by the CIT cannot be justified on the facts of the case - any order of TPO is prejudicial to the interests of Revenue - CIT cannot exercise jurisdiction over TPO as TPO functions separately under the Director of Income Tax (TP) - the DIT should have initiated the proceedings u/s 263 on the order of the TPO instead of sending proposal to the CIT for revising the order of the TPO - the CIT wrongly initiated the proceedings on the assessment order u/s 143(3) which was in conformity with the TPO order u/s 92CA(3) – Decided in favour of Assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... result in under valuation of Rs. 34,72,05,236/-. Accordingly, the CIT was requested to initiate proceedings u/s 263 on the TPO order which according to the TPO was erroneous and prejudicial to the interest of the Revenue. 4. The CIT following the above request from the DIT initiated proceedings under section 263 and issued a show cause notice to assessee seeking its comments, why proceedings under section 263 could not be initiated. In the show cause notice it was clearly stated that the Transfer Pricing Officer has pointed out that the arm's length price transactions has been erroneously under determined by him by Rs..34.72 crores which was prejudicial to the interest of the Revenue. Assessee filed its objections which were summarized by the CIT in page-5 of the order under section 263. The CIT after considering the issue and relying on various case law set aside the order of AO holding that it is erroneous in so far as AO has not adopted arm's length price as determined by the TPO, therefore, prejudicial to the interest of the Revenue. Therefore, he set aside the assessment order with a direction to reframe the same after considering the observations given above (in the order u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me order which in fact does not exist. Therefore, the order is bad in law. 8. The next submission of the Counsel was that even on merit when there are two views possible, to value either on net asset value or on price earning method and TPO adopted one method on one of the possible view, there cannot be any action under section 263 as held by the Hon'ble Supreme Court in the case of CIT vs. Max India Limited, 295 ITR 282(SC). He also questioned the jurisdiction of the CIT to revise the order of AO u/s 143(3) which is in conformity with the order of the TPO as per section 92CA(4), whereas the proposal by the TPO is to initiate action under section 263 on the TPO order itself. 9. The learned DR however, in reply submitted that according to the Board Circular, the orders of the TPO are approved by the DIT. Therefore, the CIT has jurisdiction to revise the order of AO under section 263 when it is pointed out that there was error in computation of Arms length price by the TPO himself. He relied on the Coordinate Bench decision in the case of Sun Microsystems India Pvt. Ltd vs. CIT in ITA No. 661(Bang.)2007 dated 29th March, 2011. He also referred to the Hon'ble Supreme Court d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcept a proposal by the TPO to the DIT that the value according to net asset value should have been determined and average price could have been taken (Reasons for consideration for revision under section 263 by the TPO were placed in the paper book at Page Nos. 40 to 45). This indicate that after passing the order under section 154, the TPO sent a proposal for rectification of the said order dated 22.11.2007. A proposal by the TPO clearly indicates that the order under section 92CA(3) dated 22.11.2007 that was rectified the order under section 92CA(5) r.w. section 154 dated 19.12.2007, be considered for revision under section 263. However, instead of revising the TPO order as proposed, the learned CIT revised the order passed by AO under section 143(3) dt. 01.01.2008. In our view, the CIT erred in revising the assessment order whereas the proposal is for revising the TPO order. This action of the CIT cannot be considered as appropriate action as so long the order of the TPO dated 22.11.2007 was not revised and was binding on AO under section 92CA(4). There is no point in directing AO to follow the revised TPO order which was not in existence. Even as seen from the order under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is unsustainable in law". 15. Respectfully following the above, where two views are possible and the TPO has taken one possible view the proceedings under section 263 cannot be invoked. Even otherwise, in this case instead of initiating proposal on TPO order as suggested, the CIT initiated the proceedings under AO's order which is not erroneous or prejudicial to the interests of the Revenue, as AO sincerely followed the mandate of provisions of section 92CA in proceeding to compute the total income under sub section 4 of section 92CA in conformity with the arms length price so determined by the TPO. As the provisions of section 92CA(4) have been amended w.e.f. 1.6.2007 which used the word "shall" AO is bound to follow the TPO's order determined under sub section 3 (which was itself modified by an order under sub section-5) of 92CA. Accordingly, we do not see any error in the order of AO so that it can be considered as erroneous and prejudicial to the interests of the Revenue. 16. The learned DR referred to the order of the ITAT in Sun Microsystems India Pvt. Ltd in ITA No. 661(Bang.)/2007. The assessment year therein was assessment year 2002-03 and the TPO order was dated 24.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
