Speaking order requirement for transfer pricing references: failure to consider objections before referral renders the reference unsustainable.

A transfer pricing reference made by an Assessing Officer without first considering the assessee's objections and passing a speaking order under CBDT Instruction No. 3/2016 was held unsustainable. The procedural safeguard requires an opportunity to show cause before reference to the Transfer Pricing Officer, followed by a reasoned order addressing objections. Because that mandatory step was omitted, the reference was quashed and the matter remanded to the Assessing Officer for fresh consideration in accordance with the instruction.

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Issues: Whether the reference made by the Assessing Officer to the Transfer Pricing Officer was vitiated for failure to pass a speaking order after considering the assessee's objections as required by CBDT Instruction No. 3/2016.

Analysis: The petition was under Article 226 of the Constitution of India challenging the transfer pricing reference. The record showed that the assessee had raised objections, but the Assessing Officer made the reference without first dealing with those objections through a speaking order. The CBDT instruction required that the assessee be given an opportunity to show cause against the proposed reference and that the Assessing Officer pass a reasoned order before sending the matter to the Transfer Pricing Officer. Since that procedural safeguard was not followed, the reference could not be sustained. The court therefore set aside the reference and remitted the matter for fresh consideration after passing a speaking order.

Conclusion: The impugned transfer pricing reference was invalid for non-compliance with the mandatory requirement of a speaking order and was quashed, with the matter remanded to the Assessing Officer for fresh decision.

Ratio Decidendi: A transfer pricing reference made without first considering the assessee's objections and without passing the speaking order required by the CBDT instruction is liable to be quashed and remitted for fresh decision.

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