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TMI Blog2025 (4) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... crutiny assessment, and the original assessment was completed under Section 143 (3) of the Income Tax Act, 1961 ("IT Act") on 22 December 2010 by accepting the returned income of Rs. 12,30,39,783/-. This was in conformity with the price determination by the Transfer Price Officer ("TPO"), who suggested no adjustments to the value of the assessee's international transactions. 5. For the Assessment Year 2008-09, the TPO, while finalizing its order under Section 92CA (3), suggested an adjustment of Rs. 11,22,74,613/-. Based on this, the assessee's case was reopened by invoking the provisions of Section 147 of the IT Act. A notice under Section 148 was issued on 19 January 2012, followed by notices under Section 143 (2) and Section 143 (1) issued on 30 July 2012 and 11 September 2012, respectively. 6. An order under Section 143 read with Section 147 was passed on 25 March 2013 without referring to the TPO. The Pr. CIT-1, Thane, vide order dated 05 February 2015, exercised revisional jurisdiction under Section 263 of the IT Act and set aside the AO's order dated 25 March 2013, being erroneous and prejudicial to the interest of Revenue. The AO was directed to undertake de novo asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income had escaped assessment for the relevant assessment year as well. Mr Sharma submitted that this was a sufficient ground to reopen the assessment. 12. Mr Sharma submitted that this was not a case of the AO acting on some borrowed satisfaction or under dictation from the TPO. He pointed out that under the scheme of the IT Act, the AO is bound by the determination of the TPO and must act in conformity with the directions of the TPO. He submitted that the ITAT had not adequately appreciated all these aspects, and the impugned order warrants interference on the substantial question of law formulated in this Appeal. 13. Mr Pardiwalla, learned senior counsel for the Respondent, submitted that this was a clear case where the AO had not himself had no reason to believe that income had escaped assessment. He submitted that this was a case where the TPO passed on some information to the Joint Commissioner. Based on such information, the Joint Commissioner instructed the AO to reopen the assessment. He submitted that the sequence of events prescribed by the IT Act was completely reversed, and the notice to reassess was in complete violation of the provisions of the IT Act. 14. Mr P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, are "if the assessing has reason to believe ...". This means that the Assessing Officer and not any other officer, whether superior to the Assessing Officer or not, must have had reason to believe that income had escaped assessment. Only then could the Assessing Officer exercise powers under Section 147 of the IT Act. 23. Section 148 of the IT Act had provided that before making the assessment, reassessment or recomputation under section 147, the AO shall serve on the assessee a notice, along with a copy of the order passed, and comply with the other procedural requirements prescribed therein. The proviso sets out that no notice under Section 148 shall be issued unless there is information with the AO which suggests that income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the AO has obtained prior approval of the specified authority to issue such notice. The specified authority for the grant of approval would be the Commissioner or the Joint Commissioner. 24. In the present case, the satisfaction note based upon which the AO initiated the reassessment proceedings reads as follows: In this case, the Addl, CIT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Considering all this, the AO, in his satisfaction note, has stated that he had reason to believe that the income chargeable to tax had escaped assessment due to the proceedings conducted by the Transfer Pricing Wing within the meaning of Section 147 of the IT Act. 26. Thus, it is apparent that the entire process of initiating reassessment proceedings commenced with the letter of Additional CIT, Transfer Pricing to the Jt. CIT. The Jt. CIT and the CIT, acting upon the letter from the Additional CIT, Transfer pricing, virtually directed the AO to initiate proceedings for reassessment. Nothing on record indicates any independent application of mind by the AO. There is nothing to suggest that the AO who issued the notice under Section 147-148 had, himself, any reason to believe. This AO, regarding himself, to be bound by the directions of his superiors, i.e. the Jt. CIT and the Additional CIT-Transfer Pricing to his Joint Commissioner issued the impugned notices. Thus, the record does show that this was not a case where the AO himself had any reason to believe or the AO, after independent application of mind, believed or had any reason to believe that the income had escaped assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed escaped assessment. This Court followed the decision in the case of Principal Commissioner of Income Tax Vs Shodiman Investments (P.) Ltd [2018] 93 taxmann.com 153. 31. In Aroni Commercials (supra), this Court held that the reasons for reopening of an assessment should be that an AO alone who is issuing the notice and the AO, in such matters, cannot act merely on the dictates of any other person or authority. A similar view was taken by the Patna High Court in Shivnarayan Jaiswal (supra), Madras High Court in T R Rajkumari (supra) and the Madhya Pradesh High Court in Yashwant Talkies (supra). In all these cases, notices for reopening assessments issued on the directions of the superior authorities were quashed and set aside. 32. Mr Sharma's contention that the TPO's determination bound the AO may not be correct. The AO would indeed be bound by the TPO's determination during the assessment for the relevant assessment year. The TPO's determination binds the AO only when the AO makes a reference to the TPO under Section 92CA (1) during the course of pending assessment proceedings, and the order is made by the TPO determining the arm's length price. This is clarified by Section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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