TaxTMI 
TaxTMI 
2014 (5) TMI 112
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....g certain claims made on research unit after setting off brought forward losses from earlier years. The CIT-1, Visakhapatnam called for records and issued a show cause notice to the assessee why the assessment completed by the A.O. should not be set aside on the reason that the order passed was erroneous and prejudicial to the interest of the revenue. The Ld. CIT considered two issues for arriving at the decision of order being erroneous and prejudicial which are discussed in para 1.5 onwards as follows: "1.5 After examining the material on record, the relevant provisions of the statute, the Board circular issued containing direction to the A.O. in the matter of reference to Transfer Pricing Officer in respect of International transactions and the submissions made Learned A.R., I am satisfied that the order passed u/s 143(3) was erroneous and prejudicial to the interest of the Revenue. 1.5.1 As regards the exemption allowable under sec.10B of the Act, the provisions of sub-section (3) of section 10B stipulate as under: "This section applies to the undertaking if the sale proceeds of articles or things or ....
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....oard instructions, therefore, his action has become erroneous and prejudicial to the interest of the revenue. The Hon'ble ITAT special bench in the case of Aztech Software & Tech Ltd. v. Asstt. CIT [2007] 107 ITD 141 (Bang.)(SB) in rendering the judgment in context of S. 92CA (1) vis-a-vis Board circular (Instruction No. 3 of 2003) dated 20-05-2003 observed "The assessing officer has only to look at the aggregate value of International transactions disclosed by the assessee in the Audit report and then follow the directions of the CBDT. The assessing officer, therefore, is left with a very limited role u/s 92CA(1)". This way the Hon'ble Special Bench has given a finding of the mandatory nature of reference to the TPO vis-a-vis the provisions of S.92CA of the I.T. Act. The contention of the assessee that any direction in this regard by CIT would amount to interference with the jurisdiction of the A.O is ill founded. The case laws relied upon does not fit into facts of the case. Here is a case where the A.O failed to follow Board Circular and judicial view in several cases is that Board Circular is binding on A.O. as there is a failure on the part of the A.O. in not following the Boa....
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....e the order of the WTO directing him to refer the question of valuation to the Valuation Officer, it can never be said that the CWT had committed any error in exercise of his powers which could have warranted interference by the Tribunal."' 1.6 In the light of the above, I am of the view that the assessment made by the A.O. is not only erroneous but also prejudicial to the interest of the revenue and therefore, I direct the Assessing Officer to refer the question of determination of Transfer Price to the TPO in terms of the Board Circular (instruction no.3) dated 20.5.2003 and finalise the assessment de novo keeping in view the issues considered herein above." 3. Accordingly, the Ld. CIT considered the order as erroneous and prejudicial to the interest of the revenue and therefore directed the assessing officer to refer the question of determination of transfer price to the transfer pricing officer in terms of the Board instruction no.3 dated 20.5.2003 and finalized the assessment denovo keeping in view the issues considered therein the order. The assessee is aggrieved on the above order of the CIT questioning the jurisdiction in setting aside the order u....
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.... the case of I Gate Global Solutions Ltd. v. Asstt. CIT [2008] 24 SOT 3 (Bang.) (URO), wherein considering the use of words 'enhancement of income' due to determination of arms length price by the transfer pricing officer, the ITAT held that where assessee itself computed arms length price and disclosed income on the basis of said report assessee was entitled to deduction u/s 10A of the Act in respect of income declared in return. It was submitted that there is no contrary view available so far on this issue and since the assessing officer has correctly allowed the deduction on the income including the suomoto addition made by the A.O., the opinion of the CIT(A) is perse not correct and therefore relying on the following law, it was submitted that the order is bad in law. (1) Malabar Industrial Co. Ltd. v. CIT 243 ITR 83 (2) CIT v. Max India Ltd. [2007] 295 ITR 282 (3) Spectra Shares & Scrips (P.) Ltd. v. CIT 6. The Ld. D.R. however submitted that there is no issue on merits as the Ld. CIT considered only the order to be erroneous and prejudicial on the two issues and as the assessee admitted that on the....
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....er section 92CA be made to the TPO. [Para 11] It was a common case that the CBDT has issued this Instruction in exercise of its powers under section 119. Special Bench of the Tribunal in the case of Aztec Software & Technology v. Asstt. CIT [IT. Appeal No. 826 of 2007, dated 21-10-2008] has upheld the validity of this Instruction. While doing so, the Special Bench has relied upon the judgment of this Court in Sony India (P.) Ltd. v. CBDT. The contention of the revenue before the Tribunal was that the aforesaid view of the Special Bench was erroneous and rather contrary to the decision of this Court in Sony India (P.) Ltd. (supra)/ [Para 12] The Tribunal having dismissed the assessee's submission, concluded that once validity of CBDT Circular was upheld, as per the said circular the Assessing Officer was duty bound to refer the matter to the TPO having regard to the purpose of Specialized Cell created by the Department to deal with complicated and complex issues and since this channel was not resorted to by the Assessing Officer in the instant case, the Commissioner was right in passing the order under section 263. [Para 13]  ....
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....e has formed any opinion in allowing the deduction of section 10B on the suomoto income/adjustment made by the assessee as seen from the computation of income. This amount was added in the computation of income only while arriving at the income on the STPI unit. Obviously, this working is before the A.O. However, there is nothing on record that A.O. has applied his mind to the issue as at the point of time there was dispute about the allowance and non-allowance of deduction under section 10B of the Act on the suomoto adjustment. Be that as it may as rightly pointed out by the Ld. CIT D.R., this issue was not decided on merits by the CIT at all. There is no direction given to the A.O. to do in a particular manner. The issue was analysed only in arriving at the reasoning to establish that the order is erroneous and prejudicial. He simply set aside the order with a direction to refer the matter to the TPO first and then complete the assessment keeping in mind the above issues. It can not be stated that the Ld. CIT has decided the issue on merits. Therefore, we need not consider the contentions of the assessee to decide the issue on merits as well. Since the order is to be upheld on th....