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Income Tax Appellate Tribunal, “J” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI SANDEEP SINGH KARHAIL, JM
These are four appeals filed by the assessee for A.Y. 2012-13, 2017-18, 2018-19 & 2019-20 against the revisionary order passed by the CIT(TP)-4, Mumbai [ the Ld CIT ] on 30.03.2023, 29.03.2023, 31.03.2023
The assessee aggrieved with the revisionary orders is in appeal before us for all these four Assessment years. It was stated that facts in all these four years are similar as similar TP order u/s 92CA (3) were passed by the ld TPO and Similar revisionary order are passed by the ld CIT.
The brief fact of the assessment year 2012-13 shows that the assessee dealt in Pharmaceutical products, manufacturing and export of various Pharmaceutical products.
Assessee filed its return of income on 21.06.2023 declaring total income of ₹ 1,63,90,590/-. This return of income was accepted under section 143 (1) of the Act.
It was found that assessee has engaged in export sale and import from its associated enterprises. Therefore, the case was reopened by issuing notice under section 148 of the Act. In response to that notice, assessee filed return of income on 9/4/2019 declaring total income of ₹ 16,390,590.
As during the year the assessee has entered into several international transactions with its associated enterprises, however it did not file form no 3 CEB. The assessee was given a show cause notice on
It was also found during the course of assessment proceedings that the assessee has received ₹ 49,375,458 from Alpha Pharma Company. The reference was made to FT and TR division on 22/12/2017. As per letter dated 9/4/2018 received from FT and TR division it is reported by the competent authority of Seychelles that Alpha Pharma
Accordingly total income of the assessee was computed under section 143 (3) read with section 147 and 144C (3) of the act by order dated 6/4/2021 at ₹ 65,766,050/– as per normal computation of income and the addition to the book profit was also made of ₹ 49,375,458. Therefore, addition under section 68 was made in the normal computation of total income as well as in computation of profit under section 115JB of the act.
The Ld. CIT (TP)-4, Mumbai examined the case record and observed that the assessee has not filed form no. 3CEB relating to international transaction
Serial Nature of Name of Amount of number transaction associated international enterprises transaction (rupees) 1 Receipt of Alpha Pharma 4,95,66,178/– share group Ltd Cecil is capital 2 export general Life 6,56,15,453 sales science distributors GmbH 3 export Jinan 37,73,085 sales pharmaceutical company Ltd 4 import Jinan 42,08,526 purchases pharmaceutical company Ltd
The learned CIT noted that the case was reopened by issuing notice under section 148 of the act and reference was made to the learned transfer pricing officer in terms of Para number 3.3 of the instruction number 3/2016 and survey findings were also shared
i. During the course of the transfer pricing assessment the assessee has submitted all the information and documents called for to the best of its knowledge believing it to be true. ii. The learned transfer-pricing officer was fairly informed of the transaction being undertaken and reference being made in this regard. iii. Therefore it is believed by the assessee that the learned transfer pricing officer has passed the order after making inquiries and due consideration of the information available as the order of the learned transfer pricing officer is without making any adjustment to the arm‟s- length price of the international transaction.
The learned CIT found that no details were ever called for by the learned transfer pricing officer with regard to the transaction at serial number 2, 3 and 4 stated in the above table except for the transaction
Assessee is aggrieved with that order and is in appeal before us.
The learned authorized representative referred to the provisions of section 263 of the income tax act and submitted that any order passed by the learned transfer-pricing officer is subject to revision under section 263 of the income tax act with effect from 1/4/2022. Therefore, any order passed after that date could only be revised by the learned principal chief Commissioner or chief Commissioner or principal Commissioner or Commissioner under section 263 of the income tax act. Therefore any order passed under section 92CA (3) of the act by the transfer pricing officer prior to 1/4/2022 is not subject to the revision proceedings. Thus, the impugned revisionary order revising the TP Assessment Order passed u/s 92CA (3) of the Act prior to that, date [prior to 1/4/2022] is invalid.
He referred to the decision of the coordinate bench in case of i. ITA number 2895/M/2014 for assessment year 2009 – 10 in case of Metacaps Engineering and Mahindra construction company (JV) versus the Commissioner of income tax – 18, Mumbai
ii. He further referred to the coordinate bench decision in case of Narayan Tatu Rane (ITA number 2690/M/2016 dated 6/5/2016) referring to paragraph number 19 wherein it has been also held that the said explanation does not apply retrospectively. iii. He further referred to the decision of the coordinate bench in case of ITA number 3125/M/2017 in case of Indus best hospitality and Realtors private limited (ITA number 3125/M/2017 dated 19/1/2018) wherein in paragraph number 23 referring to the several judicial precedents including referred to above it was held that the above explanation 2 to section 263 of the act is prospective in nature. iv. He further relied upon the decision of the Reliance Money Infrastructure Ltd versus v. Reference was also made to the decision of the coordinate bench in case of ITA number 3469/M/2010 dated 6/11/2015 in case of A V industries wherein in paragraph number 11 it was stated that when the revisionary order was passed on 25/3/2010 and it was held that the amendment did not apply to this case. vi. The learned authorized representative further relied upon the decision of ITA number 1056/PU when/2016 dated 27/6/2019 in case of Shruti Rahul Mane wherein the revisionary order dated 10/3/2016 was held to be not covered by the above amendment. vii. Further reference was made to ITA number 932/PU when/2016 dated 7/3/2019 in case of Mr. Sunil C Bhaybhang wherein in paragraph viii. He further referred to the decision of the coordinate bench in case of ITA number 3391/del/2018 dated 8/1/2019 in case of Arun Kumar Garg HUF l wherein following the above- referred decision it was held that the revisionary powers invoked under section 263 of the act are not rightly invoked. ix. Reference was made to the decision of the coordinate bench in case of ITA number 4341 and 4342/del/2019 dated 18/12/2019 in case of Brahma Centre development private limited wherein in paragraph number 13 the same reference was made and following the earlier judgments referred it was held that the provisions of section explanation 2 of section 263 of the income tax act does not apply retrospectively.
The learned departmental representative vehemently submitted that i. Decision of the honourable madras High Court in case of CIT versus N Sasikala (2023) 146 taxmann.com 149 (Madras) specifically covers the issue in favour of the revenue where the learned CIT invoked revisionary powers under section 263 of the income tax act issuing notice dated 18/1/2002 to revise the assessment order dated 20/3/2000 wherein it was held that the assessment order was erroneous and prejudicial to the interest of the revenue and in that case the decision of the coordinate bench was reversed.
ii. He further submitted that the power of revision has been granted to the authority under section 263 of the income tax act as and when the records are examined. Therefore, there is no iii. He submitted that the provision does not speak that transfer pricing assessment order passed only after 1/4/ 2022 would be subject to revision. iv. He further stated that the decisions relied upon by the learned authorized representative does not have any relevance to the case before the bench. He specifically referred to the facts of the case and stated that the learned transfer- pricing officer has failed to look into the details available and therefore it is merely a case of failure to make any enquiry. v. He further submitted that the learned revisionary authority has not invoked the explanation 2 of section 263 of the income tax act and therefore not all these decisions apply to the facts of the case. vii. He further submitted that it is to be seen as on the date of examination of the records by the respective revisionary authority and not the dates of the order, which is subject to revision. viii. In the result, it was submitted that there is no merit in the appeal of the assessee as assessee does not want to state anything on the facts and merits of the case. Nothing is also submitted before the learned CIT.
We have carefully considered the rival contention and perused the orders of the lower authorities. As per provisions of section 263 of the income tax act several authorities are authorized to „call for and examine‟ the „record of any proceedings‟ under the income tax act and if they consider that any order passed therein by the respective authorities including
“4. Considering the facts and circumstances of the case, the assessee submission and documents furnished electronically, the value of the international transaction (IT) with a in regard to ALP, are not been disturbed.”
Thereafter the learned transfer-pricing officer noted that assessee has not submitted form number 3CEB for the year under consideration. There was no reference that how transactions of export sales, import were benchmarked by the assessee by adopting which method, and how ALP of such transactions was determined.
Thus, it is correctly held by the learned principal Commissioner of income tax that the TPO has passed the order without taking any cognizance of making
It is also the fact that the learned CIT (TP) did not invoke the provisions of explanation 2 of section 263 of The Income Tax Act because of the reason that the order passed is without making any enquiry and therefore such an order is erroneous and prejudicial to the interest of revenue as there was no case to consider it under the deeming fiction of explanation 2 of that section. It is a case complete absence of inquiry in any manner. Therefore, it is erroneous and prejudicial to the interest of revenue u/s 263(1) itself.
Coming to the various judicial precedents cited by the learned authorized representative those are merely on the issue whether the explanation 2 introduced under section 263 of the income tax act applies prospectively or retrospectively. Before us that are not the issue, therefore, those judgments do not help the case of the assessee.
a. the date on which the revisionary authority examined the record, the order of the transfer pricing officer was not forming the part of such record or b. The show cause notice is issued to the assessee prior to 1/4/ 2022, when revisionary authority was not authorized to revise the order of the learned transfer-pricing officer.
Further explanation 1 (a) to section 263 of the Act is also amended with effect from 1/4/2022 wherein the order passed by the learned transfer pricing officer is also included and in sub clause (iii) the order under section 92CA by the transfer pricing officer is included. Therefore, even if such order is passed by the transfer pricing Officer prior to 1/4/2022, but is available before the assessing officer passing the draft assessment order or final assessment order and same is also part of the record at the time of examination by the learned CIT (TP),
The judicial precedents cited are discussed and considered as under:-
i. In Metacaps Engineering and Mahindra construction (ITA number 2895/M/2014 dated 11/9/2017) the assessment order was passed on 29/11/2011 for assessment year 2009 – 10. The revisionary order was passed under section 263 of the income tax act on 28/2/2014, which was prior to insertion of explanation 2 of section 263, which was introduced with effect from 1/6/2015. Therefore, in that case the revisionary order was passed prior to the amendment and still during the course of hearing, the learned departmental representative was supporting the revisionary order by invoking the explanation 2 which was not there on the statute book. iii. The decision of the coordinate bench in case of Indus Best hospitality and Realtors private limited is also with respect to that for assessment year 2012 – 13, the introduced explanation 2 is prospective in nature and therefore would not apply. Introduction of explanation 2 and its invocation is not an issue before us. iv. All other decisions cited before us are also on similar line.
Further when the proposed amendment was made to the provisions of section 263 of the income tax act in the „Notes On Clauses‟ it is mentioned that :-
Sub-section (1) in the said section provides that the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceedings under the Act, and if he considers that any order passed by the Assessing Officer under the Act is erroneous in so far as it is prejudicial to the interests of revenue, he may pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment, after making or causing to be made any such inquiry as he deems necessary.
It is proposed to provide that in addition to the existing provision, the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call
It is further proposed to amend clause (a) of Explanation 1 to the said sub-section also to include an order under section 92CA by the Transfer Pricing Officer for the purposes of the said section.
It is also proposed that the clause (c) of the Explanation 1 to the sub-section (1) of the said section shall provide that where any order referred
It is also proposed to amend the Explanation 2 to the sub-section (1) to make it applicable to an order passed by the Transfer Pricing Officer also. It is also proposed to insert Explanation 3 in the sub- section (1) of the said section to define the expression “Transfer Pricing Officer”.
These amendments will take effect from lst April, 2022.”
On reading the notes on clauses also, it is apparent that the income tax act authorizes the authority to revise the order if at the time of examination, such orders are on record. Thus, the date of passing of
Further if we take a view as canvassed by the learned authorized representative that any order passed by the learned transfer pricing officer on or after 1/4/2022 only can be revised, perhaps it will tantamount to putting the powers given to the revisionary authority in abeyance till that time. If we agree to such a view than, we are putting the powers of the revisionary authority in abeyance for further, at least 11 months. Therefore, such a view deserves to be rejected at threshold.
As no pleadings are made on the merits of the case, we do not have any hesitation in holding that the learned PCIT (TP) is correct in holding that the order of the learned transfer pricing officer passed on
Accordingly, ITA number 2002/MUM/2023 filed by the assessee for assessment year 2012 – 13 against the revisionary order passed under section 263 of the income tax act is dismissed.
In ITA number 2003/MUM/2023 assessee is challenging the revision order passed by the learned Commissioner of income tax (TP) – 4, Mumbai dated 29/3/2023 wherein it has been held that the transfer pricing assessment order passed under section 92CA (3) for that assessment year on 27/1/2021 without examination of the arm‟s-length price of the international transaction of export sales and import purchases is erroneous and prejudicial to the interest of revenue.
In ITA number 2004/MUM/2023 the assessee has challenged the order under section 263 of the
ITA number 2005/MUM/2023 for assessment year 2019 – 20 is preferred by the assessee challenging the correctness of the revisionary order passed under section 263 of the income tax act on 31/3/2023 wherein it has been held that the transfer pricing assessment order passed under section 92CA (3) on 18/1/2022 is erroneous and prejudicial to the interest of the revenue as the learned transfer pricing officer failed to examine the arm‟s-length price of international transaction of export sales.
Facts and circumstances of all these above three appeals are identical to ITA number 2002/M/2023. The arguments of both the parties also remain the
In view of our decision in ITA number 2002/M/2023, we have categorically held that the learned CIT (TP) has correctly invoked the powers under section 263 of the income tax act and the order passed by him for revision of the transfer pricing assessment order does not suffer from any infirmity. Therefore, for the same reasons given by us in that appeal, we also confirm the order of the learned CIT TP passed under section 263 of the income tax act for all these three assessment years. Accordingly, appeals of the assessee for assessment year 2017 – 18, 2018 – 19 and 2019 – 20 are also dismissed.
In the result all the four appeals filed by the assessee are dismissed.
Order pronounced in the open court on 29.11.2023.