AO's delayed TPO reference past statutory deadline renders assessment invalid under section 263

The ITAT Mumbai upheld the CIT's revision order under section 263, rejecting the assessee's challenge. The CIT properly exercised revisional jurisdiction after independently examining records, despite the AO's initial proposal. The AO failed to make timely reference to the TPO - although approval was received on 09/03/2021, the AO delayed until 20/09/2021, well past the 31/07/2021 deadline. This time-barred reference was invalid, making the assessment erroneous and prejudicial to revenue interests. The tribunal rejected the assessee's argument regarding ITBA portal dates, emphasizing that statutory limitations under the Act govern proceedings, not portal entries.

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Issues Involved:

1. Validity of CIT's invocation of revisional jurisdiction under Section 263 of the Income Tax Act.
2. Validity of the reference made by the Assessing Officer to the Transfer Pricing Officer (TPO).

Summary:

Validity of CIT's Invocation of Revisional Jurisdiction:

The assessee challenged the validity of the CIT's order invoking Section 263 of the Income Tax Act, arguing that the CIT acted on the proposal of the Assessing Officer without forming an independent opinion. The CIT's examination of records and application of mind are prerequisites for invoking Section 263. The tribunal found that the CIT had indeed examined the records and applied his mind, as evidenced by the language in the show cause notice and the impugned order. Therefore, the tribunal rejected the assessee's argument, stating that the CIT did not act mechanically but took a conscious decision after examining the records.

Validity of the Reference Made by the Assessing Officer to the TPO:

The assessee argued that the Assessing Officer had made a valid reference to the TPO within the extended time limit, and the TPO erred in returning the reference as time-barred. The tribunal examined the sequence of events and found that the Assessing Officer had received approval for the reference on 09/03/2021 but delayed making the reference until 20/09/2021, well past the deadline of 31/07/2021 for passing the TP order as per the Office Memo dated 28/06/2021. The tribunal held that the reference was thus invalid and amounted to no reference at all. Consequently, the assessment order was erroneous and prejudicial to the interest of Revenue, justifying the CIT's invocation of Section 263.

Conclusion:

The tribunal upheld the CIT's order invoking Section 263 and dismissed the assessee's appeal, stating that the CIT had correctly exercised revisional jurisdiction and that the reference made by the Assessing Officer to the TPO was invalid. The tribunal emphasized that the limitation for completion of assessment should be determined strictly according to the provisions of the Act and not based on dates mentioned in the ITBA portal.

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