Case Law Details
Bank of India Vs JCIT (ITAT Mumbai)
Conclusion: PCIT rightly directed Bank of India’s case to TPO for determination of arm’s length price (ALP) in relation to international transactions and specified domestic transactions under revision proceedings as it was binding on AO as per the CBDT Circular in force at that point of time under Section 92CA to refer this issue to the TPO even though he might be of the opinion that the international transactions carried by assessee were within arm’s length price.
Held: During revision proceedings, PCIT came across that assessee had made large international transactions during this year and AO failed to refer this case to TPO even though it was a fit case to be referred to the TPO as per the CBDT Circular in force at that point of time under Section 92CA for computation of arm’s length price in relation to the said international transactions. PCIT issued show cause notice wherein it was brought to the notice of assessee that AO failed to refer the case to the TPO in accordance with the CBDT Circular which was mandatory for AO and non-reference to the TPO amounted to making assessment without proper inquiry and investigation as required by law. It was held that the transactions undertaken by assessee were domestic as well as international transactions and AO should have referred the international transactions to the TPO to verify the international transactions whether the transaction were at arm’s length. Since AO failed to follow the due procedure, and the fact that the Revenue Department created specialized cell to deal with the complicated and complex issues arising out of transfer pricing mechanism, the assessment by this special officer (TPO) was an additional assessment of ‘ALP’ of international transactions and it could be assessed separately without disturbing the regular assessment carried out by AO under Section 143(3). Therefore, AO was directed to refer the case to TPO and any adjustment recommended by the TPO alone may be assessed separately and merge the same in the draft assessment order if there was any adjustment to be made, it may be assessed to tax as per law.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal is filed by the assessee against the order passed by Principal Commissioner of Income Tax -2 (in short ‘PCIT’) under Section 263 of the Income Tax Act, 1961 (in short ‘the Act’)for assessment year 2014-15 dated 27.03.2018.
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