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TMI Blog2022 (4) TMI 1462X X X X Extracts X X X X X X X X Extracts X X X X ..... learned assessing officer has passed the order in accordance with instructions issued by the board. No evidences are placed/referred in the order of the learned PCIT about any prior transfer pricing adjustment in the case of the assessee or any action of survey search and seizure. The reference of form 3CEB is made in the order of the learned PCIT itself. Therefore, there not exist the circumstances which warrants the learned assessing officer to refer the matter to the learned transfer pricing officer. As decided in case of Secure meters Ltd [ 2021 (9) TMI 1436 - ITAT JODHPUR] when a case is selected for scrutiny on non-TP risk parameters, it is not mandatory for the learned assessing officer to refer the matter to the learned transfer pricing officer for determination of arm s-length price of international transactions and specified domestic transactions and therefore the order passed by the learned assessing officer cannot be said to be erroneous so far as prejudicial to the interest of the revenue and hence cannot be subjected to revision u/s 263 of the act by the learned PCIT. Accordingly, on the first ground of non-reference to the learned transfer pricing officer we do not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act is ab initio void being bad in law. 2. On the facts and in the circumstances of the case, the learned Pr. CIT erred in setting aside the assessment order dated 21/11/2018 passed under section 143(3) of the Act and directing the Assessing Officer to pass a fresh Assessment order." 03. Brief fact of the case shows that assessee is a company engaged in the business of manufacturing of rough Diamond into cut and polished diamonds and trading and export. It filed its return of income on 26.11.2016 at Rs. 9,44,48,840/-. This return was processed under section 143(1) of the Act. Subsequently, case of the assessee was picked up for scrutiny for examination of eight different items. These are as under:- i. Sale consideration of property in ITR is less than sale consideration reported in form no. 26QB ii. Tax credit claim in ITR is less than tax credit available in 26AS iii. Gross total income is less than value of foreign remittance sent. iv. Mismatch between income/ receipt credited to profit and loss account considered under other heads of income and income from heads of income other than business/ profession. v. Sale consideration of the property in ITR i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y order u/s 263 of the income tax act was passed on 26th of March 2021 directing the learned assessing officer to:- i. refer the international and specified domestic transactions to the jurisdictional transfer pricing Officer (TPO) and ii. make further inquiries verifications into the claim of depreciation and written down value of the goodwill for carry forward 08. Assessee is aggrieved with that order and has preferred this appeal before us. The learned authorised representative submitted that:- i. Case of the assessee was selected for scrutiny Under CASS . According to the scrutiny issues, there was no issue of examination of international transactions and Specified Domestic Transactions and its Arms Length Price. Therefore, the case of the assessee was not selected for scrutiny on transfer pricing risk parameters; therefore, there was no requirement of referring the matter to the learned transfer-pricing officer for determining arm's-length price of international and specified domestic transactions. ii. Learned PCIT has stated that the case of the assessee was selected for examination of large remittance to foreign parties and therefore, the learned Assessing Officer s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ragraph no. 6 to 6.2 of the order of the learned CIT (A) and submitted that this goodwill was recorded in 2012. From 2012, depreciation on the WDV of the assessee is allowed. Since then it is forming part of block, in the past years depreciation is allowed on the same and even in the subsequent year depreciation is allowed therefore disturbed for disallowance of depreciation only for this year clearly shows that there is no error in the order. vii. He referred to the decision of Ahmadabad Bench in case of Bodal Chemicals Ltd. vs. ACIT 112 taxmann.com 217 (Ahmedabad-Trib.) to support that the depreciation cannot be disturbed in subsequent years when in the first year itself the assets entered into the block of assets and depreciation is continuously allowed. For this proposition and he also relied on the decision of co-ordinate Bench in the case of 3861/Mum/2014 dated 21.06.2017. Accordingly, he submitted that the direction of the LD PCIT on this issue is also not in accordance with law. viii. Therefore, he submitted that the order passed by the learned PCIT is not sustainable. 09. The learned CIT Departmental Representative supported the order of the learned PCIT. He submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143 (3) of the act on 21/11/2018 accepting returned income of the assessee. Subsequently on examination of the records, the learned PCIT found that assessee has filed form number 3CEB report which shows that international transaction of ₹ 133.76 crores and specified domestic transactions of ₹ 20.89 crores are entered into with its associated enterprises. It was also noted that assessing officer has allowed depreciation on goodwill of ₹ 4.87 crores and incorrect carry forward of written down value of ₹ 14.62 crores in respect of the self-generated goodwill was allowed. Therefore, a notice u/s 263 of the income tax act was issued. Admittedly, no reply was submitted by assessee. Therefore order u/s 263 of the act was passed setting aside the order of the learned assessing officer with a direction to refer the international and specified domestic transactions to the jurisdictional transfer pricing officer and make further inquiries verification into the claim of depreciation and written down value of the goodwill for carry forward. Therefore the issue that arises is whether the failure of the learned assessing officer to make a reference to the learned tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being issued to replace Instruction No. 15 of 2015. This Instruction is applicable for both international transactions and specified domestic transactions between associated enterprises. The guidelines on various issues are as follows: 3. Reference to Transfer Pricing Officer (TPO) 3.1 The power to determine the Arm's Length Price (ALP) in an international transaction or specified domestic transaction is contained in subsection (3) of section 92C. However, section 92CA provides that where the Assessing Officer (AO) considers it necessary or expedient so to do, he may refer the computation of ALP in relation to an international transaction or specified domestic transaction to the TPO. For proper administration of the Income-tax Act, the Board has decided that the AO shall henceforth make a reference to the TPO only under the circumstances laid out in this Instruction. 3.2 All cases selected for scrutiny, either under the Computer Assisted Scrutiny Selection [CASS] system or under the compulsory manual selection system (in accordance with the CBDT's annual instructions in this regard -for example. Instruction No. 6/2014 for selection in F.Y 2014-15 and Instruction N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Accountant's report under section 92E of the Act but the international transactions or specified domestic transactions undertaken by it come to the notice of the AO; ♦ where the taxpayer has not declared one or more international transaction or specified domestic transaction in the Accountant's report filed under section 92E of the Act and the said transaction or transactions come to the notice of the AO; and ♦ where the taxpayer has declared the international transactions or specified domestic transactions in the Accountant's report filed under section 92E of the Act but has made certain qualifying remarks to the effect that the said transactions are not international transactions or specified domestic transactions or they do not impact the income of the taxpayer. In the above three situations, the AO must provide an opportunity of being heard to the taxpayer before recording his satisfaction or otherwise. In case no objection is raised by the taxpayer to the applicability of Chapter X [Sections 92 to 92F] of the Act to these three situations, then AO should refer the international transaction or specified domestic transaction to the TPO for determ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO. 3.7 For administering the transferpricing regime in an efficient manner, it is clarified that though AO has the power under section 92C to determine the ALP of international transactions or specified domestic transactions, determination of ALP should not be carried out at all by the AO in a case where reference is not made to the TPO. However, in such cases, the AO must record in the body of the assessment order that due to the Board's instruction on this matter, the transfer pricing issue has not been examined at all." 013. In view of the above instructions it is necessary to examine that whether the learned assessing officer was duty-bound to hundred make a reference to the learned transfer pricing officer for determination of the arm'slength price of international transactions and specified domestic transactions or not. If the learned assessing officer has violated the instructions stated above, the order of the learned assessing officer is erroneous and judicial to the interest of the revenue. In paragraph number 3.1 of the above instructions, which lays down the clear-cut criteria for making a reference to transfer pricing officer. Paragraph 3 point to speak that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing officer to refer the matter to the learned transfer pricing officer. 014. Further the learned authorised representative has relied upon decision of the coordinate bench in case of secure meters Ltd versus principal Commissioner of income tax ITA number 02/Jodh/2021 wherein identical issue has been decided by the coordinate bench following decision of Amira pure foods private limited (2018) 63 ITR (Trib) 355 (Delhi) wherein it has been held that when a case is selected for scrutiny on non-TP risk parameters, it is not mandatory for the learned assessing officer to refer the matter to the learned transfer pricing officer for determination of arm's-length price of international transactions and specified domestic transactions and therefore the order passed by the learned assessing officer cannot be said to be erroneous so far as prejudicial to the interest of the revenue and hence cannot be subjected to revision u/s 263 of the act by the learned PCIT. 015. Accordingly, on the first ground of non-reference to the learned transfer pricing officer we do not find any infirmity in the order passed by the learned assessing officer by not referring it to the learned transfer pricing o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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