Maximize Learning P. Ltd, Pune V. ACIT, Pune

ITA 2234/PUN/2012

• Counselvise Citation: 223424514 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS M S VERMA
• Keywords: Reopening of assessment; Transfer pricing; Opportunity of being heard; International transaction; Initiation of penalty proceedings; Avoidance of tax; Reason to believe
• Section: 92C; 143(3); 92D; 92B; 92F; 92A; 92E; 234B; 148; 144; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.2234/PN/2012 (ASSESSMENT YEAR : 2007-08) MAXIMIZE LEARNING PRIVATE LIMITED, BASEMENT NO.34, ADM-166SQT BU, LOWER FLR., EAST STREET, GALLERIA PREMISES CHSL, HOUSE NO.2421, CAMP, PUNE 411 001. PAN : AAACC7416K . APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE- 11(2), PUNE. . RESPONDENT ASSESSEE BY : MR. ARVIND SONDHE/PRAMOD JOSHI/ MR. RUGVED APTE DEPARTMENT BY : MRS. M. S. VERMA, CIT DATE OF HEARING : 05-12-2014 DATE OF PRONOUNCEMENT : 02-02-2015 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL HAS BEEN PREFERRED BY THE ASSE SSEE PERTAINING TO THE ASSESSMENT YEAR 2007-08, WHICH IS DIRECTED AGAI NST THE ORDER OF THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 11(2), PU NE (IN SHORT THE ASSESSING OFFICER) PASSED U/S 143(3) R.W.S. 147 AN D 144C(13) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 28.09.2012 , WHICH IS IN CONFORMITY WITH THE DIRECTIONS GIVEN BY THE DISPUTE RESOLUTION PANE L, PUNE (IN SHORT THE DRP) DATED 29.08.2012. 2. IN THIS APPEAL, GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS UNDER: - THE APPELLANT OBJECTS TO THE ORDER DATED SEPTEMBER 28, 2012 PASSED BY THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX, C IRCLE 11(2), PUNE ['ACIT'] UNDER SECTION 143(3) R.W.S. 147 AND 144C O F THE INCOME-TAX ACT, 1961 ['THE ACT'] IN PURSUANCE OF THE DIRECTIONS OF THE LEARNED DISPUTE RESOLUTION PANEL, PUNE ['DRP'] DATED AUGUST 29, 201 2 FOR THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING AMONG OTHER GROUNDS: ITA NO.2234/PN/2012 1. INAPPROPRIATE RE-OPENING OF THE ASSESSMENT UNDER SECTION 148 OF THE ACT 1.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF THE LEARNED DRP ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN RE- OPENING THE ASSESSMENT UNDER SECTION 148 OF THE ACT . 2. TRANSFER PRICING ADJUSTMENT 2.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF THE LEARNED DRP ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN MAKING AN ADJUSTMENT AMOUNTING TO RS.17,570,070/- T O THE VALUE OF INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE APPE LLANT WITH ITS ASSOCIATED ENTERPRISE IN RESPECT OF PROVISION OF IN FORMATION TECHNOLOGY ENABLED SERVICES ('ITES'). 3. INAPPROPRIATE CALCULATION OF OPERATING MARGIN O F COMPARABLE COMPANIES 3.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF THE LEARNED DRP ERRED IN CALCULATING THE AVERAGE OPERATING MARGIN O F COMPARABLE COMPANIES. 4. INAPPROPRIATE CALCULATION OF WORKING CAPITAL A DJUSTMENT 4.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF THE LEARNED DRP ERRED IN LAW AND ON THE FACTS AND IN CALCULATING THE WORK ING CAPITAL ADJUSTMENT CONSIDERING THE SALES AS BASIS FOR CALCU LATION AGAINST CORRECT BASE OF OPERATING COST. 4.2 WHILE GRANTING THE WORKING CAPITAL ADJUSTMENT, THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF THE LEARNED DRP ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE IN NOT CONSI DERING THE INVENTORY AS A PART OF WORKING CAPITAL OF PENTAMEDI A GRAPHICS LIMITED 5. ERRONEOUS SELECTION OF COMPARABLE COMPANIES 5.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF LEARNED DRP HAS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE IN SELECTING CORAL HUB LTD. AS A COMPARABLE COMPANY. 6. BENEFIT OF THE RISK ADJUSTMENT 6.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF LEARNED DRP HAS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE IN NOT GRANTING THE RISK ADJUSTMENT. 7. BENEFIT OF THE VARIATION / REDUCTION OF 5 PERCE NT FROM THE ARITHMETIC MEAN 7.1 THE LEARNED ACIT PURSUANT TO THE DIRECTIONS OF LEARNED DRP HAS ERRED IN LAW AND ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE IN NOT GRANTING THE BENEFIT OF+/- 5 PERCENT AS PER PROVISO TO SECTION 9 2C (2) OF THE ACT. 8. INITIATION OF PENALTY PROCEEDINGS 8.1 THE LEARNED ACIT ERRED ON THE FACTS AND IN LA W IN INITIATING PENALTY PROCEEDINGS SECTION 271(1) (C) OF THE ACT. 9. LEVY OF INTEREST OBLIGATION ON ACCOUNT OF TRANS FER PRICING ADJUSTMENT 9.1 THE LEARNED ACIT HAS ERRED ON THE FACTS AND IN LAW BY LEVYING INTEREST UNDER SECTION 234B OF THE ACT, ON ACCOUNT OF THE UN ANTICIPATED ADJUSTMENTS MADE BY THE LEARNED TPO. ITA NO.2234/PN/2012 9.2 THE APPELLANT PLEADS THAT THE SHORTFALL IN ADVA NCE TAX HAS RESULTED IN VIEW OF THE ADJUSTMENTS WHICH HAVE BEEN OBJECTED IN THE GROUNDS ABOVE AND ACCORDINGLY IS CONSEQUENTIAL IN NATURE. 10. EACH ONE OF THE ABOVE GROUNDS OF APPEAL IS WIT HOUT PREJUDICE TO THE OTHER. 11. THE APPELLANT RESERVES THE RIGHT TO AMEND, ALT ER OR ADD TO THE GROUNDS OF APPEAL. 3. IN THE MEMO OF APPEAL, VARIOUS GROUNDS HAVE BEEN RAISED, BUT THE FIRST AND THE FOREMOST ISSUE RAISED BY THE APPELLANT IS R ELATING TO THE JURISDICTION ASSUMED BY THE ASSESSING OFFICER BY ISSUING NOTICE U/S 148 OF THE ACT IN ORDER TO MAKE THE IMPUGNED ASSESSMENT ORDER U/S 143(3) R. W.S. 147 AND 144C OF THE ACT. ACCORDING TO THE APPELLANT, THE INITIATIO N OF ASSESSMENT PROCEEDINGS BY ISSUANCE OF NOTICE U/S 148 OF THE ACT IS BAD IN LAW AND THEREFORE THE CONSEQUENT ASSESSMENT ORDER IS LIABLE TO BE SET-ASI DE. SINCE THE AFORESAID ISSUE GOES TO THE ROOT OF THE MATTER, THE SAME IS B EING ADJUDICATED AT THE THRESHOLD. 4. THE PERTINENT FACTS, WHICH ARE RELEVANT TO ADJUD ICATE THE AFORESAID DISPUTE CAN BE SUMMARIZED AS FOLLOWS. THE APPELLAN T BEFORE US IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER- ALIA, ENGAGED IN THE BUSINESS OF PROVIDING INFORMAT ION TECHNOLOGY ENABLED SERVICES. FOR THE ASSESSMENT YEAR UNDER CONSIDERAT ION, IT FILED A RETURN OF INCOME ON 05.11.2007 DECLARING A TOTAL INCOME OF RS .2,15,31,701/-. THE SAID RETURN OF INCOME WAS DULY PROCESSED U/S 143(1) OF T HE ACT. THE SAID RETURN WAS NOT PICKED-UP FOR SCRUTINY ASSESSMENT BECAUSE N O NOTICE U/S 143(2) OF THE ACT WAS ISSUED BY THE ASSESSING OFFICER WITHIN THE PERIOD PRESCRIBED IN CLAUSE (II) OF SUB-SECTION (2) OF SECTION 143 OF THE ACT, AS IT STOOD AT THE RELEVANT POINT OF TIME. ON 14.01.2011, THE ASSESSING OFFICER RECO RDED REASONS IN TERMS OF SECTION 147 OF THE ACT AND FORMULATED A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR THE YEAR UNDER CO NSIDERATION AND ACCORDINGLY HE ISSUED A NOTICE U/S 148 OF THE ACT O F EVEN DATE CALLING FOR A ITA NO.2234/PN/2012 RETURN OF INCOME. IN THE SUBSEQUENT ASSESSMENT MAD E U/S 143(3) R.W.S. 147 AND 144C(13) OF THE ACT DATED 28.09.2012, ASSESSING OFFICER DETERMINED THE TOTAL INCOME AT RS.3,91,01,770/-, WHICH INTER-ALIA, INCLUDED AN ADDITION OF RS.1,75,70,070/- ON ACCOUNT OF ARM'S LENGTH PRICE O F THE INTERNATIONAL TRANSACTION OF PROVISION OF IT ENABLED SERVICES TO ASSOCIATE ENTERPRISE ABROAD. THE AFORESAID ADDITION WAS MADE BY THE ASSESSING OF FICER IN CONFORMITY WITH THE ARM'S LENGTH PRICE DETERMINED BY THE TRANSFER P RICING OFFICER (IN SHORT THE TPO) VIDE ORDER DATED 29.10.2010 (AS REVISED ON 27 .09.2012) PASSED U/S 92CA(3) OF THE ACT. IT MAY ALSO BE NOTED THAT ON R ECEIPT OF THE ORDER OF THE TPO DATED 29.10.2010, ASSESSING OFFICER PASSED A DR AFT ASSESSMENT ORDER, AGAINST WHICH ASSESSEE FILED OBJECTIONS BEFORE THE DISPUTE RESOLUTION PANEL (DRP). THE DRP DISPOSED-OFF THE OBJECTIONS VIDE OR DER DATED 22.12.2011 AND THE TPO THEREAFTER GAVE A REVISED WORKING ON 27.09. 2012 ON THE BASIS OF WHICH THE IMPUGNED TRANSFER PRICING ADJUSTMENT OF R S.1,75,70,070/- HAS BEEN MADE TO THE RETURNED INCOME. ALTHOUGH, ASSESSEE HA S CHALLENGED THE AFORESAID ADDITION ON ITS MERITS ALSO, WE SHALL DEA L WITH THE SAME A LITTLE LATER, BUT FOR THE PRESENT WE CONFINE THE DISCUSSION TO TH E FACTS RELATING TO ASSESSEES CHALLENGE TO THE VALIDITY OF THE PROCEED INGS INITIATED BY THE ASSESSING OFFICER BY ISSUANCE OF NOTICE U/S 148 OF THE ACT DATED 14.01.2011. IN THIS CONTEXT, IT IS ALSO RELEVANT TO EXAMINE THE REASONS RECORDED BY THE ASSESSING OFFICER FOR INITIATING PROCEEDINGS U/S 14 7/148 OF THE ACT, WHICH READ AS UNDER :- M/S. MAXIMIZE LEARNING PVT. LTD. A.Y. 2007-08 IN THE CASE REFERENCE U/S. 92CA(1) HAS BEEN MADE TO THE TP OFFICE FOR THE A.Y. 2007-08. THE DCIT (TP-IV), PUNE VIDE ORDER U/S. 92CA(3), DATED 29/10/2010 HAS WORKED OUT ADJUSTMENT IN RELAT ION TO INTERNATIONAL TRANSACTIONS OF RS.2,49,43,811/-. IN VIEW OF THE SAME, AS PER THE ADJUSTMENT OF RS.2, 49,43,811/- TO THE TOTAL INCOME, INCOME CHARGEABLE TO TAX HAS ESCA PED ASSESSMENT WITHIN THE MEANING OF SECTION 147(C)(1) OF THE INCOME-TAX ACT, 1961. ITA NO.2234/PN/2012 I HAVE THEREFORE REASONS TO BELIEVE THAT INCOME OF RS.2,49,43,811/- HAS ESCAPED ASSESSMENT FOR A.Y. 2007-08, ON ACCOUNT OF ADJUSTMENT TO INTERNATIONAL TRANSACTIONS CARRIED OUT BY THE ASSES SEE. THE CASE SATISFIES CONDITIONS LAID DOWN IN SECTIONS 149(1)(A) AND 151(2) OF THE INCOME-TAX ACT, 1961. ISSUE NOTICE U/S.148 FOR A.Y. 5. A PERUSAL OF THE AFORESAID REASONS RECORDED SHOW THAT AS PER THE ASSESSING OFFICER, THE TPO VIDE ORDER U/S 92CA(3) O F THE ACT DATED 29.10.2010 HAD WORKED OUT THE ADJUSTMENT IN RELATIO N TO INTERNATIONAL TRANSACTION OF RS.2,49,43,811/- ON A REFERENCE MADE TO HIM BY THE ASSESSING OFFICER U/S 92CA(1) OF THE ACT. IN VIEW OF THE AFO RESAID ORDER OF THE TPO, ACCORDING TO THE ASSESSING OFFICER, INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT RELATING TO THE ADJUSTMENT OF RS.2,49,43 ,811/- TO THE TOTAL INCOME. IN NUTSHELL, THE ASSESSING OFFICER HAS FORMED A BEL IEF ABOUT ESCAPEMENT OF INCOME BASED ON THE ORDER OF THE TPO U/S 92CA(3) CO MPUTING ADJUSTMENT IN RELATION TO THE INTERNATIONAL TRANSACTIONS OF THE A SSESSEE WITH ITS ASSOCIATED ENTERPRISES. 6. IN THE ABOVE BACKGROUND, NOW WE MAY BRIEFLY RECO RD THE CONTENTIONS OF THE ASSESSEE CHALLENGING THE VALIDITY OF THE PROCEE DINGS INITIATED BY ISSUANCE OF NOTICE U/S 148 OF THE ACT AND THE DEFENSE MOUNTE D BY THE LEARNED CIT-DR TO SUPPORT THE INITIATION OF PROCEEDINGS. THE LEAR NED COUNSEL FOR THE ASSESSEE FIRSTLY CONTENDED THAT THE RECOURSE TO SECTIONS 147 /148 OF THE ACT IN ORDER TO REOPEN THE ASSESSMENT IS MERELY TO CIRCUMVENT THE S ITUATION WHICH AROSE FROM THE FACT THAT ORIGINALLY NO NOTICE WAS ISSUED U/S 1 43(2) OF THE ACT WITHIN THE PERIOD PRESCRIBED. ACCORDING TO HIM, THE REQUISITE NOTICE U/S 143(2) OF THE ACT IN ORDER TO FRAME A SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT WAS TO BE ISSUED UPTO 30.09.2008, WHICH IN THE PRESENT CASE HAS NOT BEEN DONE. HENCE, THE IMPUGNED REOPENING OF ASSESSMENT BY ISSUANCE OF NOT ICE U/S 148 OF THE ACT IS CLEARLY TO ACHIEVE THE SAME GOAL ALBEIT INDIRECTLY. ACCORDING TO HIM, THE POWERS OF REOPENING THE ASSESSMENT IN TERMS OF SECT ION 147/148 OF THE ACT ITA NO.2234/PN/2012 ARE WIDE, SO HOWEVER, THE SAME CANNOT BE CONSTRUED SO BROADLY SO AS TO PERMIT THE ASSESSING OFFICER TO RECTIFY HIS ERRORS UNDER THE GARB OF REOPENING. IT IS CONTENDED THAT IN THE PRESENT CASE, REOPENING HAS BEEN DONE MERELY TO CORRECT AN ERROR COMMITTED BY THE ASSESSING OFFICER EARLIER, I.E. NON-ISSUANCE OF A NOTICE U/S 143(2) OF THE ACT, AND THE SAME IS THEREFORE BAD IN LAW. IN THIS CONNECTION, RELIANCE HAS BEEN PLACED ON THE FOLLOWI NG DECISIONS : (I) RAJGARH LIQUORS VS. CIT, (2004) 89 ITD 84 (INDORE); AND, (I I) BABULAL LATH VS. ACIT, 83 ITD 691 (MUM.). 7. SECONDLY, IT IS CANVASSED BY THE LEARNED COUNSEL THAT THE BASIS OF REOPENING IS FLAWED INASMUCH AS IT IS BASED ON AN I NCORRECT REFERENCE MADE TO THE TPO U/S 92CA OF THE ACT AND THEREFORE ANY FURTH ER PROCEEDINGS RESULTING THEREFROM DESERVE TO BE TREATED AS ILLEGAL. IN THI S CONTEXT, IT WAS SOUGHT TO BE POINTED OUT THAT THE ASSESSING OFFICER MADE A REFER ENCE TO THE TPO FOR DETERMINATION OF ARM'S LENGTH PRICE OF THE INTERNAT IONAL TRANSACTIONS ENTERED BY THE ASSESSEE WITH ITS ASSOCIATED ENTERPRISES ON 14. 09.2009, WHICH WAS CLEARLY BELATED INASMUCH AS, AT THAT POINT OF TIME NO PROCE EDING FOR ASSESSMENT OF INCOME WAS PENDING BEFORE THE ASSESSING OFFICER. T HUS, THE REFERENCE MADE TO THE TPO WAS INCORRECT AND ILLEGAL, THEREFORE THE SUBSEQUENT ORDER OF THE TPO PASSED U/S 92CA(3) OF THE ACT DATED 29.10.2010 WAS VOID AB INITIO . SUCH AN ORDER CANNOT FORM A BASIS TO FORM A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SE CTION 147 OF THE ACT. 8. THIRDLY, IT IS CANVASSED BEFORE US THAT REASON TO BELIEVE THAT CERTAIN INCOME HAD ESCAPED ASSESSMENT AS REQUIRED BY SECTIO N 147 OF THE ACT HAS TO BE THAT OF THE ASSESSING OFFICER ALONE AND NOT THAT OF ANY OTHER AUTHORITY. BY REFERRING TO THE REASONS RECORDED, IT IS SOUGHT TO BE POINTED OUT THAT THE ONLY ASSERTION OF THE ASSESSING OFFICER TO CONCLUDE THAT HE HAS REASON TO BELIEVE THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT IS THE FACT THAT ITA NO.2234/PN/2012 THE TPO HAS WORKED OUT AN ADJUSTMENT OF RS.2,49,43, 811/- IN RELATION TO THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION S. IT IS CONTENDED THAT THE AFORESAID DOES NOT FULFILL THE JURISDICTIONAL REQUI REMENTS OF SECTION 147 OF THE ACT, WHICH PRESCRIBE THAT THE ASSESSING OFFICER HAS TO HAVE A REASON TO BELIEVE THAT CERTAIN INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. IT IS CONTENDED THAT IN THE INSTANT CASE, THE BELIEF THAT ANY INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT IS CLEARLY NOT THAT OF THE A SSESSING OFFICER BUT IT IS THAT OF THE TPO AND HENCE THE IMPUGNED REASONS RECO RDED ARE CONTRARY TO THE REQUIREMENTS OF SECTION 147 OF THE ACT AND DESERVE TO BE STRUCK DOWN. 9. LASTLY, IT IS CONTENDED THAT THE REASONS RECORDE D ARE WITHOUT ANY APPLICATION OF MIND BY THE ASSESSING OFFICER AND ON THIS COUNT ALSO THE REOPENING OF THE ASSESSMENT HAS TO FAIL. IN THIS C ONTEXT, IT WAS SOUGHT TO BE POINTED OUT THAT IN THE REASONS RECORDED, ASSESSING OFFICER HAS REFERRED TO SECTION 147(C)(1) OF THE ACT, WHICH IS WRONG, BUT A SSUMING THAT THE ASSESSING OFFICER HAD EXPLANATION 2(C) TO SECTION 147 OF THE ACT IN HIS MIND, THEN ALSO IT IS A WRONG ASSERTION BECAUSE THE SAID EXPLANATION A PPLIES WHERE AN ASSESSMENT HAS BEEN MADE , WHEREAS IN THE PRESENT CASE, NO ASSESSMENT WAS HITHERTO MADE FOR THE YEAR UNDER CONSIDERATION AS THE INCOME TAX RETURN FILED BY THE ASSESSEE WAS ONLY SUBJECT TO A PROCESS ING U/S 143(1) OF THE ACT AND IT WAS NOT PICKED-UP FOR A SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT. THIS, ACCORDING TO THE LEARNED COUNSEL, INDICATES TOTAL N ON-APPLICATION OF MIND BY THE ASSESSING OFFICER AND THUS ON THIS COUNT ALSO THE R EOPENING OF ASSESSMENT HAS TO FAIL. IN SUM AND SUBSTANCE, THE PLEA OF THE ASSESSEE IS THAT THE REASONS RECORDED BY THE ASSESSING OFFICER FOR ISSUANCE OF N OTICE U/S 148 OF THE ACT, WHICH MERELY RELY ON AN ORDER PASSED BY THE TPO U/S 92CA(3) OF THE ACT ARE BAD IN LAW AND THE CONSEQUENTIAL ASSESSMENT IS LIAB LE TO BE SET-ASIDE. ITA NO.2234/PN/2012 10. THE CRUX OF THE CONTROVERSY REVOLVES AROUND THE PROVISIONS OF SECTION 147/148 OF THE ACT WHICH EMPOWER AN ASSESSING OFFIC ER TO ASSESS OR RE- ASSESS SUCH INCOME WHICH HAS ESCAPED ASSESSMENT. S ECTION 147 OF THE ACT POSTULATES THAT IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 OF THE ACT, ASSESS OR RE-ASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF PROCEEDINGS UNDER THIS SECTION. A SIGNIFICANT EXPR ESSION CONTAINED IN SECTION 147 OF THE ACT IS REASON TO BELIEVE . IT IS JUDICIALLY WELL-SETTLED THAT SUCH BELIEF OF THE ASSESSING OFFICER MUST BE BASED ON SOME MATE RIAL ON RECORD. IN OTHER WORDS, THERE MUST BE SOME MATERIAL ON RECORD TO ENA BLE THE ASSESSING OFFICER TO ENTERTAIN A BELIEF THAT CERTAIN INCOME CHARGEABL E TO TAX HAS ESCAPED ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR. 11. IN THE PRESENT CASE, THE PERTINENT POINT SETUP BY THE ASSESSEE IS THAT THE ASSESSING OFFICER HAS ENTERTAINED THE BELIEF FO R ESCAPEMENT OF INCOME BASED ON AN ORDER OF THE TPO DATED 29.10.2010 U/S 9 2CA(3) OF THE ACT WHICH IS NONEST AND VOID AB INITIO . THE FUNDAMENTAL POINT CANVASSED BY THE APPELLANT IS THAT THE REFERENCE U/S 92CA MADE BY TH E ASSESSING OFFICER TO THE TPO FOR COMPUTING THE ARM'S LENGTH PRICE WAS INVALI D BECAUSE WHEN THE REFERENCE WAS MADE ON 14.09.2009, NO ASSESSMENT PRO CEEDINGS WERE PENDING IN RELATION TO THE INSTANT ASSESSMENT YEAR. 12. AT THIS STAGE, IT WOULD BE APPROPRIATE TO CONSI DER WHETHER THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE TPO ON 14.09.2 009 FOR DETERMINATION OF ARM'S LENGTH PRICE IS VALID OR NOT ? FOR THE SAID PURPOSE, WE MAY BRIEFLY TOUCH- UPON THE RELEVANT PROVISIONS RELATING TO THE TRANSF ER PRICING ASSESSMENT WHICH ARE CONTAINED IN SECTIONS 92 TO 92F OF THE ACT UNDE R CHAPTER X RELATING TO ITA NO.2234/PN/2012 THE SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX . SECTIONS 92 TO 92F OF THE ACT WERE INTRODUCED BY THE FINANCE ACT, 2001 AND ARE EFFECTIVE FROM THE ASSESSMENT YEAR 2002-03. SECTION 92(1) OF THE ACT PROVIDES THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION BE TWEEN ASSOCIATED ENTERPRISES SHALL BE COMPUTED HAVING REGARD TO THE ARMS LENGTH PRICE. SECTIONS 92A AND 92B OF THE ACT CONTAIN PROVISIONS RELATING TO THE MEANING OF THE EXPRESSIONS ASSOCIATED ENTERPRISE AND INTERN ATIONAL TRANSACTION RESPECTIVELY. SECTION 92C OF THE ACT CONTAINS THE POWERS OF THE ASSESSING OFFICER AND THE MANNER OF DETERMINATION OF ARM'S LE NGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION. SECTION 92CA OF THE ACT PROVIDES THAT WHERE THE ASSESSING OFFICER CONSIDERS IT NECESSARY OR EXPEDIE NT TO DO SO, HE MAY REFER TO THE TRANSFER PRICING OFFICER THE DETERMINATION O F THE ARMS LENGTH PRICE. SECTION 92CB OF THE ACT RELATES TO THE POWER OF THE BOARD TO MAKE SAFE HARBOUR RULES. SECTION 92D OF THE ACT RELATES TO M AINTENANCE AND KEEPING OF INFORMATION AND DOCUMENT BY PERSONS ENTERING INTO A N INTERNATIONAL TRANSACTION. SECTION 92E OF THE ACT PRESCRIBES THA T THE PERSON ENTERING INTO INTERNATIONAL TRANSACTION SHALL FURNISH A REPORT FR OM A CHARTERED ACCOUNTANT IN FORM NO.3CEB. SECTION 92F OF THE ACT CONTAINS DEFI NITIONS OF CERTAIN TERMS WHICH ARE RELEVANT TO COMPUTE ARM'S LENGTH PRICE, E TC. IN TERMS OF SECTIONS 92 TO 92F OF THE ACT. 13. NOTABLY, THE ENTIRE SCHEME AND MECHANISM TO COM PUTE ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION ENTERED B ETWEEN ASSOCIATED ENTERPRISES IS CONTAINED IN SECTIONS 92 TO 92F OF T HE ACT. NOW, WE MAY DEAL IN SLIGHT DETAIL THE PROVISIONS OF TRANSFER PRICING AS SESSMENT WHICH ARE RELEVANT IN THE CONTEXT OF CONTROVERSY BEFORE US. SECTION 92(1 ) OF THE ACT MANDATES THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTIO N SHALL BE COMPUTED HAVING REGARD TO THE ARM'S LENGTH PRICE. SECTION 92C, INT ER-ALIA, PRESCRIBES THE METHODS FOR COMPUTATION OF ARM'S LENGTH PRICE IN RE LATION TO AN INTERNATIONAL ITA NO.2234/PN/2012 TRANSACTION. SUB-SECTION (3) OF SECTION 92C OF THE ACT EMPOWERS THE ASSESSING OFFICER TO DETERMINE THE ARM'S LENGTH PRI CE IN RELATION TO AN INTERNATIONAL TRANSACTION IN ACCORDANCE WITH THE ME THODS PRESCRIBED IN SUB- SECTION (1), ON THE BASIS OF MATERIAL OR INFORMATIO N OR DOCUMENTS AVAILABLE WITH HIM, AFTER ALLOWING THE ASSESSEE AN OPPORTUNITY IN THIS REGARD; AND, SUB-SECTION (4) OF SECTION 92C PROVIDES THAT WHERE THE ASSESSIN G OFFICER SO DETERMINES THE ARM'S LENGTH PRICE, HE MAY COMPUTE THE TOTAL IN COME OF THE ASSESSEE HAVING REGARD TO THE ARM'S LENGTH PRICE SO DETERMIN ED. HOWEVER, SECTION 92CA OF THE ACT PROVIDES THAT WHERE THE ASSESSING O FFICER CONSIDERS IT NECESSARY OR EXPEDIENT SO TO DO, HE MAY REFER THE C OMPUTATION OF ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION T O THE TPO. IN SUCH A SITUATION, THE TPO, AFTER TAKING INTO ACCOUNT THE MATERIAL BEF ORE HIM, PASS AN ORDER IN WRITING U/S 92CA(3) OF THE ACT DETERMINING THE ARM' S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION. ON RECEIPT OF THIS O RDER, SUB-SECTION (4) OF SECTION 92CA OF THE ACT REQUIRES THE ASSESSING OFFICER TO C OMPUTE THE TOTAL INCOME OF THE ASSESSEE IN CONFORMITY WITH THE ARM'S LENGTH PR ICE SO DETERMINED BY THE TPO. IN OTHER WORDS, THE DETERMINATION OF THE ARM' S LENGTH PRICE, WHEREVER A REFERENCE IS MADE TO HIM, IS DONE BY THE TPO UNDER SUB-SECTION (3) OF SECTION 92CA BUT THE COMPUTATION OF TOTAL INCOME HAVING REG ARD TO THE ARM'S LENGTH PRICE SO DETERMINED BY THE TPO IS REQUIRED TO BE DO NE BY THE ASSESSING OFFICER UNDER SUB-SECTION (4) OF SECTION 92C, READ WITH SUB-SECTION (4) OF SECTION 92CA. 14. IN SUM AND SUBSTANCE, THE SCHEME OF THE ACT POS TULATES THAT ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSA CTION IS DETERMINED EITHER BY THE ASSESSING OFFICER AS PROVIDED IN SUB-SECTION (3 ) OF SECTION 92C OR BY THE TPO U/S 92CA(3) OF THE ACT WHERE A REFERENCE IS MAD E TO HIM BY THE ASSESSING OFFICER. IN BOTH SITUATIONS, THE ASSESSI NG OFFICER IS REQUIRED TO COMPUTE THE TOTAL INCOME OF THE ASSESSEE HAVING REG ARD TO THE ARM'S LENGTH ITA NO.2234/PN/2012 PRICE OF THE INTERNATIONAL TRANSACTION SO DETERMINE D, EITHER IN TERMS OF SUB- SECTION (4) OF SECTION 92C OR SUB-SECTION (4) OF SE CTION 92CA. NOTABLY, SUB- SECTION (4) OF SECTION 92C COMES INTO PLAY WHERE AN ARM'S LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION IS DETERM INED BY THE ASSESSING OFFICER AND SUB-SECTION (4) OF SECTION 92CA COMES INTO PLAY WHERE THE ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION I S DETERMINED BY THE TPO, ON A REFERENCE BY THE ASSESSING OFFICER. IN THE CASE BE FORE US, THE TOTAL INCOME OF THE ASSESSEE HAS BEEN COMPUTED HAVING REGARD TO THE ARM'S LENGTH PRICE DETERMINED BY THE TPO UNDER SECTION 92CA(3) OF THE ACT AND THEREFORE THE ASSESSING OFFICER HAS TAKEN RECOURSE TO SECTION 92C A(4) OF THE ACT. 15. IT IS QUITE CLEAR THAT THE PROCESS OF DETERMINA TION OF ARM'S LENGTH PRICE IS TO BE CARRIED OUT DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, MAY IT BE, UNDER SUB-SECTION (3) OF SECTION 92C WHERE THE ASSE SSING OFFICER DETERMINES THE ARM'S LENGTH PRICE OR UNDER SUB-SECTIONS (1) TO (3) OF SECTION 92CA, WHERE THE ASSESSING OFFICER REFERS THE DETERMINATION OF A RM'S LENGTH PRICE TO THE TPO. WE MAY ALSO REFER TO THE PROVISIONS OF SECTIO N 143(3) OF THE ACT DEALING WITH ASSESSMENT OF INCOME. IN TERMS OF CLAUSE (II) OF SUB-SECTION (3) OF SECTION 143, IT IS PRESCRIBED THAT THE ASSESSING OFFICER SH ALL, BY AN ORDER IN WRITING, MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF T HE ASSESSEE, AND DETERMINE THE SUM PAYABLE BY HIM OR REFUND ON ANY A MOUNT DUE TO HIM ON THE BASIS OF SUCH ASSESSMENT. IT IS ONLY IN THE COURSE OF SUCH ASSESSMENT OF TOTAL INCOME, THAT THE ASSESSING OFFICER IS OBLIGATED TO COMPUTE ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION OF AN ASSESSEE WI TH ASSOCIATED ENTERPRISES, HAVING REGARD TO THE ARM'S LENGTH PRICE. IN THIS B ACKGROUND, IS IT NOT APPROPRIATE TO INFER THAT THE PROVISIONS OF SECTION 92 TO 92F OF THE ACT GET TRIGGERED ONLY DURING THE PENDENCY OF THE PROCESS O F ASSESSMENT OF TOTAL INCOME BEFORE THE ASSESSING OFFICER, WHICH CULMINAT ES IN AN ORDER UNDER SECTION 143(3) OR SECTION 144 OF THE ACT, AS THE CA SE MAY BE ? ITA NO.2234/PN/2012 16. IN-FACT, THE OCCASION WHICH REQUIRES THE ASSESS ING OFFICER TO COMPUTE INCOME FROM AN INTERNATIONAL TRANSACTION ARISES ONL Y DURING THE ASSESSMENT PROCEEDINGS, WHEREIN HE IS DETERMINING THE TOTAL IN COME OF THE ASSESSEE. THE APPELLANT HAS CANVASSED THE AFORESAID POSITION BEFO RE US AND IN THIS CONTEXT REFERENCE HAS ALSO BEEN MADE TO THE CBDT INSTRUCTIO N NO.3 DATED 20 TH MAY, 2003 THE RELEVANT PORTION OF WHICH READ AS UNDER :- ..........THE CENTRAL BOARD OF DIRECT TAXES, THERE FORE, HAVE DECIDED THAT WHEREVER THE AGGREGATE VALUE OF INTERNATIONAL TRANS ACTION EXCEEDS RS.5 CRORES, THE CASE SHOULD BE PICKED UP FOR SCRUTINY A ND REFERENCE UNDER SECTION 92CA BE MADE TO THE TPO. IF THERE ARE MORE THAN ON E TRANSACTION WITH AN ASSOCIATED ENTERPRISE OR THERE ARE TRANSACTIONS WIT H MORE THAN ONE ASSOCIATED ENTERPRISES THE AGGREGATE VALUE OF WHICH EXCEEDS RS .5 CRORES, THE TRANSACTIONS SHOULD BE REFERRED TO THE TPO. BEFORE MAKING REFERENCE TO THE TPO, THE ASSESSING OFFICER HAS TO SEEK APPROVAL OF THE COMMISSIONER/DIRECTOR AS CONTEMPLATED UNDER THE ACT . UNDER THE PROVISIONS OF SECTION 92CA REFERENCE IS IN RELATION TO THE INT ERNATIONAL TRANSACTION. HENCE ALL TRANSACTIONS HAVE TO BE EXPLICITLY MENTIONED IN THE LETTER OF REFERENCE. SINCE THE CASE WILL BE SELECTED FOR SCRUTINY BEFORE MAKING REFERENCE TO THE TPO, THE ASSESSING OFFICER MAY PROCEED TO EXAMINE O THER ASPECTS OF THE CASE DURING PENDENCY OF ASSESSMENT PROCEEDINGS BUT AWAIT THE REPORT OF THE TPO ON THE VALUE OF INTERNATIONAL TRANSACTION BEFOR E MAKING FINAL ASSESSMENT. [UNDERLINED FOR EMPHASIS BY US] 17. IT IS EMPHASIZED ON THE BASIS OF THE CBDT INSTR UCTION (SUPRA) THAT EVEN AS PER THE UNDERSTANDING OF THE CBDT, A CASE IS TO BE SELECTED FOR SCRUTINY ASSESSMENT BEFORE THE ASSESSING OFFICER MAY REFER T HE COMPUTATION OF ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSA CTION TO THE TPO U/S 92CA OF THE ACT. THEREFORE, WE ARE INCLINED TO UPHOLD THE POSITION SOUGHT TO BE CANVASSED BY THE ASSESSEE THAT AN ASSESSING OFFICER CAN MAKE REFERENCE TO THE TPO U/S 92CA OF THE ACT ONLY AFTER SELECTING TH E CASE FOR SCRUTINY ASSESSMENT. IN-FACT, THE AFORESAID UNDERLINED OBSE RVATIONS OF THE CBDT INSTRUCTION (SUPRA) IS A POINTER TO THE LEGISLATIVE IMPORT THAT THE REFERENCE TO THE TPO FOR DETERMINING THE ARM'S LENGTH PRICE IN RELAT ION TO AN INTERNATIONAL TRANSACTION IS ENVISAGED ONLY IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, WHICH IS THE ONLY PROCESS KNOWN TO THE ACT, WHEREBY THE ASSESSMENT OF TOTAL INCOME IS DONE. AS PER THE CBDT (SUPRA), THE ASSES SING OFFICER MAY PROCEED TO EXAMINE OTHER ASPECTS OF THE CASE DURING PENDENC Y OF ASSESSMENT ITA NO.2234/PN/2012 PROCEEDINGS BUT AWAIT THE REPORT OF THE TPO ON THE VALUE OF THE INTERNATIONAL TRANSACTIONS BEFORE MAKING ASSESSMENT SINCE THE CAS E WOULD BE SELECTED FOR SCRUTINY BEFORE MAKING REFERENCE TO THE TPO. 18. IN THE CONTEXT OF THE AFORESAID CONTROVERSY, WE MAY REFER TO THE ARGUMENTS RAISED BY THE LD. CIT-DR WHEREBY IT IS CO NTENDED THAT IT WAS OPEN FOR THE ASSESSING OFFICER TO MAKE A REFERENCE TO TH E TPO FOR DETERMINATION OF ARM'S LENGTH PRICE WITHOUT ISSUING NOTICE U/S 143(2 ) OF THE ACT; IN OTHER WORDS, AS PER THE REVENUE, REFERENCE TO THE TPO U/S 92CA O F THE ACT CAN BE MADE EVEN IF NO ASSESSMENT PROCEEDING IS PENDING BEFORE THE ASSESSING OFFICER. IN THIS CONTEXT, IT IS SUBMITTED THAT THE ANNUAL NORMS FOR SELECTION OF CASES FOR SCRUTINY PRESCRIBED BY THE CBDT FOR ASSESSMENT YEAR 2007-08, INTER-ALIA, PRESCRIBED COMPULSORY SCRUTINY IN ALL CASES WHERE T HE TOTAL VALUE OF INTERNATIONAL TRANSACTIONS AS DEFINED IN SECTION 92 B EXCEEDED RS.15 CRORES. ACCORDING TO HER, IN SUCH A CASE, THE ASSESSING OFF ICER CAN VERY WELL ISSUE THE NOTICE U/S 143(2) OF THE ACT AND THEN MAKE A REFERE NCE TO THE TPO. HOWEVER, IT IS SUBMITTED THAT THE CBDT NORMS ALSO PROVIDE TH AT A CASE WHICH IS NOT DIRECTLY COVERED UNDER THE AFORESAID COMPULSORY SCR UTINY NORM, CAN ALSO BE SELECTED FOR SCRUTINY IF THE ASSESSING OFFICER RECO RDS A SATISFACTION AND SEEKS THE APPROVAL OF THE CCIT/DGIT (INTERNATIONAL TAXATI ON)/DGIT (EXEMPTION). THE AFORESAID NORM HAS BEEN POINTED OUT TO SAY THAT IN ORDER TO PICK-UP A CASE FOR SCRUTINY, SOME SATISFACTION IS REQUIRED TO BE R ECORDED BEFORE THE NOTICE U/S 143(2) OF THE ACT IS TO BE ISSUED. THIS EXERCISE, ACCORDING TO THE LD. CIT-DR, COULD VERY WELL BE THE REFERENCE OF THE MATTER OF T HE TPO, THEREFORE, THE STIPULATED PERIOD LAID DOWN BY THE CBDT DOES NOT PR E-SUPPOSE THAT THE ISSUE OF NOTICE U/S 143(2) OF THE ACT HAS TO BE NECESSARI LY AND WITHOUT FAIL PRECEDE THE REFERENCE TO TPO. ITA NO.2234/PN/2012 19. WE HAVE CAREFULLY CONSIDERED THE PLEA OF THE LD . CIT-DR, THAT IT IS OPEN TO THE DEPARTMENT TO MAKE A REFERENCE TO THE TPO WI THOUT ISSUING NOTICE U/S 143(2) OF THE ACT, BUT IN OUR VIEW, IT IS NOT SUPPO RTED BY A SCHEMATIC READING OF THE RELEVANT PROVISIONS RELATING TO THE TRANSFER PR ICING ASSESSMENT CONTAINED IN SECTIONS 92 TO 92F. THE ENTIRE PURPOSE OF COMPUTAT ION OF ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION IS FOUND I N SUB-SECTION (1) OF SECTION 92 OF THE ACT. SECTION 92(1) MANDATES THAT ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION SHALL BE COMPUTED HAVING REGARD TO THE ARM'S LENGTH PRICE. THEREFORE, THE SOLE AIM OF COMPUTING THE AR M'S LENGTH PRICE IN RELATION TO ANY INTERNATIONAL TRANSACTION IS TO COMPUTE THE INCOME ARISING THEREFROM. THUS, THE COMPUTATION OF INCOME AND THE DETERMINATI ON OF ARM'S LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION HAVE TO G O HAND-IN-HAND AND WITHOUT THERE BEING AN OCCASION TO COMPUTE INCOME ARISING F ROM AN INTERNATIONAL TRANSACTION, IT IS DIFFICULT TO COMPREHEND THE PROC ESS FOR COMPUTATION OF ARM'S LENGTH PRICE IN RELATION TO THE RELEVANT INTERNATIO NAL TRANSACTION. THEREFORE, IT WOULD NOT BE OPEN FOR THE DEPARTMENT TO SAY THAT TH E PROCESS OF COMPUTING ARM'S LENGTH PRICE OF AN INTERNATIONAL TRANSACTION OR A REFERENCE TO THE TPO TO DETERMINE ARM'S LENGTH PRICE CAN BE INITIATED IN TH E ABSENCE OF ANY PROCEEDING FOR COMPUTING TOTAL INCOME OF THE ASSESSEE. 20. FURTHER, IN OUR VIEW, THE LD. CIT-DR HAS RELIED ON ONE OF THE NORMS PRESCRIBED FOR PICKING A RETURN FOR SCRUTINY ASSESS MENT TO SAY THAT CERTAIN EXERCISE IS REQUIRED TO BE DONE ON THE PART OF THE ASSESSING OFFICER TO RECORD HIS SATISFACTION BEFORE THE MATTER IS PUT-UP TO THE CCIT/DGIT WHO SHALL APPROVE THE SELECTION OF CASE FOR SCRUTINY. ACCORD ING TO HER, THE RECORDING OF SUCH SATISFACTION CONTEMPLATED IN THE CBDT INSTRUCT ION, WOULD, INTER-ALIA, ENVISAGE A REFERENCE TO THE TPO ALSO. IN OUR CONSI DERED OPINION, THE RELIANCE PLACED BY THE LD. CIT-DR ON THE AFORESAID CBDT PROC EDURE FOR SELECTION OF CASES FOR SCRUTINY, CANNOT DISTRACT FROM THE RELEVA NT STATUTORY PROVISIONS ITA NO.2234/PN/2012 RELATING TO THE CONTROVERSY BEFORE US. IN-FACT, TH E SCHEME OF THE ACT WHICH WE HAVE DEALT EARLIER, ESTABLISHES THAT THE WORK OF CO MPUTING THE ARM'S LENGTH PRICE IN RELATION TO INTERNATIONAL TRANSACTION ARIS ES ONLY AND ONLY WHEN THE INCOME FROM SUCH INTERNATIONAL TRANSACTION IS BEING ASSESSED. CERTAINLY, THE REFERENCE TO THE TPO FOR THE COMPUTATION OF ARM'S L ENGTH PRICE CANNOT PRECEDE THE INITIATION OF THE ASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER BY ISSUANCE OF NOTICE U/S 143(2) OF THE ACT. 21. AS PER THE LD. CIT-DR, SECTION 92C(3) OR 92CA O F THE ACT DO NOT ENJOIN THE ASSESSING OFFICER TO HAVE ANY ASSESSMENT PROCEE DINGS PENDING BEFORE A REFERENCE TO THE TPO CAN BE MADE FOR COMPUTATION OF ARM'S LENGTH PRICE IN RELATION TO AN INTERNATIONAL TRANSACTION. IN THIS CONTEXT, REFERENCE HAS BEEN MADE TO THE PHRASEOLOGY OF SECTION 92CA(1) OF THE A CT TO SAY THAT ONLY TWO CONDITIONS ARE PRESCRIBED THEREIN WHICH ARE TO BE F ULFILLED BY THE ASSESSING OFFICER BEFORE REFERRING THE MATTER TO THE TPO. FI RSTLY, ASSESSEE SHOULD HAVE ENTERED INTO INTERNATIONAL TRANSACTION; AND, THAT I F THE ASSESSING OFFICER CONSIDERS IT NECESSARY AND EXPEDIENT TO DO SO, HE M AY REFER THE MATTER TO THE TPO UNDER APPROVAL OF THE COMMISSIONER. IF BOTH TH E CONDITIONS ARE SATISFIED THERE IS NO BAR OR REQUIREMENT OF ANY ASSESSMENT PR OCEEDINGS BEING PENDING, BEFORE THE REFERENCE IS MADE TO THE TPO. 22. THE AFORESAID PLEA OF THE LD. CIT-DR ALSO, IN O UR VIEW, FAILS TO TAKE INTO CONSIDERATION THE ENTIRE SCHEME ENVISAGED FOR THE T RANSFER PRICING ASSESSMENT IN SECTIONS 92 TO 92F OF THE ACT. THE PROVISIONS O F SECTIONS 92 TO 92F OF THE RELATE TO COMPUTATION OF INCOME FROM THE INTERNATIO NAL TRANSACTION HAVING REGARD TO THE ARM'S LENGTH PRICE, MEANING OF ASSOCI ATED ENTERPRISES, MEANING OF INTERNATIONAL TRANSACTION, DETERMINATION OF ARM' S LENGTH PRICE, KEEPING AND MAINTAINING OF INFORMATION AND DOCUMENTS BY PERSONS ENTERING INTO INTERNATIONAL TRANSACTIONS, FURNISHING OF A REPORT FROM AN ACCOUNTANT BY ITA NO.2234/PN/2012 PERSONS ENTERING INTO SUCH TRANSACTION AND THE DEFI NITION OF CERTAIN EXPRESSIONS OCCURRING IN SUCH SECTIONS. THE AFORESAID PROVISIO NS DO NOT OPERATE IN INDIVIDUAL SPHERES BUT THE SAME OPERATE WITH A SING ULAR PURPOSE OF COMPUTING INCOME ARISING FROM AN INTERNATIONAL TRANSACTION. THE PROCESS OF COMPUTATION OF INCOME IS NECESSARILY A PART AND PARCEL OF THE A SSESSMENT PROCEEDINGS ENVISAGED UNDER THE ACT. SECTION 92CA OF THE ACT I S NOT AN INDEPENDENT PROVISION, BUT IT IS TRIGGERED ONLY WHEN THE OCCASI ON ARISES FOR APPLICATION OF SECTION 92(1) OF THE ACT, WHEREBY INCOME FROM AN IN TERNATIONAL TRANSACTION IS TO BE COMPUTED HAVING REGARD TO ITS ARM'S LENGTH PRICE ; AND, THE OCCASION TO COMPUTE THE INCOME WOULD ARISE ONLY WHEN THERE IS A N ON-GOING ASSESSMENT PROCEEDING. THEREFORE, REFERENCE MADE BY THE LD. C IT-DR TO THE PHRASEOLOGY OF SECTION 92CA(1) WITHOUT CONSIDERING THE ENTIRE S CHEMATIC ARRANGEMENT OF SECTIONS 92 TO 92F WOULD BE INCORRECT. 23. THEREFORE, WE CONCLUDE THIS ASPECT BY HOLDING T HAT THE ASSESSING OFFICER IS PRECLUDED FROM MAKING A REFERENCE TO THE TPO U/S 92CA(1) OF THE ACT FOR THE PURPOSES OF COMPUTING ARM'S LENGTH PRIC E IN RELATION TO THE INTERNATIONAL TRANSACTION WHEN NO ASSESSMENT PROCEE DINGS ARE PENDING IN RELATION TO THE RELEVANT ASSESSMENT YEAR. 24. NOW, WE MAY COME BACK TO THE FACTS OF THE PRESE NT CASE. IN THIS CASE, RETURN OF INCOME WAS FILED ON 05.11.2007, WHICH WAS PROCESSED U/S 143(1) OF THE ACT. ON 14.09.2009, THE ASSESSING OFFICER MADE A REFERENCE TO THE TPO FOR COMPUTATION OF ARM'S LENGTH PRICE IN RELATION T O AN INTERNATIONAL TRANSACTION ENTERED BY ASSESSEE WITH ITS ASSOCIATED ENTERPRISE. THE TPO, AFTER ALLOWING THE ASSESSEE OPPORTUNITY OF BEING HEARD AND AFTER T AKING INTO ACCOUNT THE MATERIAL AVAILABLE WITH HIM, PASSED AN ORDER DATED 29.10.2010 DETERMINING THE ARM'S LENGTH PRICE IN ACCORDANCE WITH SUB-SECTION ( 3) OF SECTION 92CA OF THE ACT. ITA NO.2234/PN/2012 25. IN THE BACKGROUND OF THE ABOVE FACTS, IT NEEDS TO BE ESTABLISHED AS TO WHETHER ON 14.09.2009 WHEN THE ASSESSING OFFICER MA DE A REFERENCE TO THE TPO U/S 92CA(1) OF THE ACT, WAS THERE AN ASSESSMENT PROCEEDINGS U/S 143 OF THE ACT PENDING FOR THE YEAR UNDER CONSIDERATION. IN THE PRESENT CASE, WE ARE DEALING WITH ASSESSMENT YEAR 2007-08 AND ASSESSEE F ILED ITS RETURN OF INCOME ON 05.11.2007. IN TERMS OF CLAUSE (II) TO SUB-SECT ION (2) OF SECTION 143 OF THE ACT, AS IT STOOD AT THE RELEVANT POINT OF TIME, NOT ICE U/S 143(2) OF THE ACT IN ORDER TO SUBJECT THE RETURN OF INCOME TO SCRUTINY A SSESSMENT, SHOULD HAVE BEEN ISSUED WITHIN THIS SIX MONTHS FROM THE END OF THE RELEVANT ASSESSMENT YEAR I.E. UPTO 30.09.2008. THERE IS NO DISPUTE THA T NO SUCH NOTICE HAS BEEN ISSUED WITHIN THE ABOVE STIPULATED PERIOD. A CONSE QUENCE OF THE AFORESAID SITUATION IS THAT THE RETURN OF INCOME FILED BY THE ASSESSEE ON 05.11.2007 BECAME FINAL AS NO SCRUTINY PROCEEDINGS WERE STARTE D WITHIN THE PERIOD STIPULATED IN LAW. THE AFORESAID POSITION IS ALSO REINFORCED BY THE CBDT CIRCULAR NO.549 DATED 31.10.1989. AS PER THE CBDT, IF, AFTER FURNISHING RETURN OF INCOME, AN ASSESSEE DOES NOT RECEIVE A NOTICE U/ S 143(2) OF THE ACT FROM THE DEPARTMENT WITHIN PERIOD STIPULATED IN THE PROV ISO TO SECTION 143(2) OF THE ACT, IT FOLLOWS THAT THE RETURN FILED BY THE ASSESS EE HAS BECOME FINAL AND NO SCRUTINY PROCEEDINGS SHOULD BE STARTED IN RESPECT O F THAT RETURN. IN OTHER WORDS, IN THE PRESENT CASE, ASSESSMENT PROCEEDINGS U/S 143 OF THE ACT CAME TO END AND THE MATTER BECAME FINAL ON 30.09.2008 I. E. THE DATE WITHIN WHICH A NOTICE U/S 143(2) OF THE ACT WAS REQUIRED TO BE ISS UED, WHICH WAS NOT DONE. THE JUDGEMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF VIPAN KHANNA VS. CIT AND OTHERS, 255 ITR 220 (P&H) IS ALSO TO THE SAME EFFECT. IN-FACT, AS PER THE HONBLE PUNJAB & HARYA NA HIGH COURT, IN CASE WHERE A RETURN IS FILED AND IS PROCESSED AND NO NOT ICE UNDER SUB-SECTION (2) OF SECTION 143 THEREAFTER IS SERVED ON THE ASSESSEE WI THIN THE STIPULATED PERIOD, THE ASSESSMENT PROCEEDINGS U/S 143 COME TO AN END A ND MATTER BECOMES FINAL. AS PER THE HONBLE HIGH COURT, ALTHOUGH TEC HNICALLY NO ASSESSMENT IS ITA NO.2234/PN/2012 FRAMED IN SUCH A CASE, YET THE PROCEEDINGS FOR ASSE SSMENT STAND TERMINATED. TO THE SIMILAR EFFECT IS THE RATIO OF THE JUDGEMENT S OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF (I) CIT VS. M. CHELLAPPAN AND ANOTHER, 281 ITR 444 (MADRAS); AND, (II) CIT VS. DEEP BARUAH, 329 ITR 36 2 (MADRAS). 26. IN THIS BACKGROUND, IF ON THE DATE OF MAKING OF REFERENCE TO THE TPO, THE ASSESSMENT PROCEEDINGS U/S 143 OF THE ACT HAD COME TO AN END AND THE PROCEEDINGS FOR ASSESSMENT STOOD TERMINATED, THERE WAS NO OCCASION FOR THE ASSESSING OFFICER TO HAVE MADE A REFERENCE TO THE T PO FOR DETERMINATION OF ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTION S IN TERMS OF SECTION 92CA OF THE ACT. WE HAVE ALREADY INFERRED IN THE EARLIER P ARAS THAT UNDER THE PROVISIONS OF SECTION 92CA OF THE ACT, A REFERENCE TO THE TPO FOR COMPUTATION OF ARM'S LENGTH PRICE IN RELATION TO INTERNATIONAL TRANSACTIONS IS PERMISSIBLE ONLY IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. 27. IN VIEW OF THE AFORESAID DISCUSSION, IT HAS TO BE INFERRED THAT WHEN THE ASSESSING OFFICER MADE REFERENCE TO THE TPO ON 14.0 9.2009 FOR DETERMINATION OF ARM'S LENGTH PRICE IN RELATION TO AN INTERNATION AL TRANSACTION, THERE WAS NO ASSESSMENT PROCEEDINGS PENDING, AND THEREFORE IT WA S AN INVALID REFERENCE. CONSEQUENTLY, THE SUBSEQUENT ORDER PASSED BY THE TP O ON 29.10.2010 (SUPRA) DETERMINING THE ADJUSTMENT OF RS.2,49,48,81 1/- TO THE INTERNATIONAL TRANSACTION IS A NULLITY IN LAW AND VOID AB INITIO . 28. THE NEXT ASPECT IS AS TO WHETHER, IN THE ABOVE CIRCUMSTANCES, THE ORDER OF THE TPO DATED 29.10.2010 (SUPRA) CAN BE A VALID MATERIAL FOR THE ASSESSING OFFICER TO ENTERTAIN A BELIEF THAT CERTAIN INCOME C HARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. ITA NO.2234/PN/2012 29. IN THIS CONTEXT, THE LD. CID-DR HAS VEHEMENTLY POINTED OUT THAT THE RETURN OF INCOME FILED BY THE ASSESSEE INCLUDED INT ERNATIONAL TRANSACTIONS ENTERED WITH THE ASSOCIATED ENTERPRISE AND SUCH RET URN OF INCOME WAS REQUIRED TO BE TAKEN-UP FOR COMPULSORY SCRUTINY, AS PER THE NORMS OF THE CBDT RELATING TO ASSESSMENT YEAR 2007-08. THEREFORE, WHEN SUCH A RETURN OF INCOME WAS NOT PICKED UP FOR A SCRUTINY ASSESSMENT WITHIN THE STIPULATED PERIOD, THE ONLY COURSE FOR THE REVENUE WAS TO ISSUE NOTICE U/S 148 OF THE ACT ON THE GROUND THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT. SECONDLY, IT IS POINTED OUT THAT THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 05.11.2007 WITH CIRCLE 11(2), PUNE WHEREAS FORM NO. 3CEB FOR THE SAME ASSESSMENT YEAR WAS FILED IN CIRCLE 1(1), PUNE ON 3 1.10.2007. IT IS ONLY ON 28.07.2009, FORM NO.3CE B WAS RECEIVED BY THE PRESE NT ASSESSING OFFICER I.E. CIRCLE 1(1) WHEREIN IT WAS SEEN THAT ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRI SES. FOR THIS REASON, THE CASE OF THE ASSESSEE HAD ESCAPED FROM COMPULSORY SE LECTION FOR SCRUTINY. ON THIS BASIS, IT IS SOUGHT TO BE POINTED OUT THAT THE RE-OPENING OF ASSESSMENT BY ISSUANCE OF NOTICE U/S 147/148 OF THE ACT IS JUSTIF IED. 30. APART FROM THE AFORESAID, IT WAS ALSO VEHEMENTL Y ARGUED THAT ANY ILLEGALITY OR IRREGULARITY IN MAKING OF A REFERENCE TO THE TPO U/S 92CA OF THE ACT CANNOT RENDER THE SUBSEQUENT ORDER PASSED BY THE TP O U/S 92CA(3) OF THE ACT AS A NULLITY QUA THE BELIEF ENTERTAINED BY THE ASSESSING OFFICER THAT CERTAIN INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT ON ACCOUNT OF DETERMINATION OF ARM'S LENGTH PRICE OF THE INTERNAT IONAL TRANSACTION WITH THE ASSOCIATED ENTERPRISE. THE LD. CIT-DR SUBMITTED TH AT IN THE CASE OF THE POORAN MAL VS. DIT, (1974) 93 ITR 505 (SC), THE COU RT HAD REFUSED TO EXCLUDE FROM THE PURVIEW OF ASSESSMENT EVEN THE MATERIAL AN D EVIDENCE WHICH WAS OBTAINED BY THE DEPARTMENT EVEN THROUGH A ILLEGAL S EARCH AND SEIZURE ACTION. DRAWING A SIMILAR ANALOGY TO THE FACTS OF THE PRESE NT CASE, IT IS CONTENDED THAT ITA NO.2234/PN/2012 AN ILLEGAL OR INCORRECT REFERENCE TO THE TPO WOULD NOT INVALIDATE THE ARM'S LENGTH PRICE DETERMINED BY HIM U/S 92CA(3) OF THE A CT, WHICH SHOWED THAT AN ADJUSTMENT OF RS.2,49,43,811/- WAS REQUIRED TO BE M ADE TO THE STATED VALUES OF THE INTERNATIONAL TRANSACTION. THEREFORE, THE A FORESAID MATERIAL PROVIDED A GOOD GROUND FOR THE ASSESSING OFFICER TO FORMULATE A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. 31. AT THE OUTSET, WE MAY NOTICE THAT THE VALIDITY OF THE NOTICE REOPENING THE ASSESSMENT U/S 148 OF THE ACT HAS TO BE DETERMINED ON THE BASIS OF THE REASONS WHICH ARE DISCLOSED TO THE ASSESSEE. THOSE REASONS CONSTITUTE THE FOUNDATION OF THE ACTION INITIATED BY THE ASSESSING OFFICER OF REOPENING THE ASSESSMENT. THE AVERMENTS MADE BY THE LD. CIT-DR R EGARDING THE COMPULSORY SCRUTINY OF RETURNS WHICH INVOLVED INTER NATIONAL TRANSACTIONS AND/OR THAT THE FORM NO.3CEB WAS NOT FILED WITH THE ASSESS ING OFFICER, ARE REASONS WHICH ARE NOT FINDING A PLACE IN THE REASONS RECORD ED BY THE ASSESSING OFFICER FOR RE-ASSESSMENT. THE REASONS RECORDED BY THE ASS ESSING OFFICER FOR RE- ASSESSMENT, HAVE ALREADY BEEN REPRODUCED BY US IN T HE EARLIER PART OF THIS ORDER. ITS A TRITE LAW THAT THE REASONS RECORDED BY THE ASSESSING OFFICER ARE ALONE TO BE EXAMINED SO AS TO TEST THEIR VALIDITY. IN THIS CONTEXT, A REFERENCE CAN BE MADE TO THE JUDGEMENT OF THE HONBLE DELHI H IGH COURT IN THE CASE OF NORTHERN EXIM (P) LTD. VS. DCIT, (2012) 20 TAXMANN. COM 466 (DELHI) WHEREIN IT HAS BEEN HELD THAT A COURT IS TO BE GUIDED ONLY BY THE REASONS RECORDED FOR RE-ASSESSMENT AND NOT BY THE REASONS OR EXPLANATION GIVEN BY THE REVENUE AT A LATER STAGE IN RESPECT OF THE NOTICE OF RE-ASSESS MENT. THE HONBLE DELHI HIGH COURT AFTER MAKING A REFERENCE TO THE FOLLOWIN G JUDGEMENTS :- (I) JAMNA LAL KOBRA VS. ITO (1968) 69 ITR 461 (ALL. ); (II) CIT VS. AGARWALLA BROS. (1991) 189 ITR 786 (PA T.); (III) G.M. RAJGHARIA VS. ITO, (1975) 98 ITR 486 (PA T.); (IV) ASA JOHN DEVINATHAN VS. ADDL. CIT, (1980) 126 ITR 270 (MAD.); ITA NO.2234/PN/2012 (V) EAST COAST COMMERCIAL CO. LTD. VS. ITO, (1981) 128 ITR 326 (CAL.); (VI) EQUITABLE INVESTMENT CO. (P.) LTD. VS. ITO, (1 988) 174 ITR 714 (CAL.); AND, (VII) S. SREERAMACHANDRA MURTHY VS. DCIT, (2000) 24 3 ITR 427 (AP). HELD AS UNDER :- THE RATIO LAID DOWN IN ALL THESE CASES IS THAT, HA VING REGARD TO THE ENTIRE SCHEME AND PURPOSE OF THE ACT, THE VALIDITY OF THE ASSUMPTION OF JURISDICTION UNDER SECTION 147 CAN BE TESTED ONLY B Y REFERENCE TO THE REASONS RECORDED UNDER SECTION 148(2) OF THE ACT AND THE AS SESSING OFFICER IS NOT AUTHORIZED TO REFER TO ANY OTHER REASON EVEN IF IT CAN BE OTHERWISE INFERRED AND/OR GATHERED FROM THE RECORDS. HE IS CONFINED T O THE RECORDED REASONS TO SUPPORT THE ASSUMPTION OF JURISDICTION. HE CANNOT RECORD ONLY SOME OF THE REASONS AND KEEP THE OTHERS UP HIS SLEEVES TO BE DI SCLOSED BEFORE THE COURT IF HIS ACTION IS EVER CHALLENGED IN A COURT OF LAW. 32. TO THE SIMILAR EFFECT IS THE JUDGEMENT OF THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF 31 INFOTECH LTD. VS. ACIT, (2010) 32 9 ITR 257 (BOM.) WHEREIN IT HAS BEEN HELD THAT THE VALIDITY OF THE REOPENING OF ASSESSMENT HAS TO BE DETERMINED WITH REFERENCE TO THE REASONS WHICH HAD WEIGHED WITH THE ASSESSING OFFICER AND THOSE CANNOT BE ADDED TO OR S UPPORTED ON A BASIS WHICH WAS NOT PRESENT TO THE MIND OF THE ASSESSING OFFICER WHEN HE ISSUED THE NOTICE TO REOPEN THE ASSESSMENT. AS A CONSEQUE NCE OF OUR AFORESAID DISCUSSION, WE ARE UNABLE TO CONSIDER THE VALIDITY OF THE ISSUANCE OF NOTICE OF RE-ASSESSMENT BASED ON THE EXPLANATION/REASONS NOW SOUGHT TO BE SUPPLEMENTED BY THE LD. CIT-DR, WHICH OTHERWISE DO NOT FIND A PLACE IN THE REASONS RECORDED BY THE ASSESSING OFFICER. 33. WE HAVE ALSO CAREFULLY CONSIDERED THE OTHER PLE A RAISED BY THE LD. CIT- DR BASED ON THE JUDGEMENT OF THE HONBLE SUPREME CO URT IN THE CASE OF POORAN MAL (SUPRA). IT IS QUITE WELL-SETTLED THAT ANY ILLEGALITY OR IRREGULARITY IN OBTAINING MATERIAL OR EVIDENCE WOULD NOT PRECLUDE T HE REVENUE AUTHORITIES FROM UTILIZING THE SAME IN ASSESSMENT OF INCOME UNL ESS THE GENUINENESS AND ITA NO.2234/PN/2012 CORRECTNESS OF THE MATERIAL OR EVIDENCE IS IN DOUBT . SO HOWEVER, IN THE PRESENT CASE, WE ARE NOT DEALING WITH THE POWER OF THE ASSE SSING OFFICER TO COMPUTE INCOME OF THE ASSESSEE ARISING FROM AN INTERNATIONA L TRANSACTION BASED ON THE ARM'S LENGTH PRICE DETERMINED BY THE TPO. INDEED, AS WE HAD SEEN EARLIER THE COMPUTATION OF TOTAL INCOME FROM AN INTERNATIONAL T RANSACTION HAS TO BE DONE BY THE ASSESSING OFFICER UNDER SUB-SECTION (4) OF S ECTION 92C READ WITH SUB- SECTION (4) OF SECTION 92CA OF THE ACT HAVING REGAR D TO THE ARM'S LENGTH PRICE DETERMINED BY THE TPO. THERE IS NO DISPUTE ON THE SAID ASPECT. IN THE PRESENT CASE, THE POINT MADE OUT BY THE ASSESSEE IS THAT A NONEST AND VOID AB INITIO ORDER PASSED BY THE TPO ON 29.10.2010 DETERMINING THE ARM'S LENGTH PRICE U/S 92CA(3) OF THE ACT CANNOT FORM A BASIS TO FORMULATE A BELIEF THAT CERTAIN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESS MENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. THE CONTROVERSY IN THE PRESENT CASE HAS TO BE ADJUDICATED IN THE LIGHT OF THE PARAMETERS OF SECTI ON 147/148 OF THE ACT. IN A SOMEWHAT SIMILAR SITUATION, THE HONBLE RAJASTHAN H IGH COURT IN THE CASE OF BRIG B. LAL VS. WTO, 127 ITR 308 (RAJ.) WAS DEALING WITH A SITUATION WHERE THE REOPENING OF ASSESSMENT WAS BASED ON A REPORT SUBMI TTED BY THE VALUATION OFFICER IN AN INVALID REFERENCE. AS PER THE HONBL E HIGH COURT, A REPORT SUBMITTED BY THE VALUATION OFFICER IN AN INVALID RE FERENCE MUST BE TREATED AS A NULLITY IN THE EYES OF LAW, NONEST AND VOID AB INITIO . ACCORDING TO THE HONBLE HIGH COURT, WHERE THE REOPENING OF ASSESSMENT WAS B ASED ON SUCH ILLEGAL, NULL AND VOID REPORT, THE ENTIRE FABRIC FOR REOPENI NG OF THE ASSESSMENT PROCEEDINGS FALLS FLAT. IN OUR CONSIDERED OPINION, THE RATIO OF THE JUDGEMENT OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF BRI G B. LAL (SUPRA) IS SQUARELY APPLICABLE IN THE PRESENT CASE. THEREFORE, HAVING REGARD TO THE PECULIAR FACTS OF THE PRESENT CASE, THE PROPOSITION SOUGHT TO BE C ANVASSED BY THE LD. CIT-DR BASED ON THE DECISION IN THE CASE OF POORAN MAL (SU PRA) DOES NOT VALIDATE THE ISSUANCE OF NOTICE U/S 148 OF THE ACT TO REOPEN THE ASSESSMENT IN THE PRESENT CASE. ITA NO.2234/PN/2012 34. THE LD. CIT-DR ALSO RELIED UPON THE JUDGEMENT O F THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S COCA COLA IND IA INC VS. ACIT, (2009) 177 TAXMANN.COM 103 TO SAY THAT AN ORDER PASSED BY THE TPO CAN BE A REASON FOR RE-ASSESSMENT OF INCOME U/S 147/148 OF T HE ACT. THE ABOVE PROPOSITION CANVASSED BY THE LD. CIT-DR IS NOT AN A BSOLUTE PROPOSITION, AND THE JUDGEMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S COCA COLA INDIA INC (SUPRA) HAS TO BE APPRECIATED I N THE LIGHT OF THE FACT- SITUATION THEREIN. IN THE CASE OF M/S COCA COLA IN DIA INC (SUPRA), THE STAND OF THE REVENUE WAS THAT ASSESSEE WAS SUPPRESSING ITS P ROFIT IN ITS TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISES IN THE PERIOD PRIOR TO THE ASSESSMENT YEAR 2002-03. THE REVENUE CONTENDED THE SUPPRESSION OF PROFITS ON THE GROUND OF AN ORDER PASSED BY THE TPO UNDER CHAPTER X AFTER 01 .04.2002 IN RELATION TO AN ASSESSMENT YEAR AFTER 01.04.2002. SUCH ORDER OF THE TPO FORMED THE BASIS FOR THE ASSESSING OFFICER TO FORMULATE A BELI EF THAT THERE WAS AN ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE ACT FOR THE PERIOD PRIOR TO ASSESSMENT YEAR 2002-03. PERTINENT LY, IN THE PERIOD PRIOR TO ASSESSMENT YEAR 2002-03, THE UN-AMENDED PROVISIONS OF SECTION 92 OF THE ACT DID NOT PROVIDE FOR AN ORDER BY THE TPO DETERMINING ARM'S LENGTH PRICE. THE ASSESSEE ATTACKED THE INITIATION OF PROCEEDINGS U/S 147/148 OF THE ACT FOR A PERIOD PRIOR TO ASSESSMENT YEAR 2002-03 CONTENDING THAT THE ORDER OF THE TPO PASSED UNDER CHAPTER X SUBSEQUENT TO THE AMENDMENT MADE WITH EFFECT FROM 01.04.2002 IN RESPECT OF A SUBSEQUENT ASSESSMENT YE AR WAS IRRELEVANT. IN OTHER WORDS, ASSESSEE CANVASSED THAT THE ORDER OF T HE TPO IN RESPECT OF A SUBSEQUENT ASSESSMENT YEAR COULD NOT BE A GROUND TO REOPEN THE ASSESSMENT OF A YEAR WHICH WAS PRIOR TO THE AMENDMENT OF SECTI ON 92 OF THE ACT WITH EFFECT FROM 01.04.2002. THE HONBLE HIGH COURT DISAGREED WITH THE ASSESSEES DEFENSE AND UPHELD THE ACTION OF THE ASSESSING OFFI CER IN TAKING INTO ACCOUNT THE SUBSEQUENT ORDER OF THE TPO FOR FORMING A BELIE F THAT CERTAIN INCOME LIABLE TO TAX HAD ESCAPED ASSESSMENT EVEN IN RELATION TO A N ASSESSMENT YEAR PRIOR ITA NO.2234/PN/2012 TO THE INSERTION OF 92CA OF THE ACT WITH EFFECT FRO M 01.04.2002. AS PER THE HONBLE HIGH COURT, THE ORDER OF THE TPO COULD CERT AINLY HAVE NEXUS FOR REACHING A CONCLUSION THAT INCOME HAS BEEN INCORREC TLY ASSESSED OR HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 14 7 OF THE ACT. THE PROPOSITION LAID DOWN BY THE HONBLE HIGH COURT IS TO THE EFFECT THAT THE ORDER OF THE TPO PASSED U/S 92CA OF THE ACT AFTER 01.04.2 002 I.E. UNDER THE AMENDED PROVISIONS, CAN BE ONE OF THE REASONS FOR R E-ASSESSMENT FOR A PERIOD PRIOR TO THE INTRODUCTION OF THE AMENDED CHAPTER X WITH EFFECT FROM 01.04.2002. CLEARLY, THE DISPUTE IN THE CASE OF M/ S COCA COLA INDIA INC (SUPRA) STOOD ON A DIFFERENT FOOTING THAN THE DISPU TE BEFORE US. IN THE CASE OF M/S COCA COLA INDIA INC (SUPRA), IT WAS NOBODYS CA SE THAT THERE WAS ANY ILLEGALITY IN THE REFERENCE MADE TO THE TPO OR THAT THE ORDER OF THE TPO WAS VOID AB INITIO WITH RESPECT TO THE ASSESSMENT YEAR FOR WHICH THE TPO PASSED THE ORDER U/S 92CA(3) OF THE ACT. THE ONLY POINT W AS WHETHER ORDER OF THE TPO PASSED U/S 92CA(3) OF THE ACT FOR A SUBSEQUENT ASSESSMENT YEAR COULD FORM A BASIS FOR THE ASSESSING OFFICER TO FORMULATE A BELIEF ABOUT THE ESCAPEMENT OF INCOME IN A PRECEDING ASSESSMENT YEAR WHEN THE AMENDED REGIME OF CHAPTER X WAS NOT ON THE STATUTE. THE FA CTS AND CIRCUMSTANCES IN THE PRESENT CASE ARE ENTIRELY DIFFERENT AND THEREFO RE THE JUDGEMENT OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S COCA COLA INDIA INC (SUPRA) DOES NOT HELP THE CASE OF THE REVENUE. 35. AS A CONSEQUENCE, WE CONCLUDE BY HOLDING THAT T HE REASONS RECORDED BY THE ASSESSING OFFICER IN THE PRESENT CASE DO NOT MEET WITH THE REQUIREMENTS OF SECTION 147 OF THE ACT AND THEREFOR E THE ASSESSING OFFICER HAD NO JURISDICTION TO ISSUE NOTICE U/S 148 OF THE ACT DATED 14.01.2011. AS A CONSEQUENCE, THE SUBSEQUENT ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 147 AND 144C(13) OF THE ACT IS LIABLE TO BE QUASHED. W E HOLD SO. ITA NO.2234/PN/2012 36. AS THE PRELIMINARILY ISSUE RAISED BY THE ASSESS EE REGARDING THE ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND THE IMPUGNED ASSESSMENT HAS BEE N QUASHED, THE REMAINING GROUNDS OF APPEAL RAISED BY THE ASSESSEE REGARDING THE MERITS OF THE ADDITIONS ARE RENDERED ACADEMIC. THEREFORE, SU CH GROUNDS ARE NOT ADJUDICATED FOR THE PRESENT. 37. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED, AS ABOVE. ORDER PRONOUNCED ON 02 ND FEBRUARY, 2015. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 02 ND FEBRUARY, 2015. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE DRP, PUNE; 4) THE DIT (INTERNATIONAL TAXATION), PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE