Transfer pricing reference without pending scrutiny is jurisdictionally invalid and cannot support reassessment reopening.

A reference to the Transfer Pricing Officer is permissible only in the course of pending scrutiny assessment, because arm's length price determination forms part of assessment of total income. Where no notice under section 143(2) was issued and no scrutiny proceedings were pending, the reference was without jurisdiction and the Transfer Pricing Officer's order was a nullity. An assessment reopening based solely on such an invalid order could not rest on valid material to form a belief that income had escaped assessment, so the reopening was held invalid.

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Issues: Whether a reference to the Transfer Pricing Officer could validly be made when no scrutiny assessment proceedings were pending, and whether an order made on such a reference could form the basis for reopening the assessment under sections 147 and 148.

Analysis: The scheme of transfer pricing under sections 92 to 92F operates in the course of assessment proceedings. A reference under section 92CA is permissible only when the Assessing Officer is engaged in scrutiny assessment, because determination of arm's length price is part of the assessment of total income. Where no notice under section 143(2) had been issued and the case was not selected for scrutiny, there were no pending assessment proceedings and the reference to the Transfer Pricing Officer was outside jurisdiction. The order passed by the Transfer Pricing Officer on such an invalid reference was therefore a nullity. Since the reopening was founded only on that order, the Assessing Officer had no valid material to form a belief that income had escaped assessment.

Conclusion: The reopening was invalid and the challenge to it failed; the objection to the Transfer Pricing Officer reference was accepted, and the appeal was dismissed.

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