TPO order under section 92CA(3) deemed erroneous for failing to examine arm's length pricing despite missing Form 3CEB

The ITAT Mumbai upheld the CIT's revision order under section 263 against the TPO's order dated 27/1/2021. The TPO had passed an order under section 92CA(3) without examining the arm's length price of international transactions involving export sales and imports, despite the assessee not submitting Form 3CEB. The ITAT rejected the assessee's argument that revision under section 263 for TP adjustments could only be made from 1/4/2022 onwards, holding that the date of examination of records is relevant, not the date of the original order. The TPO's order was deemed erroneous and prejudicial to revenue due to complete absence of inquiry regarding transfer pricing benchmarking.

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Issues Involved:

1. Validity of the revisionary order under section 263 of the Income Tax Act.
2. Whether the Transfer Pricing Officer (TPO) conducted adequate inquiries.
3. Applicability of amendments to section 263 retrospectively.

Issue 1: Validity of the Revisionary Order under Section 263

The assessee contested the revisionary orders passed by the CIT(TP)-4, Mumbai, which directed the TPO to make fresh orders under section 92CA of the Income Tax Act for A.Y. 2012-13, 2017-18, 2018-19, and 2019-20. The assessee argued that any order passed by the TPO prior to 1/4/2022 is not subject to revision under section 263. The Tribunal, however, upheld the CIT's authority to revise such orders, emphasizing that the date of examination of the record by the revisionary authority is what matters, not the date of the TPO's order. The Tribunal rejected the assessee's argument, stating that the powers of the revisionary authority cannot be put in abeyance.

Issue 2: Adequacy of Inquiries Conducted by the TPO

The CIT observed that the TPO did not conduct adequate inquiries regarding several international transactions, including export sales and import purchases, despite having information on record. The TPO's order was deemed erroneous and prejudicial to the interest of the revenue as it was passed without proper inquiries. The Tribunal agreed with the CIT, noting that the TPO failed to benchmark transactions and determine the arm's-length price, thus justifying the revisionary order.

Issue 3: Applicability of Amendments to Section 263 Retrospectively

The assessee cited several judicial precedents to argue that amendments to section 263, including explanation 2, do not apply retrospectively. The Tribunal clarified that the issue at hand was not about the retrospective application of explanation 2 but rather the complete absence of inquiry by the TPO. The Tribunal concluded that the CIT did not invoke explanation 2 but relied on section 263(1) itself, making the revisionary order valid.

Conclusion:

The Tribunal dismissed all four appeals filed by the assessee, affirming the CIT's revisionary orders. The Tribunal held that the TPO's orders were erroneous and prejudicial to the interest of the revenue due to the lack of adequate inquiries into international transactions. The Tribunal also confirmed that the CIT had the authority to revise the TPO's orders under section 263, regardless of the date the TPO's orders were passed. All appeals were dismissed, and the revisionary orders were upheld.

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