Tax Tribunal rules CIT lacks jurisdiction to revise TPO's order under sec 92CA(3). CIT's orders canceled, assessee's appeals allowed.

The Tribunal held that the Commissioner of Income Tax (CIT) cannot revise the Transfer Pricing Officer's (TPO) order under section 92CA(3). Consequently, the assessment orders in line with the TPO's order for the years 2005-06 and 2006-07 were not set aside. The CIT's orders were canceled due to lack of jurisdiction, and the assessee's appeals for those years were allowed. Other grounds raised were not addressed.

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Issues Involved:
1. Jurisdiction of the Commissioner under section 263 of the Income Tax Act, 1961 to set aside the order passed by the Transfer Pricing Officer (TPO) under section 92CA(3).
2. Validity of the assessment orders passed by the Assessing Officer in conformity with the TPO's order.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner under Section 263:

The assessee challenged the orders passed by the Commissioner of Income Tax (CIT) under section 263 of the Income Tax Act, 1961, which set aside the assessment orders and the TPO's orders for the assessment years 2005-06 and 2006-07. The primary legal ground was that the CIT, under revisionary jurisdiction, cannot set aside the order passed by the TPO under section 92CA(3).

The CIT issued a show cause notice based on the transfer pricing order for the subsequent assessment year (2007-08), questioning why the assessment orders for 2005-06 and 2006-07 should not be referred again to the TPO for re-determination of the arm's length price (ALP) of international transactions.

The assessee argued that it had complied fully with section 92E by disclosing all international transactions in Form 3CEB and the transfer pricing study report. The TPO, after examining all details and methodology adopted by the assessee, passed a detailed order under section 92CA(3), which is binding on the Assessing Officer as per section 92CA(4). Therefore, the CIT cannot revise or cancel such an order.

The CIT observed that since the TPO made adjustments in certain foreign transactions for the assessment year 2007-08, similar adjustments should be made for 2005-06 and 2006-07. Consequently, the CIT set aside the TPO's order and the assessment order, directing the issue of adjustment of ALP to be reconsidered by the TPO.

2. Validity of the Assessment Orders:

The learned Senior Counsel for the assessee contended that the Tribunal in Essar Steels Ltd. v/s ACIT, [2013] 152 TTJ 265 (Mum.) had held that the CIT has no jurisdiction over the TPO administratively and cannot revise the TPO's order under section 92CA(3). Therefore, the CIT's order cancelling the TPO's order and the assessment order should be set aside.

The Departmental Representative argued that the CIT has the power under section 263 to revise the order of the Assessing Officer if it is erroneous and prejudicial to the interest of the revenue. Since the TPO's order gets merged with the Assessing Officer's order, the CIT can revise the order of the Assessing Officer.

The Tribunal, after hearing both sides, referred to the Essar Steel Ltd. case, where it was held that the CIT has no jurisdiction over the TPO administratively and cannot revise the TPO's order. The Tribunal observed that the CIT cannot exercise revisionary jurisdiction under section 263 on the order passed under section 92CA(3) by the TPO. Consequently, the order passed by the Assessing Officer, which is in conformity with the TPO's order, cannot be set aside by the CIT.

Conclusion:

The Tribunal concluded that the CIT cannot exercise jurisdiction under section 263 over the TPO's order under section 92CA(3). Therefore, the assessment orders passed by the Assessing Officer in conformity with the TPO's order cannot be set aside. The impugned orders passed by the CIT for the assessment years 2005-06 and 2006-07 were cancelled for want of jurisdiction. The appeals by the assessee were allowed, and other grounds raised by the assessee were not adjudicated upon.

Order Pronounced:

The Tribunal pronounced the order in the open Court on 20th December 2013, allowing the assessee's appeals for the assessment years 2005-06 and 2006-07.

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