Where any person, being the assessee, has entered into an international transaction in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Principal Commissioner or Commissioner, refer the computation of the arm’s length price in relation to the said international transaction under section 92C to the Transfer Pricing Officer.
In a case where not only extent of shareholding was involved but also control exercisable in terms of material on record, matter was rightly referred to TPO under section 92CA. [First American Securities (P.) Ltd. v ACIT (2014) 52 taxmann.com 520 (Del)]
Reference to Transfer Pricing Officer, in absence of any proceedings pending before Assessing Officer, is unsustainable in law. [XL India Business Services (P.) Ltd. v ACIT (2014) 51 taxmann.com 549 (Del) (Trib)]
Under provisions of section 92CA, a reference to TPO for computation of arm’s length price in relation to international transactions is permissible only in course of assessment proceedings.
In case where a return is filed and is processed and no notice under section 143(2) thereafter is served on assessee within stipulated period, assessment proceedings under section 143 come to an end and matter becomes final.
Thus where on date of making reference to TPO, assessment proceedings under section 143 had come to an end and proceedings for assessment stood terminated, there was no occasion for Assessing Officer to have made a reference to TPO for determination of arm’s length price of international transactions in terms of section 92CA. Consequently, subsequent order passed by TPO determining adjustment to international transaction was a nullity in law and void ab initio. [Maximize Learning (P.) Ltd. v ACIT (2015) 54 taxmann.com 234 (Pune) (Trib)]
Assessee must be given an opportunity to be heard before reference to Transfer Pricing Officer. [Indorama Synthetics (India) Ltd v Addl. CIT (2016) 386 ITR 665 (Del)]
As per CBDT’s Instruction No. 3/2016 dated 10.03.2016, the AO is required to give an opportunity to the assessee to show cause why the reference should not be made to the TPO and thereafter pass speaking order while making a reference to the TPO. The failure to do so renders the reference void. [Alpha Nipon Innovatives Lid. v DCIT (Guj), www.itatonline.org]
In terms of section 92CA, failure to supply satisfaction note to assessee before making reference to him is at highest a mere irregularity, and it cannot render reference to him void ab initio. [S.P. Vitamins (India) Ltd v DCIT, Central Circle, Karnal (2016) 389 ITR 385 (P&H) (P&H)]