2024 (10) TMI 307 - AT - Income Tax

ITAT quashes PCIT revision order under section 263 for transfer pricing reference errors during search proceedings

M/s. Tinna Trade Ltd Versus ACIT, Central Circle-15, New Delhi, Pr. CIT, Central -2, New Delhi

The ITAT Delhi quashed the PCIT's revision order u/s 263. The PCIT had invoked revision jurisdiction claiming the AO erred by not waiting for the TPO's ... Revision u/s 263 - AO had passed an erroneous order by not waiting for the Transfer Pricing order u/s 92CA(3) of the Act for determination of Arm’s Length price of the international transactions undertaken by the assessee - PCIT observed that reference u/s 92CA(3) of the Act was already made by the ld DCIT Central Circle 6 to TPO - Also TPO had proposed a transfer pricing adjustment to Arm’s length price in respect of international transaction of purchase of agriculture commodities which had escaped assessment in the hands of the assessee u/s 153C thereby the order of the AO became prejudicial to the interest of revenue. HELD THAT:- PCIT does not invoke revision jurisdiction u/s 263 of the Act on the ground that no fresh reference was made by AO to TPO u/s 92CA(1) of the Act, instead, the PCIT says that the AO ought to have waited for the order of ld TPO based on the old reference made by the AO to TPO. As stated earlier, when the original assessment and TPO proceedings gets abated pursuant to initiation of proceedings u/s 153C of the Act and the AO in the search assessment proceedings u/s 143(3) read with Section 153C of the Act had chosen in his wisdom not to make fresh reference to ld TPO u/s 92CA(1) of the Act, how any error could be attributed in his order. Hence, the order of the ld PCIT by invoking revision jurisdiction u/s 263 of the Act fails on this. We find that the search assessment proceedings u/s 143(3) read with section 153C of the Act was framed on 26.03.2013 by DCIT, Central Circle, New Delhi after obtaining prior approval u/s 153D of the Act from Additional Commissioner of Income Tax, Central Range-2, New Delhi. On perusal of the order of the ld PCIT u/s 263 of the Act, we find nowhere in his order, the ld PCIT even whispers about the approval granted by the Additional CIT u/s 153D of the Act to be erroneous and prejudicial to the interest of the revenue. Without doing so, PCIT could not assume revision jurisdiction u/s 263 of the Act. Reliance in this regard is placed on the decision of Prakhar Developers Pvt. Ltd [2024 (4) TMI 498 - MADHYA PRADESH HIGH COURT] The very same view was also taken by the coordinate bench of this tribunal in the case of Devender Kumar Gupta [2024 (9) TMI 210 - ITAT DELHI] In view of the aforesaid decision the revision jurisdiction assumed by the PCIT u/s 263 of the Act fails on this count also. Thus, revision order passed u/s 263 of the Act by the ld PCIT deserves to be quashed for more than one reason as detailed supra. Issues: Appeal against revision order u/s 263 of the Income-tax Act, 1961 for AY 2010-11; Delay in filing appeal; Assumption of revision jurisdiction by the Principal Commissioner of Income Tax (PCIT); Error in the original assessment by the Assessing Officer (AO) regarding Transfer Pricing order; Approval granted by Additional CIT u/s 153D; Legitimacy of revision order by PCIT.Analysis:The appeal in ITA No. 917/Del/2017 was filed against the order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Income-tax Act, 1961 for the assessment year 2010-11. The appeal was initially found to be time-barred by 629 days. However, the delay was condoned based on affidavits from the director and the Chartered Accountant advising against filing the appeal. The PCIT sought to revise the assessment framed by the Assessing Officer (AO) under section 143(3) read with Section 153C of the Act, citing errors related to Transfer Pricing order and revenue interest. The PCIT contended that the AO should have waited for the Transfer Pricing order before finalizing the assessment, leading to a prejudicial order. The PCIT's revision jurisdiction was challenged by the assessee on various grounds.The facts emerged from the events included the initiation of proceedings under section 153C of the Act, a search and seizure action, and the abatement of original assessment proceedings due to section 153C proceedings. The PCIT's revision jurisdiction was questioned based on the absence of fresh reference to the Transfer Pricing Officer (TPO) and the lack of mention of approval granted by the Additional CIT under section 153D. The tribunal referred to judicial precedents highlighting the importance of considering the approval granted by competent authorities before assuming revision jurisdiction. The tribunal concluded that the PCIT's revision order failed on multiple grounds, leading to the quashing of the revision order and allowing the appeals of the assessee in ITA No. 917/Del/2017 and ITA No. 6117/Del/2016.In summary, the tribunal held that the PCIT's revision order under section 263 of the Act was not justified due to procedural lapses and errors in the assessment process, ultimately leading to the quashing of the revision order and allowing the appeals of the assessee. The judgment emphasized the importance of following proper procedures and considering all relevant factors before invoking revision jurisdiction in tax matters.