TaxTMI 
TaxTMI 
TaxTMI 
2023 (6) TMI 260
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....unting to Rs.279457.28 crores. The Ld CIT(IT) further noticed that as per Instruction No.3/2016 dated 10-03-2016 issued by CBDT, the AO is mandatorily required to refer the matter of determination of Arms Length Price (ALP) of international transactions to the Transfer pricing Officer (TPO). The Ld CIT(IT) noticed that the AO has not referred the matter of determination of ALP of international transactions to TPO and hence, the AO has failed to follow the CBDT instruction No.3/2016 dated 10-03-2016, which has been issued by CBDT issued u/s 119 of the Act. Hence, the Ld CIT(IT) held that the impugned assessment order is erroneous and prejudicial to the interests of revenue as per clause (c) of Explanation 2 to sec. 263 of the Act. Accordingly, the Ld CIT(IT) initiated revision proceedings u/s 263 of the Act. After providing adequate opportunity to the assessee, the Ld CIT(IT) set aside the impugned assessment order and directed as under:- "6. The assessing officer is directed to make a reference to the TPO as stipulated in the instruction 3/2016 para 3.2 and pass assessment order in respect of the international Transactions based on the order of TPO as per law. The assessment orde....
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....determination of ALP to the TPO. 3.2 The Ld A.R further contended that the AO is required to get previous approval of the Principal Commissioner or Commissioner before referring the matter to the TPO. However, the CIT(IT), in his revision order, has directed the AO to refer the matter to the TPO. Further, as per paragraph 3.4 of the Circular, the AO must record his satisfaction that there is an income or a potential of an income arising and/or being affected on determination of ALP of an international transaction, meaning thereby, the AO has to record his satisfaction before referring the matter to TPO. He contended that the Ld CIT(IT) has circumvented above said jurisdictional requirements of recording satisfaction and also taking prior approval of CIT. It was also contended that the Ld CIT(IT) has extended the time limit for completion of assessment by passing the impugned revision order. 3.3 The Ld A.R placed his reliance on various case laws in support of various contentions raised by him. 4. On the contrary, the Ld D.R submitted that the case of Ld CIT(IT) is that the AO is required to refer the matter of determination of ALP to TPO as per the Instruction no.3/2016 issued b....
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....that the AO should refer the matter of determination of ALP of international transactions to TPO. For the sake of convenience, we extract below the above said instruction no.3/2016 issued by CBDT:- "InstructionNo.3/2016 F.No.500/9/2015-APA-II Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Foreign Tax and Tax Research Division-I APA-II Section New Delhi, dated10th March, 2016 Subject: Guidelines for Implementation of Transfer Pricing Provisions- Replacement of InstructionNo.15/2015-Regarding The provisions relating to transfer pricing are contained in Sections 92 to 92F in Chapter X of the Income-tax Act, 1961. These provisions came into force w.e.f. Assessment Year 2002-2003 and have seen a number of amendments over the years, including the insertion of Safe Harbour and Advance Pricing Agreement provisions and the extension of the applicability of transfer pricing provisions to Specified Domestic Transactions. In terms of the provisions, any income arising from an international transaction or specified domestic transaction between two or more associated enterprises shall be computed having regard to the Arm's L....
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....or one of the reasons for selection of a case for scrutiny is a TP risk parameter, then the case has to be mandatorily referred to the TPO by the AO, after obtaining the approval of the jurisdictional PCIT or CIT. 3.3 Cases selected for scrutiny on non-transfer pricing risk parameters but also having international transactions or specified domestic transactions, shall be referred to TPOs only in the following circumstances: (a) where the AO comes to know that the taxpayer has entered into international transactions or specified domestic transactions or both but the taxpayer has either not filed the Accountant's report under Section 92E at all or has not disclosed the said transactions in the Accountant's report Wed; (b) where there has been a transfer pricing adjustment of Rs. 1O Crore or more in an earlier assessment year and such adjustment has been upheld by the judicial authorities or is pending in appeal; and (c) where search and seizure or survey operations have been carried out under the provisions of the Income-tax Act and findings regarding transfer pricing issues in respect of international transactions or specified domestic transactions or both have b....
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....cing adjustment in an earlier assessment year that has been fully or partially set-aside by the ITAT, High Court or Supreme Court on the issue of the said adjustment shall invariably be referred to the TPO for determination of the ALP. 3.6 Since the provisions of Section 92CA of the Act, inter-alia, refer to the computation of the ALP of the international transaction or specified domestic transaction, it is imperative for the AO to ensure that all international transactions or relevant specified domestic transactions or both, as the case may be, are explicitly mentioned in the letter through which the reference is made to the TPO. In this regard, guidelines as under may be followed: (a) If a case has been selected for scrutiny on a TP risk parameter pertaining to international transactions only, then the international transactions shall alone be referred to the TPO; (b) If a case has been selected for scrutiny on a TP risk parameter pertaining to specified domestic transactions only, then the specified domestic transactions shall alone be referred to the TPO; and (c) If a case has been selected for scrutiny on the basis of TP risk parameters pertaining to both internati....