ESSAR STEEL LTD, MUMBAI V. ADDL CIT 5(1), MUMBAI

ITA 4007/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8364 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Next Hearing Date: 22-10-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 17-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJEET KUMAR JAIN
• Keywords: Transfer pricing; Arm length price
• Section: 92C; 143(3); 115JB; 263; 154

Judgement Text

ITA NO.4007 OF 2010 ESSAR STEEL LTD MUMBAI PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL 'K' BENCH, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.4007/MUM/2010 (ASSESSMENT YEAR: 2005-06) ESSAR STEEL LIMITED, GROUP TAXATION, ESSAR HOUSE, NO.11 K.K. MARG, MAHALAXMI, MUMBAI-400034 PAN: AAACE 1741 P VS. ADDL. COMMISSIONER OF INCOME TAX 5(1) AAYAKAR BHAVAN, MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI VIJAY MEHTA DEPARTMENT BY: SHRI AJEET KUMAR JAIN DATE OF HEARING: 22/10/2012 DATE OF PRONOUNCEMENT: 31/10/2012 O R D E R PER BENCH. THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT-5, MUMBAI, DATED 29/03/2010 UNDER SECTION 263 OF THE I NCOME TAX ACT. THE SHORT ISSUE FOR CONSIDERATION IS WHETHER T HE CIT-5 IS CORRECT IN INVOKING THE JURISDICTION UNDER SECTION 263 FOR SETTING ASIDE THE ORDER OF ASSESSING OFFICER U/S 143(3) DAT ED 01.01.08 WHICH WAS PASSED IN CONSONANCE WITH THE TPOS ORDER DETERMINING THE ARMS LENGTH PRICE FOR CERTAIN TRANSACTIONS. 2. BRIEFLY STATED, ASSESSEE FILED RETURN OF INCOME ON 31.10.2005 DECLARING TAXABLE INCOME AT NIL AND BOOK PROFIT UND ER SECTION 115JB AT ` .59,82,70,426/-. SUBSEQUENTLY THE RETURN WAS REVIS ED DECLARING NIL INCOME AND BOOK PROFIT UNDER SECTION 115JB AT N IL. IN THE SCRUTINY PROCEEDINGS, AS ASSESSEE HAS SOLD SOME SHA RES AND CLAIMED LONG TERM CAPITAL LOSS, AO REFERRED THE MAT TER TO THE TPO- I(3) FOR DETERMINATION OF ARMS LENGTH PRICE FOR TH ESE TRANSACTIONS. DURING THE YEAR ASSESSEE SOLD 10,700 EQUITY SHARES IN PT ESSAR ITA NO.4007 OF 2010 ESSAR STEEL LTD MUMBAI PAGE 2 OF 10 DHANANJAYA IN INDONESIA TO M/S. ESSAR GLOBAL LTD, M AURITIUS, A NON-RESIDENT ASSOCIATE CONCERN OF ASSESSEE. TPO-I( 3) AFTER ANALYZING THE ISSUE AND REJECTING THE NET ASSET VALUE ADOPTED BY ASSESSEE WHILE SUPPORTING THE SALE PRICE HOWEVER, CONSIDERED THAT THE MOST APPROPRIATE METHOD IS THE PE METHOD AND DETERMINED THE ARMS LENGTH PRICE AND THE VALUE OF THE SHARE AT USD7197. 22 PER SHARE. THEREFORE, HE ARRIVED AT THE COST OF TOTAL SALE PRI CE AT ` 335.61 CRORES. AS ASSESSEE HAS SOLD THE SHARES AT ` .33.36 CRORES THIS RESULTED IN ENHANCEMENT OF TOTAL INCOME BY ` .302.24 CRORES. TPO ORDER WAS DT. 22-11-07. AO FOLLOWING THE PROVISIONS OF THE ORDER HAVE TO ADOPT THIS VALUE. HOWEVER, IN THE MEANTIME NOTICING THAT THERE WAS AN ERROR IN COMPUTING THE PE RATIO OF ESSAR STEEL LTD, TPO PASSED AN ORDER U/S 154 READ WITH 92CA(5) DT.19-12-07 REDUCIN G THE ARM LENGTH PRICE TO ` .44,99,23,887/- THEREBY THE DIFFERENCE IN SHARES WORKED OUT AT ` .11,62,46,042/-. AS AGAINST THE CAPITAL LOSS CLAIME D AT ` .19.04 CRORES, THE LONG TERM CAPITAL LOSS WAS DETER MINED AT ` .7.41 CRORES WHICH COULD NOT BE ADJUSTED FROM ANY O THER SOURCE AND WAS ALLOWED TO BE CARRIED FORWARD BY THE ORDER OF AO DATED 1.1.2008. 3. SUBSEQUENTLY THE DIT (TP-I) VIDE HIS LETTER NO. DIP (TP)- I/MUM/REVISION/2007-08 DATED 28.12.2007 FORWARDED A PROPOSAL SUBMITTED BY THE TPO FOR CONSIDERING ACTION UNDER S ECTION 263 OF THE INCOME TAX ACT. IT WAS THE CONTENTION OF THE TP O THAT THE TRANSFER PRICING ORDER DATED 22.11.2007 REJECTING T HE NET ASSET VALUE (NAV) METHOD WAS NOT CORRECT AND THE CORRECT METHOD SHOULD HAVE BEEN TO DETERMINE UNDER NAV METHOD ACCORDING TO WHI CH THE RECTIFIED ARMS LENGTH PRICE WOULD COME TO US$ 2454. 46 AND YIELD METHOD WOULD ARRIVE AT US$ 964.87, THEREBY THE AVER AGE VALUE PER SHARE WOULD COME TO US$ 1709.46. THIS WOULD RESULT IN UNDER VALUATION OF RS. 34,72,05,236/-. ACCORDINGLY, THE C IT WAS REQUESTED TO INITIATE PROCEEDINGS U/S 263 ON THE TPO ORDER WH ICH ACCORDING TO ITA NO.4007 OF 2010 ESSAR STEEL LTD MUMBAI PAGE 3 OF 10 THE TPO WAS ERRONEOUS AND PREJUDICIAL TO THE INTERE ST OF THE REVENUE. 4. THE CIT FOLLOWING THE ABOVE REQUEST FROM THE DIT IN ITIATED PROCEEDINGS UNDER SECTION 263 AND ISSUED A SHOW CAU SE NOTICE TO ASSESSEE SEEKING ITS COMMENTS, WHY PROCEEDINGS UNDE R SECTION 263 COULD NOT BE INITIATED. IN THE SHOW CAUSE NOTICE IT WAS CLEARLY STATED THAT THE TRANSFER PRICING OFFICER HAS POINTED OUT T HAT THE ARMS LENGTH PRICE TRANSACTIONS HAS BEEN ERRONEOUSLY UNDE R DETERMINED BY HIM BY ` .34.72 CRORES WHICH WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ASSESSEE FILED ITS OBJECTIONS WHICH WERE S UMMARIZED BY THE CIT IN PAGE-5 OF THE ORDER UNDER SECTION 263. T HE CIT AFTER CONSIDERING THE ISSUE AND RELYING ON VARIOUS CASE L AW SET ASIDE THE ORDER OF AO HOLDING THAT IT IS ERRONEOUS IN SO FAR AS AO HAS NOT ADOPTED ARMS LENGTH PRICE AS DETERMINED BY THE TPO , THEREFORE, PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFO RE, HE SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO REFRAME THE SA ME AFTER CONSIDERING THE OBSERVATIONS GIVEN ABOVE (IN THE OR DER UNDER SECTION 263) AND AFTER GIVING ASSESSEE A REASONABLE OPPORTU NITY OF BEING HEARD. THIS WAS CHALLENGED BY ASSESSEE IN THE PRESE NT APPEAL. 5. THE LEARNED COUNSEL REFERRED TO THE PROVISIONS OF S ECTION 92CA(4) TO SUBMIT THAT AO AFTER RECEIPT OF THE ORDE R UNDER SUB- SECTION 3 OF SECTION 92CA HAS PROCEEDED TO COMPUTE THE TOTAL INCOME OF ASSESSEE IN CONFORMITY WITH THE ARMS LEN GTH PRICE AS DETERMINED BY THE TPO. REFERRING TO THE ORDERS PASS ED BY THE TPO, IT WAS SUBMITTED THAT THE TPO ORIGINALLY DETERMINED A HIGHER AMOUNT AS ARMS LENGTH PRICE AND HAVING NOTICED AN ERROR IN COMPUTATION PASSED AN ORDER UNDER SECTION 154 WHICH WAS FORWARDED TO AO AND AO IN COMPLIANCE TO THE PROVISI ONS OF SUB- SECTION 4 OF 92CA ADOPTED THE SAME VALUE. THEREFORE , THE ORDER OF AO WHICH WAS SUBJECT MATTER OF REVISION BY THE CIT DOES NOT SUFFER ANY MISTAKE OR ERROR. ITA NO.4007 OF 2010 ESSAR STEEL LTD MUMBAI PAGE 4 OF 10 6. ANOTHER CONTENTION WAS THAT IN PAGE 2 OF THE CITS ORDER REFERENCE WAS MADE TO THE REVISED ORDER OF TPO-I(3) ON THE BASIS OF WHICH THE CIT DIRECTED AO TO REVISE THE COMPUTATION , WHEREAS THERE IS NO SUCH ORDER BY THE TPO-I(3). IT WAS THE SUBMIS SION THAT ONCE A REFERENCE WAS MADE BY AO DURING THE ASSESSMENT PROC EEDINGS WHICH CULMINATED BY THE ORDER OF THE TPO DATED 22.1 1.2007 THE TPO CANNOT REVISE HIS OWN ORDER UNLESS THERE WAS AN Y OTHER REFERENCE. THERE WAS NO ORDER PASSED BY THE TPO AFT ER CONCLUSION OF PROCEEDINGS THEREFORE, REFERENCE TO THE REVISED ORD ER OF THE TPO BY THE CIT WHILE INITIATING PROCEEDINGS U/S 263 ITSELF IS FACTUALLY WRONG. IN SUPPORT, HE FILED THE ORDER OF THE ASSESS MENT PASSED BY AO CONSEQUENT TO THE PROCEEDINGS UNDER SECTION 263 TO SUBMIT THAT EVEN THE REVISED ASSESSMENT ORDER THERE IS NO REFER ENCE TO REVISED TPO ORDER. I IT WAS THE CONTENTION THAT INTERNAL CO MMUNICATION BETWEEN THE DIT AND THE CIT CANNOT BE CONSIDERED AS AN ORDER. SINCE THE ORIGINAL ORDER PASSED BY THE TPO WHICH IS VALID EVEN AS OF NOW, HAS BEEN COMPLIED WITH BY AO, THERE CANNOT BE ANY MODIFICATION OF THE SAID ORDER AND ANY OTHER ACTION TAKEN BY AO IS IN VIOLATION OF PROVISIONS OF SECTION 92CA(4). 7. THE NEXT CONTENTION OF THE AR WAS THAT THE LEARNED CIT HAS NOT APPLIED HIS MIND WHILE COMING TO THE SATISFACTI ON THAT THERE WAS AN ERRONEOUS ORDER AS AT THE TIME OF INITIATION ITS ELF HE REFERRED TO THE NON EXISTING REVISED TPO ORDER AND WHILE PASSIN G THE ORDER ALSO HE REFERRED TO THE REVISED ORDER OF THE TPO AND DIR ECTED AO TO ADOPT THE SAME ORDER WHICH IN FACT DOES NOT EXIST. THEREF ORE, THE ORDER IS BAD IN LAW. 8. THE NEXT SUBMISSION OF THE COUNSEL WAS THAT EVEN ON MERIT WHEN THERE ARE TWO VIEWS POSSIBLE, TO VALUE EITHER ON NET ASSET VALUE OR ON PRICE EARNING METHOD AND TPO ADOPTED ONE METH OD ON ONE OF THE POSSIBLE VIEW, THERE CANNOT BE ANY ACTION UNDER SECTION 263 AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CI T VS. MAX INDIA LIMITED, 295 ITR 282(SC). HE ALSO QUESTIONED THE JU RISDICTION OF THE ITA NO.4007 OF 2010 ESSAR STEEL LTD MUMBAI PAGE 5 OF 10 CIT TO REVISE THE ORDER OF AO U/S 143(3) WHICH IS I N CONFORMITY WITH THE ORDER OF THE TPO AS PER SECTION 92CA(4), WHEREA S THE PROPOSAL BY THE TPO IS TO INITIATE ACTION UNDER SECTION 263 ON THE TPO ORDER ITSELF. 9. THE LEARNED DR HOWEVER, IN REPLY SUBMITTED THAT ACC ORDING TO THE BOARD CIRCULAR, THE ORDERS OF THE TPO ARE APPRO VED BY THE DIT. THEREFORE, THE CIT HAS JURISDICTION TO REVISE THE O RDER OF AO UNDER SECTION 263 WHEN IT IS POINTED OUT THAT THERE WAS E RROR IN COMPUTATION OF ARMS LENGTH PRICE BY THE TPO HIMSELF . HE RELIED ON THE COORDINATE BENCH DECISION IN THE CASE OF SUN MI CROSYSTEMS INDIA PVT. LTD VS. CIT IN ITA NO. 661(BANG.)2007 DA TED 29 TH MARCH, 2011. HE ALSO REFERRED TO THE HON'BLE SUPREME COURT DECISION IN THE CASE OF T.N. CIVIL SUPPLIES CORPORATION LTD VS. CIT , 260 ITR 82 (SC) TO SUBMIT THAT THE CIT HAS POWER TO REVISE THE ORDE R WHICH WAS PASSED ON THE DIRECTIONS OF SUPERIOR AUTHORITY EITH ER UNDER SECTION 144A OR SECTION 144B. HE REFERRED TO THE FACTS TO S UBMIT THAT THE CIT HAS VALIDLY INVOKED THE JURISDICTION UNDER SECT ION 263 TO SET ASIDE THE ORDER OF AO. 10. THE LEARNED COUNSEL IN REPLY RELIED ON THE AMENDED PROVISIONS OF SECTION 92CA(4) TO SUBMIT THAT THE WO RDS HAVING REGARD TO HAS BEEN AMENDED W.E.F. 1.6.2007 AND MAN DATED THAT AO HAS TO PROCEED TO COMPUTE IN CONFORMITY WITH THE AR MS LENGTH PRICE AS DETERMINED BY TPO. THEREFORE, WHEN AO HAS COMPLI ED WITH THE ARMS LENGTH PRICE DETERMINED BY THE TPO, THERE CANN OT BE ANY ERROR IN THE ORDER SO AS TO REVISE UNDER SECTION 263. 11. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RECOR D. THERE IS NO DISPUTE WITH REFERENCE TO THE FACT THAT ASSES SEE HAS SOLD SOME SHARES IT WAS HOLDING IN PT ESSAR DHANANJAYA IN IND ONESIA TO M/S. ESSAR GLOBAL LTD, MAURITIUS. IT HAS CLAIMED LONG TE RM CAPITAL LOSS AT ` .19,04,35,383/-. IT FILED VALUERS REPORT WHEREIN TH E VALUER ADOPTED THE AVERAGE OF NET ASSET VALUE AND PRICE EARNING VA LUE TO SUPPORT ASSESSEE SALE PRICE. THE RBI ALSO APPROVED THE SALE BASED ON THE ITA NO.4007 OF 2010 ESSAR STEEL LTD MUMBAI PAGE 6 OF 10 VALUERS REPORT. IN ASSESSMENT PROCEEDINGS, AO REFE RRED THE MATTER TO THE TPO-I(3) FOR DETERMINATION OF ARMS LENGTH PR ICE ON THESE SALE TRANSACTIONS. THE TPO AFTER ANALYZING THE ISSUE, IN HIS ORDER DT. 22- 11-07 RUNNING TO 23 PAGES, REJECTED THE NET ASSET V ALUE ADOPTED BY THE VALUER AND DISCUSSED THE MOST APPROPRIATE METHO D VIDE PARA 7.6 AND DETERMINED THE ARMS LENGTH PRICE AT ` .335,61,06,459/-. SUBSEQUENTLY, HE NOTICED AN ERROR IN CALCULATION AN D VIDE ORDER DATED 19.12.2007 HE MODIFIED THE ORDER INVOKING 92C A(5) AND DETERMINED THE ARMS LENGTH PRICE AT ` .44,99,23,887/-. AS ASSESSEE HAS SHOWN SALE VALUE AT ` .33,36,76,364/- THE ENHANCEMENT PROPOSED AS PER THE TPO ORDER DATED 19.12.2007 AT ` .11,62,47,523/- WAS ADOPTED BY AO IN THE ASSESSMENT ORDER DATED 01.01.2008. 12. THE ENTIRE ISSUE BOILS DOWN TO THE REFERENCE BY THE CIT TO THE REVISED ORDER OF THE TPO-I(3) WHICH WAS STATED TO H AVE BEEN FORWARDED TO THE CIT BY THE DIT(TP-I) VIE HIS LETTE R NO. DIP(TP)- I/MUM/REVISION/2007-08 DATED 28.12.2007. EVEN THOUG H THE LEARNED CIT REFERRED TO THE REVISED ORDER OF THE TP O, THERE IS NO SUCH REVISED ORDER ON RECORD, EXCEPT A PROPOSAL BY THE TPO TO THE DIT THAT THE VALUE ACCORDING TO NET ASSET VALUE SHO ULD HAVE BEEN DETERMINED AND AVERAGE PRICE COULD HAVE BEEN TAKEN (REASONS FOR CONSIDERATION FOR REVISION UNDER SECTION 263 BY THE TPO WERE PLACED IN THE PAPER BOOK AT PAGE NOS. 40 TO 45). THIS INDI CATE THAT AFTER PASSING THE ORDER UNDER SECTION 154, THE TPO SENT A PROPOSAL FOR RECTIFICATION OF THE SAID ORDER DATED 22.11.2007. A PROPOSAL BY THE TPO CLEARLY INDICATES THAT THE ORDER UNDER SECTION 92CA(3) DATED 22.11.2007 THAT WAS RECTIFIED THE ORDER UNDER SECTI ON 92CA(5) R.W. SECTION 154 DATED 19.12.2007, BE CONSIDERED FOR REV ISION UNDER SECTION 263. HOWEVER, INSTEAD OF REVISING THE TPO O RDER AS PROPOSED, THE LEARNED CIT REVISED THE ORDER PASSED BY AO UNDER SECTION 143(3) DT. 01.01.2008. IN OUR VIEW, THE CIT ERRED IN REVISING THE ASSESSMENT ORDER WHEREAS THE PROPOSAL IS FOR RE VISING THE TPO ITA NO.4007 OF 2010 ESSAR STEEL LTD MUMBAI PAGE 7 OF 10 ORDER. THIS ACTION OF THE CIT CANNOT BE CONSIDERED AS APPROPRIATE ACTION AS SO LONG THE ORDER OF THE TPO DATED 22.11. 2007 WAS NOT REVISED AND WAS BINDING ON AO UNDER SECTION 92CA(4) . THERE IS NO POINT IN DIRECTING AO TO FOLLOW THE REVISED TPO ORD ER WHICH WAS NOT IN EXISTENCE. EVEN AS SEEN FROM THE ORDER UNDER SEC TION 143 R.W.S. 263 BY THE AO, THERE IS NO FRESH REFERENCE TO THE T PO NOR THERE WAS ANY REVISED ORDER BY THE TPO. THEREFORE, UNDER THE PROVISIONS OF SECTION 92CA(4) SINCE AO FOLLOWED THE ORDER OF THE TPO, THERE IS NO ERROR IN THE ORDER DATED 01.01.2008 PASSED BY AO. 13. WE ARE NOT CONSIDERING THE ISSUE WHETHER THE TPO OR DER COULD BE REVISED BY THE CIT OR BY THE DIT AS THAT ISSUE I S NOT BEFORE US AT THIS MOMENT. AS SEEN FROM THE PROVISIONS, THE CIT H AS NO JURISDICTION OVER THE TPO ADMINISTRATIVELY AND THER EFORE, THE CIT COULD NOT HAVE REVISED THE ORDER UNDER SECTION 92C( 3) PASSED BY THE TPO. WHETHER THE DIT CAN REVISE THE ORDER WHICH HE HIMSELF HAS APPROVED AS PER THE BOARD CIRCULAR CAN ONLY BE EXAM INED WHEN SUCH ISSUE ARISES BUT FOR DECIDING THIS ISSUE, WE C AN SAFELY CONCLUDE THAT THE ORDER OF THE CIT REVISING THE ASSESSMENT O RDER DATED 1.1.2008 PASSED UNDER SECTION 143(3) IS NOT ERRONEO US OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE, AS IT COMPLIED WITH THE ORDER OF TPO U/S 92CA(4). 14. WHETHER THE ORDER PASSED BY THE TPO IS CORRECT ON T HE METHOD ADOPTED IS A SUBJECT MATTER OF OPINION AS TP O HAS CLEARLY STATED IN THE ORDER PASSED ON 22.11.2007 THAT THE N ET ASSET VALUE ADOPTED BY ASSESSEE CANNOT BE ACCEPTED AND HE WENT ON TO DETERMINE THE PRICE ON PRICE EARNING METHOD. WHETHE R THE TPO IS RIGHT IN STATING THAT AVERAGE PRICE OF NET ASSET VA LUE AND PRICE EARNING METHOD VALUE (VALUATION ARRIVED AT IN THE P ROPOSAL FOR REVISION UNDER SECTION 263) IS A DEBATABLE ISSUE ON WHICH TWO OPINIONS CAN BE FORMED. THE HON'BLE SUPREME COURT I N THE CASE OF CIT VS. MAX INDIA LIMITED, 295 ITR 282 HAS CONSIDER ED THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE AS UN DER: ITA NO.4007 OF 2010 ESSAR STEEL LTD MUMBAI PAGE 8 OF 10 THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REV ENUE IN SECTION 263 OF THE INCOME-TAX ACT, 1961, HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS O F REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSI NG OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICE R ADOPTS ONE OF TWO COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VI EW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANN OT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE REVENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFF ICER IS UNSUSTAINABLE IN LAW . 15. RESPECTFULLY FOLLOWING THE ABOVE, WHERE TWO VIEWS A RE POSSIBLE AND THE TPO HAS TAKEN ONE POSSIBLE VIEW THE PROCEED INGS UNDER SECTION 263 CANNOT BE INVOKED. EVEN OTHERWISE, IN T HIS CASE INSTEAD OF INITIATING PROPOSAL ON TPO ORDER AS SUGGESTED, T HE CIT INITIATED THE PROCEEDINGS UNDER AOS ORDER WHICH IS NOT ERRON EOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE, AS AO SINCERELY FOLLOWED THE MANDATE OF PROVISIONS OF SECTION 92CA IN PROCEE DING TO COMPUTE THE TOTAL INCOME UNDER SUB SECTION 4 OF SECTION 92C A IN CONFORMITY WITH THE ARMS LENGTH PRICE SO DETERMINED BY THE TPO . AS THE PROVISIONS OF SECTION 92CA(4) HAVE BEEN AMENDED W.E .F. 1.6.2007 WHICH USED THE WORD SHALL AO IS BOUND TO FOLLOW T HE TPOS ORDER DETERMINED UNDER SUB SECTION 3 (WHICH WAS ITSELF MO DIFIED BY AN ORDER UNDER SUB SECTION-5) OF 92CA. ACCORDINGLY, WE DO NOT SEE ANY ERROR IN THE ORDER OF AO SO THAT IT CAN BE CONSIDER ED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 16. THE LEARNED DR REFERRED TO THE ORDER OF THE ITAT IN SUN MICROSYSTEMS INDIA PVT. LTD IN ITA NO. 661(BANG.)/2 007. THE ASSESSMENT YEAR THEREIN WAS ASSESSMENT YEAR 2002-03 AND THE TPO ORDER WAS DATED 24.03.2005. AT THAT TIME THE RELEVA NT PROVISIONS OF SECTION 92CA(4) EMPOWERS AO TO COMPUTE THE TOTAL IN COME HAVING REGARD TO THE ARMS LENGTH PRICE. IT WAS NOT A MAND ATORY PROVISION, THEREFORE UNDER THOSE PROVISIONS INVOKING OF POWER UNDER SECTION 263 BY THE CIT WAS UPHELD. HOWEVER, PROVISIONS OF S ECTION 92CA(4) ITA NO.4007 OF 2010 ESSAR STEEL LTD MUMBAI PAGE 9 OF 10 WERE MODIFIED W.E.F. 1.06.2007. SO LONG AS THE ORDE R UNDER SECTION 92CA(3) BY THE TPO WAS AVAILABLE ON RECORD, AO HAS NO OTHER OPTION THAN TO FOLLOW THE SAME WHICH AO DID IN THIS CASE. ACCORDINGLY RELIANCE ON THE ABOVE DECISION CANNOT BE ACCEPTED I N VIEW OF THE CHANGE IN THE PROVISIONS. 17. THE LEARNED DR ALSO RELIED ON THE DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF T.N. CIVIL SUPPLIES CO RPORATION LTD VS. CIT, 260 ITR 82 (SC) TO SUBMIT THAT THE CIT HAS POW ER TO REVISE THE ORDER PASSED BY AO ON THE DIRECTIONS OF THE SUPERIO R AUTHORITY. RELIANCE ON THIS CASE ALSO IS MISPLACED IN THE SENS E THAT THE ISSUE INVOLVED IN THAT APPEAL WAS WHETHER THE ORDER PASSE D BY THE INCOME TAX OFFICER WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE WHEN THE SAME WAS PASSED WITH THE APPROVAL OF THE IAC UNDER SECTION 144B. IN THAT CASE THE CIT WAS THE SUPERIOR AUTHORITY TO THE IAC. THEREFORE, ON THE SET OF FACTS THE HON'BLE SUPREME COURT HELD THAT THERE IS NO SCOPE FOR LIMITING THE ORDER PASSED BY THE INCOME TAX OFFICER UNDER SECTION 263 TO EXCLUDE THE ORDERS PAS SED BY THE INCOME TAX OFFICER ON THE DIRECTIONS OF THE SUPERIO R AUTHORITY EITHER UNDER SECTION 144A OR UNDER SECTION 144B. IN THIS P RESENT CASE, NO SUCH ISSUE ARISES AS THE CIT WRONGLY INVOKED THE PR OCEEDINGS UNDER SECTION 263 ON AOS ORDER WHEN THE PROPOSAL BY THE TPO ITSELF IS FOR INITIATING THE PROCEEDINGS UNDER SECTION 263 ON THE TPO ORDER UNDER SECTION 92CA(3). THEREFORE, WE ARE NOT PERSUA DED BY THE ARGUMENTS OF THE DR THAT THE ORDER OF THE TPO CAN A LSO BE REVISED. FOR THESE REASONS, WE ARE OF THE OPINION THAT THE O RDER PASSED BY THE CIT CANNOT BE JUSTIFIED ON THE FACTS OF THE CAS E AND ACCORDINGLY THE SAME WAS SET ASIDE. 18. BEFORE PARTING, WE WOULD LIKE TO OBSERVE THAT THERE SEEMS TO BE NO CLARITY ABOUT THE AUTHORITY WHO HAS TO MODIFY THE TPO ORDER IN CASE, ANY ORDER OF TPO IS PREJUDICIAL TO THE INT ERESTS OF REVENUE. CIT CANNOT EXERCISE JURISDICTION OVER TPO AS TPO FU NCTIONS SEPARATELY UNDER THE DIRECTOR OF INCOME TAX (TP). I N OUR VIEW THE ITA NO.4007 OF 2010 ESSAR STEEL LTD MUMBAI PAGE 10 OF 10 DIT SHOULD HAVE INITIATED THE PROCEEDINGS UNDER SEC TION 263 ON THE ORDER OF THE TPO INSTEAD OF SENDING PROPOSAL TO THE CIT FOR REVISING THE ORDER OF THE TPO. BE THAT AS IT MAY, THE CIT, H OWEVER, WRONGLY INITIATED THE PROCEEDINGS ON THE ASSESSMENT ORDER U NDER SECTION 143(3) WHICH WAS IN CONFORMITY WITH THE TPO ORDER U NDER SECTION 92CA(3). AS THERE IS NO REVISED TPO ORDER IN THIS C ASE, THE ORDER OF CIT HOLDING THE ORDER OF AO U/S 143(3) DTD.01-01-08 AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE CAN NOT BE UPHELD. 19. IN THE RESULT APPEAL FILED BY ASSESSEE IS ALLOWED A ND THE ORDER OF THE CIT U/S 263 IS SET ASIDE. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2012. SD/- SD/- ( AMIT SHUKLA ) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 31 ST OCTOBER, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, K BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI