|CORAM:||C. M. Garg (JM), Pramod Kumar (AM)|
|GENRE:||Domestic Tax, Transfer Pricing|
|CATCH WORDS:||Reopening, Transfer Pricing|
|DATE:||November 25, 2014 (Date of pronouncement)|
|DATE:||December 3, 2014 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 147: After the expiry of the time limit for issue of s. 143(2) notice, the AO has no jurisdiction to make a reference to the TPO. The TPO's report cannot form the basis for reopening the assessment|
The assessee filed the return of income of 29th October 2007, and that the time limit for issuance of notice, under section 143(2), selecting the case for scrutiny assessment expired on 30th September 2008. It is also an admitted position that it was only on 24th December 2009 that the Assessing Officer made a reference, under section 92CA(3), to the Transfer Pricing Officer for determination of arm’s length price of the international transactions entered into by the assessee with its associated enterprises. This reference to the TPO, and the resulted proceedings before him, culminated in the order dated 15th October 2010 proposing an arm’s length price adjustment of Rs 2,80,91,619. As there were no proceedings pending before the Assessing Officer, nor was, for that purpose, the case of the assessee was even picked up for scrutiny assessment under section 143(3), the Assessing Officer proceeded to reopen the assessment, which had by then achieved finality, by reopening the assessment. On a challenge by the assessee to the reopening HELD by the Tribunal:
A reference to the Transfer Pricing Officer, in the absence of any proceedings pending before the Assessing Officer, is indeed unsustainable in law. As held by Hon’ble Karnataka High Court, in the case of the CIT Vs SAP Labs Pvt Ltd [judgment dated 25th August 2014 in ITA Nos. 842 of 2008 and 339 of 2010] , unless an income tax return, in respect of which notice under section 143(2) can be issued, is pending before the Assessing Officer, a reference to the Transfer Pricing Officer cannot be made by the AO. As to what is the relevance of an order passed by the Transfer Pricing Officer’s order, in a situation in which the reference itself is unsustainable in law, we find guidance from Hon’ble Bombay High Court’s judgment in the case of CWT Vs Sona Properties (327 ITR 592). That was a case in which the Assessing Officer had made a reference to the Departmental Valuation Officer after the end of the assessment proceedings. Their Lordships held that such a reference could not have been made under the scheme of the Act because the assessment proceedings had come to an end before the point of time when such a reference was made, and as such the reference itself was legally invalid. The stand of the revenue was that even if reference to the DVO is to be held to be invalid, the DVO’s report constituted information and as such it could be a good basis for coming to the conclusion that wealth has escaped assessment. Rejecting this plea, Their Lordships observed that, “a report called by an authority having no jurisdiction would be a nullity at law and consequently proceedings based solely on such report considering the requirement of s.17 would be illegal and will have to be quashed” . In effect thus, it is held that when reference itself is invalid, the report received as a result of the said reference cannot constitute material for forming the belief that an income or wealth tax escaped assessment. This precisely applies to the situation before us. There is no contrary decision by any of the Hon’ble Courts above, including the Hon’ble jurisdictional High Court. However, this binding judicial precedent is distinguished by the authorities below on the ground that while DVO’s report is not binding on the Assessing Officer, the TPO’s order is binding on the Assessing Officer. That aspect of the matter, however, is wholly irrelevant inasmuch the reassessment proceedings were quashed in Sona Properties’ case (supra) for the short reason of illegality for reference rather than on the consequence of the report obtained as a result of the reference. We are not inclined to accept the plea that the material facts of this case vis-à-vis that of Sona Properties’ case, so far as relevant to the principle of law laid down by Hon’ble Bombay High Court, are any different. The distinction being sought to be made out by the revenue authorities is devoid of legally sustainable merits.
right decision ITAT had taken, ie you cannot reopen an assessment when your jurisdiction is non est means when AO’s jurisdiction is eclipsed by sec 143(2)(ii)… ;
when once the AO’s jurisdiction is dead vide 143(2)(ii), the AO shd desist from issuing illegal notices and illegal litigation is promoted by revenue that need to be curbed by the hon courts by leying vicarious liability fines on the relevant authorities, for they resort to such for some obvious reasons is a well known fact in income tax circles as every tax payer says.
So hon SC should give necessary directions to government that wasting public funds in unnecessary litigation might get them into constitutional court ire and hon courts would not hesitate to fine exemplary fines on any government or ts agencies, that way one need to curb the unreasonable tendencies of the authorities.
it is to be noted by AO whether he has jurisdiction on an assessment per se the legislative intent, that way in scrutiny matters falling u/s143(2), he is bound to read sub section of 143(2)(ii) that provides limitation on the AO’s jurisdiction when an ROI after a certain date the AO concerned loses his jurisdiction, as it is clear the parliament wanted the revenue to act within his prescribed time limit if not he loses jurisdiction ,irrespective whether government loses revenue or not is the principle.
Parliament is not interested in any other reasons advanced by the department when department fails in its due diligence of time essence on every assessment; after time given is substantial enough there is no need to extend more time to revenue is the substance.
if tjudiciary he AO fails he failed and revenue equally failed, that way parliament itself establishes wednesbury principle on the revenue ie revenue’s action after specified period is unreasonable on the tax payer, after all parliament need to countenance Art 265 – taxation jurisprudence per se constitution;
so the constitution entrusted with constitutional courts the responsibility to properly assess, whether the authorities under government function with propriety or not?
lf not the judiciary declares ultra vires as the act of the authority lacks vires on the issue and thus declares null and void the very action of the authority, that way the citizens’ interests are duly protected by judiciary, in that way only if there are two opinions that which is favorable to the assessee shall be accepted came into being.