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TMI Blog2024 (10) TMI 246X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently, the law makers proceeded to include a Transfer Pricing Officer alongside an assessing officer for authorities in respect of whom revisionary orders can be invoked by the respective principle chief commissioner or chief commissioner or commissioner. It is trite law that when the provisions of the statute are unambiguously clear and do not afford divergent meanings, no interpretation of the same is permissible. As categorically mandated that w.e.f 01.04.2022 only a principle chief commissioner or chief commissioner or commissioner can exercise revisionary authority in respect of orders passed by TPO under their command and control. In this view of the matter, the order passed by Ld. PCIT, Madurai-1 can be taken as an order passed without having any valid lawful jurisdiction. Consequently, the same deserves to meet the fate of getting quashed. We are also not inclined to subscribe to the view of the Ld. DR that the order passed by Ld. PCIT, Madurai-1 was not against TPO s order but was against the assessment order passed by the Ld.AO. The show cause notice issued by Ld. PCIT, Madurai-1 referred herein above as well as his order u/s 263 clearly indicates that he is assailing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and in circumstances of the case and in law, without prejudice to one another or the grounds of appeal furnished in the Memorandum of Appeal inform 36: 1. The Impugned Order passed by the Ld. PCIT - 1, Madurai, under section 263 of the Act, is without jurisdiction and lacks the authority of law, in so far as it relates to the amendment of the TP Order passed under section 92CA (3) by the Ld. DCIT, TP, Circle 2(2) Chennai, and is therefore illegal, void-ab-initio, contrary to the provisions of the Income Tax Act, 1961 and is liable to be quashed as such. 2. Without prejudice, the assessment order dated May 04, 2021 passed by the Ld. AO, in conformity with the order of the Ld. TPO as mandated by section 92CA(4) of the Act, is not erroneous in so far as it relates to the arms' length price determined by the Ld. TPO. The Appellant craves leave to add / modify / alter any additional grounds. The above additional grounds are without prejudice to each other. The Appellant submits that the omission to raise the aforesaid additional grounds of appeal in the original grounds of appeal was neither deliberate nor willful and prays that the Hon'ble Tribunal may consider it as pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus it was argued that the appellant has not been able to conclusively satisfy its bona-fide of the ground raised and why it was not raised earlier. The Ld. DR argued that the assessee fully participated in the assessment proceedings and hence cannot now challenge the revisionary proceedings. It was argued that the reliance of the appellant in the case of Essar Steels Limited reported in 28 taxman.com 232 is misplaced as the views of the Hon ble ITAT are merely obiter dicta and not ratio decidendi. Accordingly, the Ld. DR contested admission of the additional grounds of appeal. 7.0 We have heard the rival submissions in the light of material available on records and noted that the additional grounds raised by the assessee s case lies at the root of the matter and therefore in the interest of justice, deserves adjudication. It is trite law that the first and foremost thing which a judicial authority including quasi-judicial authority must possess while exercising its lawfully given authority, over any matter, is the availability of jurisdiction. Thus jurisdiction is sina qua non for any order passed by any authority. Jurisdiction is not a fact of presumption but it flows from statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the TPO passed an order dated January 27, 2021 under section 92CA(3) of the Act and subsequently Assessing Officer (AO) passed an order dated May o4, 2021 under section 143(3) of the Act making only an addition towards disallowance of inventory write off, thereby determining an assessed income of Rs. 2,91,08,991. It was emphasized that no disturbance was made by the TPO and consequently no addition was made by the Ld. AO to its returned income qua any adverse remarks of the TPO. The Principal Commissioner of Income Tax, Madurai - 1 based on the assessments concluded under for the AYs 2015-16 and 2017-18, opined that the margin retained by Phillips Foods International (Hong Kong) Limited (PFHK)) was much higher when compared to the functions performed by PFHK and accordingly concluded that PFHK must be considered as the tested party and accordingly an adjustment must be made to PFIN's total income with reference to the 'excess margin retained' by PFHK. During the course of the revisionary proceedings u/s 263 the Ld. PCIT, Madurai-1 issued a show cause notice, relevant part of which is reproduced hereunder:- 2. On verification of the records, it was noticed that your c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Company to justify the above position. 5.4 It is clear from the above that PFHK acts as intermediary between your company and PFUS. The Chapter-2 of the OECD guidelines gives the example of intermediary activities where a tax payer purchases goods from an Associated Enterprise and on sales these goods to other associated enterprise as an example of where the berry ratio may be usefully applied. In Such cases both sales and costs of goods are controlled transactions leaving operating expenses as the only reasonably independent accounting line item from which to base a transfer pricing method. For AY 2015-16, accordingly PFHK was considered as the tested party and since the data relating to costs incurred by PFHK was not available, the PLI of GP / sales was adopted and traders in aqua products in Asia pacific region was selected from Bloomberg data base for comparables. Similarly, for the AY-2016-17, PFHK (which acts as intermediary between your company and the PFUS) has to be considered as the tested party and the margins have to be necessarily bench marked against the comparables . . 9.0 The Ld. Counsel for the assessee argued that the revisionary order u/s 263 of PCIT-1, Madurai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case commissioner of income tax (Transfer Pricing) Chennai would have lawful authority u/s 263 to revise the orders passed by DCIT / ACIT (Transfer Pricing) 2(2), Chennai. It was therefore argued that consequently the revisionary order u/s 263 passed by Ld. PCIT, Madurai-1 is void ab initio and deserves to be quashed. In support of its contentions the Ld. AR relied upon the decision of Hon ble ITAT, Mumbai in the case of Essar Steel Ltd. reported at 28 taxman.com 232 holding that a CIT who does not has administrative control over the TPO would not be in a position to exercise his revisionary authority u/s 263 qua orders passed by the TPO. 11.0 The Ld. DR fiercely opposed the arguments put forth by the Ld. AR. It was argued that the Ld. PCIT, Madurai-1 had exercised his revisionary authority in respect of assessment order passed by the Ld. AO u/s 143(3) r.w.s 144B dated 04.05.2021 and not the TPO s order. The Ld. DR would make us believe that the amendment by finance act 2022 was effective from 01.04.2022 and hence financial year 2022-2023 was transitional year and such technical mistakes deserves to be ignored. The Ld. DR also argued that the adjustments if any made by the TPO con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer 3[or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2. For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 3[or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle chief commissioner or chief commissioner or commissioner. It is trite law that when the provisions of the statute are unambiguously clear and do not afford divergent meanings, no interpretation of the same is permissible. We have examined the facts and are convinced that the law has clearly and categorically mandated that w.e.f 01.04.2022 only a principle chief commissioner or chief commissioner or commissioner can exercise revisionary authority in respect of orders passed by Transfer Pricing Officer under their command and control. In this view of the matter, the order passed by Ld. PCIT, Madurai-1 can be taken as an order passed without having any valid lawful jurisdiction. Consequently, the same deserves to meet the fate of getting quashed. 14.0 We are also not inclined to subscribe to the view of the Ld. DR that the order passed by Ld. PCIT, Madurai-1 was not against TPO s order but was against the assessment order passed by the Ld.AO. The show cause notice issued by Ld. PCIT, Madurai-1 referred herein above as well as his order u/s 263 clearly indicates that he is assailing the order of the TPO and the revision of order u/s 143(3) was merely an offshoot of this activ ..... 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