Supreme Court directs Assessing Officer to refer to Transfer Pricing Officer as per CBDT guidelines

The Supreme Court found that the Assessing Officer breached mandatory instructions by not referring the matter to the Transfer Pricing Officer (TPO) in compliance with CBDT guidelines. The Court upheld the Tribunal's decision but directed the matter to be restored to the Assessing Officer for proper reference to the TPO as per CBDT Instruction No. 3/2003. Regarding the extension of benefits based on tax effect limit per Circular dated 08.08.2019, the Court dismissed the Review Petition as the matter was remanded for TPO reference, precluding the applicability of the Circular's benefits at that stage.

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Issues:
1. Compliance with CBDT guidelines regarding reference to Transfer Pricing Officer (TPO).
2. Consideration of Circular dated 08.08.2019 for extending benefits based on tax effect limit.

Comprehensive Analysis:

Issue 1: Compliance with CBDT guidelines regarding reference to Transfer Pricing Officer (TPO)

The Supreme Court, in this judgment, addressed the issue of compliance with CBDT guidelines regarding the reference to the Transfer Pricing Officer (TPO). The Court acknowledged that the Tribunal was correct in observing that the Assessing Officer had breached mandatory instructions by not making reference to the TPO. The Court found the Tribunal's conclusion on this matter to be correct. However, the Court also noted that the Tribunal should have accepted the submission made by the Departmental Representative and restored the matter to the file of the Assessing Officer for appropriate reference to the TPO. The Court directed that the Assessing Officer should now take necessary steps in accordance with Instruction No.3/2003 issued by the CBDT.

Issue 2: Consideration of Circular dated 08.08.2019 for extending benefits based on tax effect limit

The Review Petition argued for the extension of benefits in favor of the Petitioner based on a Circular dated 08.08.2019, citing that the tax effect in the matter was below the prescribed limit in the Circular. However, the Court noted that since the matter had been remanded to the Assessing Officer for appropriate reference to the TPO, the benefit of the Circular dated 08.08.2019 could not be extended at that stage. Consequently, the Court dismissed the Review Petition based on this argument.

In conclusion, the Supreme Court's judgment emphasized the importance of compliance with CBDT guidelines regarding the reference to the Transfer Pricing Officer and highlighted the need for proper adherence to such instructions. Additionally, the Court clarified that the benefits based on Circulars would be applicable based on the specific circumstances and stages of the proceedings, as evidenced by the dismissal of the Review Petition in this case due to the matter being remanded for TPO reference.

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