DCIT, AAYAKAR BHAVAN CHURCHGATE, MUMBAI V. IIFL FINANCE LTD, THANE, MUMBAI

ITA 4318/MUM/2024

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The appeals by the Revenue challenged the jurisdiction of the NFAC in deciding appeals related to transfer pricing adjustments for the assessment years 2010-11 and 2012-13. The Tribunal found that the NFAC did not have jurisdiction over these appeals as per the CBDT's Circular and notification, which specified that such cases should be handled by the Commissioner of Income Tax (Appeals), Mumbai. The Tribunal admitted the additional ground raised by the Revenue regarding jurisdiction and set aside the orders passed by the NFAC, restoring the appeals to the appropriate CIT(A) for a fresh decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33374 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Other Referred Cases: NTPC vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AJAY CHANDRA
• Assessee Lawyers: PRITESH MEHTA
• Keywords: Set aside; Transfer pricing; International transaction; Recovery proceedings
• Section: 143(3); 142(1); 143(2); 250; 246A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.4159/MUM/2024 ITA No.4318/MUM/2024 (Assessment Year 2010-11) (Assessment Year 2012-13) DCIT – 4(2)(1), Room No.640, Aayakar Bhavan Mumbai – 400020 ............... Appellant v/s IIFL Finance Ltd., IIFL House Sun Infotech Park Road No.16V B-23, MIDC Thane Wangle Estate, Thane – 400604, Maharashtra PAN : AABCI0745G ……………… Respondent Assessee by : Shri Pritesh Mehta Revenue by : Shri Ajay Chandra, CIT-DR Date of Hearing – 02/04/2025 Date of Order - 03/04/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The Revenue has filed the present appeals against the separate impugned orders dated 21/06/2024 and 27/06/2024, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment years 2010-11 and 2012-13, respectively. ITAs No.4159 & 4318/Mum/2024 (A.Ys. 2010-11 & 2012-13) 2 2. In both appeals, the Revenue has raised additional ground, vide application dated 07/01/2025, challenging the jurisdiction of the National Faceless Appeal Centre (“NFAC”) in deciding the appeals by the assessee, which involve grounds pertaining to transfer pricing adjustments. 3. Since the issue raised by way of additional ground is a legal issue, which can be decided on the basis of the material available on record, therefore, the same is admitted in view of the ratio laid down by the Hon’ble Supreme Court in NTPC vs. CIT, reported in (1989) 229 ITR 383 (SC). Further, as the issue raised by the Revenue vide additional ground is a jurisdictional issue, which goes to the root of the matter, therefore, we are considering the same at the outset. 4. During the hearing, the learned Departmental Representative (“learned DR”) submitted that in its appeals before the learned CIT(A), the assessee raised grounds challenging the addition made by the Transfer Pricing Officer (“TPO”) vide order passed under section 92CA(3) of the Act. The learned DR, by referring to the notification dated 13/10/2022 issued by the Central Board of Direct Taxes (“CBDT”), submitted that all the cases where order has been passed by the TPO and one or more grounds of appeal relates to the arm’s length price under Chapter-X of the Act, the designated Income Tax Appellate Authority in the Mumbai region is Commissioner of Income Tax (Appeals)-55 – 58, Mumbai. The learned DR also placed reliance upon the Circular dated 06/10/2022 issued by the CBDT, clarifying that all the appeals under section 246A of the Act, pending or instituted on or after 25/09/2020, shall be completed under the Faceless Appeal Scheme, 2021, except, inter-alia, the ITAs No.4159 & 4318/Mum/2024 (A.Ys. 2010-11 & 2012-13) 3 appeals against assessments involving arm’s length price of international transaction under Chapter-X of the Act. Accordingly, the learned DR submitted that the learned CIT(A), NFAC, had no jurisdiction to pass the impugned orders in the present case, as the assessee’s appeals involved issues pertaining to transfer pricing adjustment. 5. On the contrary, the learned Authorised Representative (“learned AR”) submitted that even after the CBDT’s Circular dated 06/10/2022, the learned CIT(A), NFAC, issued three notices, which were duly responded to by the assessee. Objecting to the additional ground raised by the Revenue, the learned AR submitted that a jurisdictional issue cannot be raised by the Revenue to the prejudice of the assessee, and the Revenue has to follow the prescribed procedure. The learned AR further submitted that the Revenue has made a full recovery of tax due, along with interest, on the additions made vide assessment order, and there is no outstanding demand in respect of the years under consideration. 6. We have considered the submissions of both sides and perused the material available on record. In the present case, the assessee is engaged in the business of stockbroking and is a member of the National Stock Exchange of India Ltd and the Bombay Stock Exchange. The return filed by the assessee for the assessment years 2010-11 and 2012-13 was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. It is an undisputed fact that pursuant to the reference by the Assessing Officer (“AO”) under section 92CA(1) of the Act, the TPO proposed transfer pricing adjustments vide order passed under ITAs No.4159 & 4318/Mum/2024 (A.Ys. 2010-11 & 2012-13) 4 section 92CA(3) of the Act for both the assessment years. Accordingly, in conformity, the AO passed the assessment orders under section 143(3) of the Act, inter-alia, incorporating the transfer pricing adjustments proposed by the TPO. There is also no dispute amongst the parties that in its appeals before the learned CIT(A), the assessee raised grounds challenging the transfer pricing adjustments made by the AO/TPO. In the present case, it is pertinent to note that the appeals were instituted by the assessee before the learned CIT(A) on 10/04/2014 and 31/05/2016 for the assessment years 2010-11 and 2012-13, respectively. Thus, it is evident that both appeals were filed by the assessee before the learned CIT(A) prior to the introduction of the Faceless Appeal Scheme, 2020. 7. We find that in the exercise of the powers conferred under section 250(6B) of the Act, the CBDT introduced the Faceless Appeal Scheme, 2020, vide notification issued on 25/09/2020. The said scheme was later superseded by the Faceless Appeal Scheme, 2021, vide notification dated 28/12/2021. We find that vide Circular dated 06/10/2022, the CBDT clarified that all the appeals under section 246A and/or under section 248 of the Act, pending or instituted on or after 25/09/2020, shall be completed under the Faceless Appeal Scheme, 2021, except, inter-alia, the appeals against assessments and penalties involving arm’s length price of international transaction or specified domestic transactions under Chapter-X of the Act. We find that vide the notification dated 13/10/2022, the CBDT directed that the Commissioner of Income Tax (Appeals), Mumbai shall exercise powers and perform the functions in respect of the appeals arising under section 246A and section 248 ITAs No.4159 & 4318/Mum/2024 (A.Ys. 2010-11 & 2012-13) 5 of the Act in all cases where the order has been passed by the TPO and one or more grounds of appeal relates to arm’s length price under Chapter-X of the Act. Therefore, from a careful perusal of the afore-noted Circular and notification issued by the CBDT, it is evident that even after implementation of the Faceless Appeal Scheme, 2021, the jurisdiction to decide the appeals in cases where order has been passed by the TPO and one or more grounds of appeal relates to transfer pricing adjustments under Chapter-X of the Act has not been transferred to the learned CIT(A), NFAC and the same remained with the learned CIT(A) as per the old regime. 8. However, in the present appeals, it is evident from the record that the impugned order for the assessment years 2010-11 and 2012-13 were passed by the learned CIT(A), NFAC, which we find to be completely contrary to the Circular and notification issued by the CBDT, and thus, is without jurisdiction. In the present case, it is undisputed that the Revenue is aggrieved against the orders passed by the learned CIT(A) for the years under consideration and has raised the grounds challenging the deletion of addition/adjustments on merits. Since the Revenue is in appeal before us, the Rule 11 of the ITAT Rules, 1963 permits the Appellant to raise additional grounds of appeal with the leave of the Tribunal. Further, as noted above, the Hon’ble Supreme Court in NTPC vs. CIT (supra) also held that the legal issue, which can be decided on the basis of the material available on record, can be raised at any stage of the proceedings. Thus, we do not find any embargo in the Act or the Rules, which prohibits the Revenue, being an Appellant before us, to raise any jurisdictional issue. Further, it is pertinent to note that even though the ITAs No.4159 & 4318/Mum/2024 (A.Ys. 2010-11 & 2012-13) 6 learned CIT(A) functions under the administrative control of the CBDT, Department of Revenue, Ministry of Finance, its orders are appealable at the instance of both the assessee as well as the Revenue before the Tribunal under the Act. At this stage, it is further pertinent to note that the Revenue is not challenging the improper exercise of jurisdiction by the AO/TPO, and rather it is challenging the improper exercise of jurisdiction by the learned CIT(A), NFAC, in passing the impugned orders. Therefore, we are of the considered view that merely because the Revenue is in appeal before us, the same would not restrain it from challenging the improper exercise of jurisdiction by the learned CIT(A). Accordingly, we do not find any merits in the plea raised by the learned AR that the jurisdictional issue cannot be raised to the prejudice of the assessee in the present case. Further, even though the assessee has paid all the taxes and there is no outstanding demand in respect of the assessment years under consideration before us, the same would not absolve the learned CIT(A) from properly assuming jurisdiction while deciding the appeal filed by the assessee. 9. Therefore, in view of the facts and circumstances of the present case, since the appeals filed by the assessee before the learned CIT(A) are decided by the NFAC, which does not have the jurisdiction to decide the same, being the appeals, inter-alia, pertaining to transfer pricing adjustment, we are of the considered view that the learned CIT(A), NFAC, wrongly assumed the jurisdiction while passing the impugned orders in the present case. Accordingly, we restore the appeals by the assessee for the assessment years 2010-11 and 2012-13 to the file of the learned CIT(A), who has jurisdiction ITAs No.4159 & 4318/Mum/2024 (A.Ys. 2010-11 & 2012-13) 7 over the assessee to decide the appeal involving issues, inter-alia, pertaining to transfer pricing adjustment under Chapter-X of the Act as per CBDT’s Circular and notification, for de novo adjudication. As almost 15 years have elapsed since the assessment years under consideration, we deem it appropriate to direct the learned CIT(A) to decide the assessee’s appeals as expeditiously as possible on a priority basis. We order accordingly. With the above directions, the impugned order in both appeals is set aside, and the additional ground raised by the Revenue vide application dated 07/01/2025 for the assessment years 2010-11 and 2012-13 is allowed. In view of our aforesaid findings, the other grounds raised by the Revenue in its appeals are left open. 10. In the result, both appeals by the Revenue are allowed for statistical purposes. Order pronounced in the open Court on 03/04/2025 Sd/- VIKRAM SINGH YADAV ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 03/04/2025 Prabhat Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "