TaxTMI 
TaxTMI 
2018 (5) TMI 1266
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.... petitioner filed return of income on 29.9.2015. Since the petitioner had entered into certain specified domestic transactions and was desirous of opting for safe harbour, the petitioner applied for such purpose in a prescribed format duly certified by the Chartered Accountant. Such application was filed along with the return itself. 3. Case of the petitioner is and to which no dispute is raised by the Revenue that the Assessing Officer did not raise any objection to the petitioner's application for safe harbour nor passed any order declaring that the petitioner had not validly opted for safe harbour. 4. The return of income filed by the petitioner was taken in scrutiny by the Assessing Officer. He issued a notice under section 143(2) of the Income Tax Act("the Act" for short) on 28.8.2015. In the course of such scrutiny assessment, the petitioner received various notices from the Assessing Officer and replied to the same. As per the normal assessment procedure, the last date for completing the assessment in case of the petitioner for the said assessment year 2014-2015 would be 31.12.2016. 5. On 8.12.2016, the petitioner wrote to the Assessing Officer and preempted any....
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....ent. Our attention was drawn to the sequence of events noted above. It was pointed out that at the fag end of the period for framing the assessment, the Assessing Officer had made the reference to the TPO on 13.12.2016 totally unknown to the petitioner. This was despite the petitioner's objection to any such reference raised in the petitioner's letter dated 8.12.2016. Under the circumstances, according to the petitioner, even when the TPO has not suggested any upward adjustment in price of the petitioner's specified domestic transactions, the order of the TPO is required to be quashed, failing which, the Assessing Officer could claim extended limitation for completing the assessment which has otherwise become timebarred. 12. On the other hand, learned counsel for the department opposed the petition contending that the Assessing Officer had acted on the CBDT circular no.3/2016 dated 10.3.2016 under which the Assessing Officer was required to make reference to the TPO under certain circumstances. Since the petitioner's case was covered by the said circular, reference was made. Counsel further submitted that the TPO has not made any upward adjustment of the price of....
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.... Amendment) Rules, 2015 with effect from 4.2.2015. Rule 10THA of the said Rules, specifies an 'eligible assessee' as under : "10THA The "eligible assessee" means a person who has exercised a valid option for application of safe harbour rules in accordance with the provisions of rule 10THC, and (i) is a Government company engaged in the business of generation, supply, transmission or distribution of electricity; or (ii) is a cooperative society engaged in the business of procuring and marketing milk and milk products." 18. Rule 10THB pertains to eligible specified domestic transaction and reads as under : "10THB The "eligible specified domestic transaction" means a specified domestic transaction undertaken by an eligible assessee and which comprises of : (i) supply of electricity; or (ii) transmission of electricity; or (iii) wheeling of electricity; or (iv) purchase of milk or milk products by a cooperative society from its members." 19. Rule 10THC pertains to safe harbour and reads as under : 10THC (1) Where an eligible assessee has entered into an eligible specified domestic transaction....
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.... furnish a Form 3CEFB, complete in all respects, to the Assessing Officer on or before the due date specified in Explanation 2 to subsection (1) of section 139 for furnishing the return of income for the relevant assessment year: Provided that the return of income for the relevant assessment year is furnished by the assessee on or before the date of furnishing of Form 3CEFB: Provided further that in respect of eligible specified domestic transactions, other than the transaction referred to in clause (Iv) of rule 10THB, undertaken during the previous year relevant to the assessment year beginning on the 1st day of April, 2013 or beginning on the 1st day of April, 2014 or beginning on the 1st day of April, 2015, Form 3CEFB may be furnished by the assessee on or before the 3lst day of March, 2016: Provided also that in respect of eligible specified domestic transactions, referred to in clause (iv) of rule 10THB, undertaken during the previous year relevant to the assessment year beginning on the lst day of April, 2013 or beginning on the lst day of April, 2014 or beginning on the lst day of April, 2015, Form 3CEFB may be furnished by the assessee on or befor....
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....ed by the assessee and cause a copy of the said order to be served on the assessee and the Assessing Officer. (7) For the purposes of this rule, (i) no order under subrule (4) shall be made by an Assessing Officer after expiry of a period of three months from the end of the month in which Form 3CEFB is received by him; (ii) the order under subrule (6) shall be passed by the Principal Commissioner or Commissioner or Principal Director or Director, as the case may be, within a period of two months from the end of the month in which the objection filed by the assessee under sub11 17 rule (5) is received by him. (8) If the Assessing Officer or the Principal Commissioner or the Commissioner or the Principal Director or the Director, as the case may be, does not pass an order within the time specified in subrule (7), then the option for safe harbour exercised by the assessee shall be treated as valid." 22. Rule 10THD of the said Rules lays down the procedure 21. From the above statutory scheme, it can be seen that in order to avoid the number of transfer pricing audits and prolonged disputes, section 92CB was inserted to the Act providing for Safe H....
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....HC were not satisfied and that therefore, despite the petitioner's application for safe harbour, the price indicated by the petitioner could be rejected. 22. Rule 10THD of the said Rules lays down the procedure for making application for safe harbour and consideration of such application by the revenue authorities. This rule being important, we have reproduced the said rule in entirety in this judgment. Under subrule( 1) of rule 10THD, an eligible assessee desiring to opt for safe harbour would furnish application in prescribed form to the Assessing Officer on or before the due date for furnishing the return. Under subrule( 2), on receipt of such an application, the the Assessing Officer would verify whether the assessee is an eligible assessee and the transaction in respect of which the option is exercised is an eligible specified domestic transaction before the option for safe harbour by the assessee can be treated to be validly exercised. Under subrule( 3), if the Assessing Officer has any doubt about the valid exercise of the option for the safe harbour by an assessee, he would require the assessee to furnish the information within the specified time. Under subrule (4), ....
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....g down such time limit. Subrule( 8) in fact, mandates that if either the Assessing Officer or the concerned competent authority does not pass the order within the time specified in subrule( 7), then the option for safe harbour exercised by the assessee shall be treated as valid. Subrule( 8) thus gives rise to a deeming fiction where in absence of any order passed by the Assessing Officer under subrule( 4) declaring the option exercised by an assessee as invalid, same shall be treated as valid. In fact, even if the Assessing Officer has passed such an order under subrule( 4) and the assessee objected to such order before the concerned authority within the time permitted and such authority fails to dispose of such objection within the time specified in clause(ii) of subrule( 7) of Rule 10THD, in such a case, the option exercised by the assessee shall be treated as valid. 25. In the present case, admittedly, after the petitioner exercised such an option, the Assessing Officer passed no order under subrule( 4) of rule 10THD declaring that the exercising of option was invalid. In terms of subrule( 7) and subrule( 8) of the said rule, therefore, the option exercised by the assessee wo....