M/s JSK International, Baddi V. PR. CIT, Shimla

ITA 643/CHANDI/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5681 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 07-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR GULSHAN RAJ
• Keywords: Transfer pricing; Opportunity of being heard; Principle of natural justice; International transaction; Set aside
• Section: 92C; 143(3); 92F; 92E; 80IC; 263; 92

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CH B, CHANDIGARH , ! . .., # $, %& BEFORE: SH. SANJAY GARG, JM & DR. B.R.R. KUMAR, AM ITA NO. /CHD/201 ASSESSMENT YEAR : 2014-15 M/S J.S.K. INTERNATIONAL VARDMAN BHUD ROAD GULLERWALA BADDI, DISTT. SOLAN PR. CIT SHIMLA PAN NO: AAEFJ8801B APPELLANT !' RESPONDENT #$%& ASSESSEE BY : SHRI. SATISH AGARWAL '%& REVENUE BY : DR. GULSHAN RAJ ( )%$* DATE OF HEARING : 04/09/2018 +,-.%$* DATE OF PRONOUNCEMENT : 29/11/2018 %'/ ORDER PER DR. B.R.R. KUMAR, A.M THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. PR. CIT(A), SHIMLA. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS : (1) THAT THE ORDER PASSED BY THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX, SHIMLA IS ARBITRARY, BIASED AND BAD IN LAW AND IN F ACTS OF THE CASE. (2) THAT THE ORDER PASSED BY THE LEARNED PRINCIPAL CIT UNDER SECTION 263 DESERVES TO BE QUASHED AS THE ORDER PASSED BY THE ASSESSING OFFICER WAS NEITHER ERRONEOUS NOR PRE-JUDICIAL TO THE INTEREST OF THE REVENUE. (3) THAT THE LEARNED PRINCIPAL CIT HAS GROSSLY ERRE D IN QUOTING OUT OF CONTEXT THE OBSERVATIONS OF JUDGMENT OF APEX COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY VS. CIT TO INVOKE JURISDICTION UNDER SECTION 263 WHICH IS P ATENTLY ILLEGAL AND BAD IN LAW. (4) THAT THE LEARNED PRINCIPAL CIT HAS GROSSLY ERRE D IN INCORRECTLY INVOKING THE PROVISIONS O F EXPLANATION 2(C) OF SECTION 263(1) TO ASSUME JURISD ICTION UNDER SECTION 263 WHICH ORDER DESERVES TO BE QUASHED. (5) THAT THE LEARNED PRINCIPAL CIT HAS GROSSLY ERRED IN HOLDING THAT THE ORDER PASSED UNDER SECTION 143(3) BY THE DCIT, CIRCLE PAR WANOO ON 08.03.2016 IN WHICH ONE OF THE PARAMETERS UNDER SCRUTINY THROUGH CASS W AS TO VERIFY LARGE SPECIFIED DOMESTIC TRANSACTIONS (FORM 3CEB) HAD TO BE COMPULS ORILY REFERRED TO THE TPO IN ACCORDANCE WITH INSTRUCTION NUMBER 3/2016-F.NO. 500 /9/2015-APA-II DATED 10.03.2016 IGNORING THE FACT THAT THE ASSESSMENT OR DER HAD ALREADY BEEN PASSED ON 08.03.2016 IN VIEW OF WHICH THE AFORESAID INSTRU CTION ISSUED BY THE CBDT COULD NOT HAVE BEEN APPLIED. 2 (6) THAT THE LEARNED PRINCIPAL CIT HAS GROSSLY ERRED IN INVOKING PROVISIONS OF SECTION 263 OF THE ACT IGNORING THE FACT THAT A SPE CIFIC QUERY HAD BEEN RAISED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS VIDE NOTICE DATED 06.01.2016 ORDER SHEET ENTRY DATED 29.02.2016 AND IN RESPONSE TO WHICH A COPY OF THE TRANSFER PRICING STUDY WAS SUBMITTED AN D IS ON RECORD. (7) THAT THE LEARNED PRINCIPAL CIT HAS GROSSLY ERRED IN INVOKING PARA 7 OF CBDT INSTRUCTION DATED 16.10.2015 ABOUT WHICH THE APPELL ANT IS UNAWARE NOR COULD HAVE ENSURED THE FOLLOWING OF THE SAME BY THE ASSES SING OFFICER EVEN IF IT WAS HELD TO BE APPLICABLE. (8) THAT THE LEARNED PRINCIPAL CIT HAS GROSSLY ERRED IN HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS WITHOUT PR OPER APPLICATION OF MIND AS WELL AS WITHOUT MAKING PROPER ENQUIRIES INTO THE FACTS. 3. DETAILED FACTS TAKEN FROM THE ORDER OF THE PR.CI T ARE THAT THE ASSESSEE FILED RETURN OF INCOME FOR THE A.Y. 2014-15 ON 25/11/2014 CLAIMING DEDUCTION OF RS. 67,26,292/- UNDER SECTION 80IC OF THE INCOME TAX AC T,1961. THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 PASSED BY DCIT P ARWANOO ON 08.03.2016. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS, TO VERIF Y THE FOLLOWING REASONS: I) LARGE DEDUCTION CLAIMED UNDER CHAPTER VI-A. II) LARGE SPECIFIED DOMESTIC TRANSACTION(S) (FORM 3 CEB) III) MISMATCH IN AMOUNT PAID TO RELATED PERSONS U/S 40A(2)(B) REPORTED IN AUDIT REPORT AND ITR. 4. THEREAFTER, THE ASSESSING OFFICER VIDE HIS OFFIC E LETTER NO. 4199, DATED 23.01.2018 HAS SUBMITTED A PROPOSAL TO REVIEW THE A SSESSMENT ORDER PASSED U/S 263 OF THE ACT INTER-ALIA SUBMITTING THAT THIS CASE WAS NOT REFERRED TO THE TRANSFER PRICING OFFICER (TPO) BY THE THEN AO EVEN THOUGH TH E CASE WAS SELECTED FOR SCRUTINY ON THE BASIS OF TP RISK PARAMETERS. ELABOR ATING THE SAME HE HAS SUBMITTED THAT ONE OF THE PARAMETERS FOR SELECTING THE CASE UNDER SCRUTINY THROUGH CASS WAS TO VERIFY 'LARGE SPECIFIED DOMESTIC TRANSACTION(S)(FORM 3CEB) ', BUT THE AO HAS COMPLETED THE ASSESSMENT ORDER WITHO UT REFERRING THE ISSUE OF DOMESTIC TRANSFER PRICING TO THE TPO AS REQUIRED VI DE INSTRUCTION NO. 3/2016- F.NO.500/9/2015-APA-II DATED 10.03.2016; WHEREBY, I T WAS CLARIFIED THAT ALL CASES SELECTED FOR SCRUTINY, EITHER UNDER CASS OR UNDER T HE COMPULSORY MANUAL SELECTION SYSTEM IN ACCORDANCE WITH THE CBDT'S ANNU AL INSTRUCTIONS IN THIS REGARD- E.G., INSTRUCTION NO. 6/2014 FOR SELECTION IN F.Y. 2014-15 AND INSTRUCTION NO. 8/2015 FOR SELECTION IN F.Y. 2015-16), ON THE B ASIS OF TRANSFER PRICING RISK PARAMETERS (IN RESPECT OF INTERNATIONAL TRANSACTION S OR SPECIFIED DOMESTIC TRANSACTIONS OR BOTH), HAVE TO BE COMPULSORILY REFE RRED TO THE TPO BY THE ASSESSING OFFICER, AFTER OBTAINING THE APPROVAL OF THE JURISDICTIONAL PCIT OR CIT, FOR DETERMINING ARMS LENGTH PRICE.. 3 5. ON ACCOUNT OF THE ABOVE, SINCE THE CASE OF THE A SSESSEE WAS SELECTED FOR SCRUTINY BASED ON TRANSFER PRICING AS A RISK PARAME TER AND THE AO HAS FAILED TO REFER THE SAME TO THE TPO FOR DETERMINING THE ARMS LENGTH PRICE, THE PCIT ISSUED A SHOW CAUSE NOTICE U/S 263 OF THE ACT R.W. EXPLANA TION -2, VIDE OFFICE LETTER NO. 8706 DATED 19.02.2018, AS UNDER:- '2.ON REVIEW OF THE CASE RECORDS IN YOUR CASE FOR T HE ASSESSMENT YEAR 2014-15 BY THE UNDERSIGNED, IT IS NOTICED THAT THE CASE OF THE ASSESSEE- FIRM WAS SELECTED FOR SCRUTINY THROUGH CASS, TO VERIFY THE FOLLOWING REAS ONS :- IV) LARGE DEDUCTION CLAIMED UNDER CHAPTER VJ-A. (V) LARGE SPECIFIED DOMESTIC TRANSACTION(S) (FORM 3 CEB) (VI) MISMATCH IN AMOUNT PAID TO RELATED PERSONS U/S 40A(2)(B) REPORTED IN AUDIT REPORT AND ON PERUSAL OF THE OFFICE NOTE GIVEN BY THE ASSESSIN G OFFICER IN THE ASSESSMENT ORDER PASSED U/S 143(3) DATED 08.03.2016, IT IS FOU ND THAT ALTHOUGH THE AO HAS STATED IN THE SAID OFFICE NOTE THAT' THIS CASE WAS SELECTE D FOR SCRUTINY UNDER CASS FOR EXAMINING THE LARGE DEDUCTION CLAIMED UNDER CHA PTER VI-A, LARGE SPECIFIED DOMESTIC TRANSACTION(S) (FORM 3CEB) AND MISMATCH IN AMOUNT PAID TO RELATED PERSONS U/S 40A(2)(B) REPORTED IN AUDIT REPORT AND ITR. THE SAME HAS BEEN EXAMINED.' HOWEVER, ON VERIFICATION OF THE CASE REC ORDS, NOTHING WAS FOUND IN THE RELEVANT ASSESSMENT FOLDER TO SUGGEST THAT THE LARGE SPECIFIED DOMESTIC TRANSACTION(S) (FORM 3CEB) HAVE BEEN VERIFIED BY TH E ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THUS, APPARENTLY, THE ASSESSING OFFICER HAS NOT VERIFIED THE SAME MOREOVER, THE ASSESSING OFFICER W AS ALSO NOT EMPOWERED TO VERIFY THE 'SPECIFIC DOMESTIC TRANSACTIONS' INVOLVI NG TRANSFER PRICING RISK PARAMETER, WHICH IS MORE CLEARLY ESTABLISHED FROM THE FOLLOWIN G FACTS 3. AS PER THE INSTRUCTION NO. 3/2016- F.NO.500/9/20 L5-APA-II DATED 10 MARCH, 2016 ALL THE CASES SELECTED FOR SCRUTINY, EITHER UNDER T HE COMPUTER ASSISTED SCRUTINY SELECTION [(CASS] SYSTEM OR UNDER THE COMPULSORY MA NUAL SELECTION SYSTEM (IN ACCORDANCE WITH THE CBDT'S ANNUAL INSTRUCTIONS IN T HIS REGARD -FOR EXAMPLE, INSTRUCTION NO. 6/2014 FOR SELECTION IN F.Y 2014-15 AND INSTRUCTION NO 8/201 5FOR SELECTION IN F. T 2015-16 ON THE BASIS OF TRANSFER PRICING RISK PARAMETERS [IN RESPECT OF INTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS OR BOTH HAVE TO BE REFERRED TO THE TPO BY THE AO, AFTER OBTAINING T HE APPROVAL OF THE JURISDICTIONAL PRINCIPAL COMMISSIONER OF INCOME-TAX (PCIT) OR COMMISSIONER OF INCOME-TAX (CIT). THE FACT THAT A CASE HAS BEEN SEL ECTED FOR SCRUTINY ON A TP RISK PARAMETER BECOMES CLEAR FROM A PERUSAL OF THE REASO NS FOR WHICH A PARTICULAR CASE HAS BEEN SELECTED AND THE SAME ARE INVARIABLY AVAILABLE WITH THE JURISDICTIONAL AO. THUS, IF THE REASON OR ONE OF TH E REASONS FOR SELECTION OF A CASE FOR SCRUTINY IS A TP RISK PARAMETER, THEN THE CASE HAS TO BE MANDATORILY REFERRED TO THE TPO BY THE AO, AFTER OBTAINING THE APPROVAL OF THE JURISDICTIONAL PCIT OR CIT. 3.1 HOWEVER, IT IS NOTICED THAT THE ASSESSING OFFIC ER, HAS COMPLETED THE ASSESSMENT U/S 143(3) OF THE INCOME-TAX ACT, 1961 I N YOUR CASE WITHOUT FOLLOWING THE DIRECTIONS OF THE CBDT, AS PER THE INSTRUCTION NO. 3/2016- F.NO.500/9/2015- APA-II DATED 10 TH MARCH, 2016 AS MENTIONED ABOVE. 4. IN THE LIGHT OF ABOVE FACTS AND FAILURE ON THE P ART OF THE A.O. TO VERIFY AND EXAMINE THE ABOVE SHOWS NEGLIGENCE ON THE PART OF T HE A.O. AND, THUS, CONSTITUTES AN ERROR WITHIN THE MEANING OF SECTION 263(1) OF THE INCOME-TAX ACT CONFERS THE POWER UPON THE COMMISSIONER TO CALL FOR AND EXAMINE THE RECORDS OF A PROCEEDING UNDER THE ACT AND REVISE ANY ORDER IF HE CONSIDERS THE SAME TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. AS PER THE EXPLANATION 2 FOR THE PURPOSE OF THIS SECTION, IT IS HEREBY DE CLARED 4 THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IF IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER :- (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VER IFICATION WHICH, SHOULD HAVE BEEN MADE; OR (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQ UIRING INTO THE CLAIM; OR (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WITH AN Y DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JURISD ICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OTHER PERS ON. 4.1 THE ASSESSMENT, THUS, FRAMED BY THE A.O. FOR TH E A.T. 2014-15 VIDE ORDER PASSED U/S 143(3) OF THE I.T. ACT, 1961 ON 08.03.20 16 IS ERRONEOUS, IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. 5. THE NEGLIGENCE ON THE PART OF THE A.O. AND HIS F AILURE TO APPRECIATE THE FACTS ON RECORD AND FOLLOW THE DIRECTIONS OF THE CB DT, AMOUNTS TO AN ERROR WITHIN THE MEANING OF SECTION 263(1) - EXPLANATION 2 (C)- OF THE I.T. ACT, 1961, AS FAILUR E OF THE ASSESSING OFFICER TO REFER THE CASE IN WHICH 'SPECI FIED DOMESTIC TRANSACTIONS' WERE REPORTED BY THE ASSESSEE AND MANDATORILY WAS REQUIRED TO BE REFERRED TO THE TPO BY THE AO, MAKES THE ERROR ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. IN VIEW OF THE FACTS, I PROPOSE TO SET ASIDE/CANCEL/ANNUL/MODI FY THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT, 1961 ON 08.03.2016 BY DY. COMMISSIONER OF INCOME TAX, CIRCLE, PARWANOO IN YOUR CASE FOR THE A.T. 2014-15 AND DIRECT HIM TO MA KE A FRESH ASSESSMENT ON THE ABOVE LINES, AS THE CASE MA Y BE.'' 6. AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE THE LD. PCIT HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE AO HAS NOT REFERRED THE MATTE R TO THE TPO IN ACCORDANCE WITH THE INSTRUCTIONS ISSUED BY THE CBDT. THE RELEV ANT PORTION OF THE ORDER OF THE LD. PCIT PASSED UNDER SECTION 263 ON FACTS AND BASE D ON JUDICIAL PRONOUNCEMENT READS AS UNDER: ON PERUSAL THEREOF, IT IS NOTICED THAT THE BASIC FA CTS BROUGHT ON RECORD REGARDING THE SELECTION OF CASE FOR SCRUTINY UNDER CASS FOR V ERIFICATION OF ' LARGE SPECIFIED DOMESTIC TRANSACTION(S)(FORM 3CEB)' , IS NOT DISPUTED BY THEM. HOWEVER, THE AR HAS SUBMITTED THAT THE ASSESSMENT ORDER WAS PASSED BY THE AO IN THIS CASE ON 08.03.2016; WHEREAS, THE CBDT INSTRUCTION REFERRED TO IN THE SHOW CAUSE NOTICE IS DATED 10.03.2016, THEREFORE, THE AO WAS NOT BOUND T O FOLLOW AN INSTRUCTION WHICH WAS NOT IN EXISTENCE AS ON THE DATE OF PASSING OF T HE ASSESSMENT ORDER. THEREFORE, IT WAS SUBMITTED THAT IT CANNOT BE SAID THAT THE AO HAS FAILED TO FOLLOW THE ABOVE REFERRED INSTRUCTION OF THE CBDT AND ACCORDINGLY, T HE ORDER PASSED BY THE AO CANNOT BE TERMED AS ERRONEOUS WHICH IS PREJUDICIAL TO THE INTEREST OF REVENUE AS PROVIDED U/S 263 OF THE ACT. IT WAS ALSO SUBMITTED THAT UNDER THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE, THE P CIT HAS NO JURISDICTION U/S 263 OF THE ACT TO CANCEL OR SET ASIDE THE VALID ORD ER PASSED BY THE AO. 5. I HAVE CAREFULLY CONSIDERED THE AFORESAID SUBMIS SION OF THE AR AND ALSO THE PROPOSAL OF THE AO AND THE CASE RECORDS MADE AVAILA BLE. FROM THE SAME AND FURTHER DETAILED DISCUSSION HELD WITH THE AR, IT IS NOT IN DISPUTE THAT ONE OF THE PARAMETERS FOR SELECTING THE CASE UNDER SCRUTINY TH ROUGH CASS IS TO VERIFY LARGE SPECIFIED' DOMESTIC TRANSACTIONS REPORTED IN 3CEB R EPORT OF THE ACCOUNTANT 5 FURNISHED BY THE ASSESSEE. IN THIS REGARD THE CBDT VIDE INSTRUCTION NO.3 OF 2016 DATED 10.03.20L6 VIDE PARA-3.2 HAS CLARIFIED THAT A LL CASES SELECTED FOR SCRUTINY EITHER UNDER CASS OR UNDER THE COMPULSORY MANUAL SE LECTION SYSTEM ON THE BASIS OF TRANSFER PRICING RISK PARAMETERS IN RESPECT OF I NTERNATIONAL TRANSACTIONS OR SPECIFIED DOMESTIC TRANSACTIONS OR BOTH HAVE TO BE MANDATORILY REFERRED TO THE TPO BY THE AO, AFTER OBTAINING THE APPROVAL OF THE JURISDICTIONAL PCIT OR CIT, AS THE CASE MAY BE. IT IS FURTHER CLARIFIED THAT THE C ASE HAS BEEN SELECTED FOR SCRUTINY ON A TP RISK PARAMETER BECOMES CLEAR FROM A PERUSAL OF THE REASONS FOR WHICH A PARTICULAR CASE HAS BEEN SELECTED AND THE SAME ARE INVARIABLY AVAILABLE WITH THE JURISDICTIONAL AO. THEREFORE, IF THE REASON OR ONE OF THE REASONS FOR SELECTION OF THE CASE FOR SCRUTINY IS A TP RISK PARAMETER, THEN THE CASE HAS TO BE MANDATORILY REFERRED TO THE TPO BY THE AO, AFTER OBTAINING THE APPROVAL OF THE JURISDICTIONAL PCIT OR CIT., 6. HOWEVER AS DISCUSSED ABOVE, THE AR HAS RAISED AN ISSUE BASED ON FACTS ON RECORD THAT IN THIS PARTICULAR CASE THE ASSESSMENT ORDER WAS PASSED BY THE AO (08.03.2016) BEFORE THE SAID INSTRUCTION DATED 10.0 3.2016 WAS ISSUED BY THE CBDT, THEREFORE, THE SAME COULD NOT HAVE BEEN FOLLOWED BY THE AO IN THE SAID ASSESSMENT ORDER. IN THIS REGARD, THE ATTENTION OF THE AR WAS DRAWN TOWARDS INSTRUCTION NO. 15 OF20L5 DATED 16.10.2015 OF THE C BDT; WHEREBY THE BOARD HAS CLARIFIED THAT IN TERMS OF SECTION 92 TO 92F OF THE I.T. ACT, ANY INCOME ARISING FROM AN INTERNATIONAL TRANSACTION OR SPECIFIED DOMESTIC TRANSACTIONS BETWEEN TWO OR MORE ASSOCIATED ENTERPRISES IS TO BE COMPUTED HAVIN G REGARD TO THE ARMS-LENGTH PRICE. INSTRUCTION NO. 3 WAS ISSUED ON 20.05.2003 T O PROVIDE GUIDANCE TO THE TPO AND THE AO TO OPERATIONALISE_THE INSFER PRICING PRO VISIONS AND TO HAVE PROCEDURAL UNIFORMITY. DUE TO A NUMBER OF LEGISLATIVE, PROCEDU RAL AND STRUCTURAL CHANGES CARRIED OUT OVER THE LAST FEW YEARS, INSTRUCTION NO . 3 OF 2003 WAS REPLACED WITH THIS (INSTRUCTION NO. 15 OF 2015) DATED 16.10.2015 TO PR OVIDE UPDATED AND ADEQUATE GUIDANCE ON THE TRANSFER PRICING PROVISIONS PERTAIN ING TO INTERNATIONAL TRANSITIONS. 7. FURTHER, IN PARA -7 OF THE SAID INSTRUCTION DATE D 16.10.2015, THE BOARD HAS FURTHER CLARIFIED THAT THIS GUIDANCE IS APPLICABLE ONLY TO TRANSFER PRICING PROVISIONS IN RESPECT OF INTERNATIONAL TRANSACTIONS. SIMILAR GUID ANCE IN RESPECT OF TRANSFER PRICING PROVISIONS PERTAINING TO SPECIFIED DOMESTIC TRANSACTION ARE UNDER THE CONSIDERATION OF THE CBDT. TILL SUCH TIME THE GUIDA NCE PERTAINING TO SPECIFIED DOMESTIC TRANSACTIONS IS NOT ISSUED, PARA - 3.5 OF THIS INSTRUCTION SHALL APPLY TO THE EFFECT THAT WHERE A CASE HAS BEEN SELECTED FOR SCRU TINY ON NON TP PARAMETERS AND THE CASE ALSO INVOLVES SPECIFIED DOMESTIC TRANS ACTIONS WITH AES. THE CASE SHALL NOT BE REFERRED TO THE TPO IRRESPECTIVE OF TH E VALUE THAT SPECIFIED DOMESTIC TRANSACTION OR AGGREGATE VALUE OF ALL SPECIFIED DOM ESTIC TRANSACTIONS. THE ONLY EXCEPTION TO THIS WOULD BE A CASE SELECTED FOR SCRU TINY ON NON TP PARAMETERS WHERE THE AO COMES TO KNOW THAT THE TAXPAYER HAS EN TERED INTO SPECIFIED DOMESTIC TRANSACTION OR TRANSACTION(S) BUT THE TAX PAYER HAS EITHER NOT FILED THE ACCOUNTANTS REPORTS UNDER SECTION 94E OF THE ACT OR HAS NOT DISCLOSED THE SAID SPECIFIED DOMESTIC TRANSACTION OR TRANSACTIONS IN T HE ACCOUNTANTS REPORT FILED. IN SUCH EXCEPTIONAL SITUATIONS, THE AO MAY REFER THE M ATTER TO THE TPO AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE TAXP AYER. 8. HOWEVER, IN THE CASE OF THE ASSESSEE AS DISCUSSE D ABOVE THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS ON THE TP RISK PAR AMETER OF SPECIFIED DOMESTIC TRANSACTION. THIS FACT ON RECORD IS NEITHER DISPUTE D NOR DENIED BY THE AR. HENCE, THE AO WAS STATUTORILY BOUND TO REFER THE CASE TO T PO TO DETERMINE ALP IN CASE OF SUCH SPECIFIED DOMESTIC TRANSACTIONS ENTERED WITH A O. AS PER EXPLANATION -2 (C) TO SECTION 263 OF THE ACT, IT IS CLARIFIED THAT FOR THE PURPOSE OF THIS SECTION , AN ORDER PASSED BY THE AO SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IF, IN THE OPINION OF THE PCIT OR CIT THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INS TRUCTION ISSUED BY THE CBDT. APPARENTLY, FROM THE AFORESAID DISCUSSION AND FACTS ON RECORD, IT IS EVIDENT THAT THE AO HAS NOT FOLLOWED THE INSTRUCTION NO. 15 OFJ2 015 DATED 16.10.2015 ISSUED BY THE CBDT SPECIFICALLY ON THIS ISSUE WHICH WAS APPLI CABLE AS ON 08.03.2016, THE DATE ON WHICH THE ASSESSMENT ORDER IS GASSED BY THE AO. THEREFORE, IT IS EVIDENT THAT THE AO HAS FAILED TO REFER THE CASE TO THE TPO FOR THE DETERMINATION OF ARMS- LENGTH PRICE IN RESPECT OF SPECIFIED DOMESTIC TRANS ACTIONS CARRIED OUT WITH THE AE, MANDATORILY REQUIRED AS PER THE CBDT INSTRUCTION ON THE SUBJECT MATTER AND FURTHER CONSIDERING TO THE PROVISIONS OF EXPLANATIO N -2(C) TO SECTION 263 OF THE ACT. 6 THEREFORE, I FIND THAT THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE AS PER TH E PROVISIONS OF SECTION 263 OF THE ACT. 9. IN THE CASE OF RANBAXY LABORATORIES LTD. VS. ADDL. CIT, THE HON'BLE ITAT TT BENCH NEW DELHI IN ITA NO. 2146 OF 2007 DATED 22.1. 2008 FOR THE A.Y. 2004-05 UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE HON'BLE ITAT IN PARA-71 HAS HELD IN THIS REGARD THAT IN THE LIGHT OF CBDT INSTRUCTION, THE A O WAS DUTY BOUND TO REFER THE MATTER TO THE TPO, HAVING REGARD TO THE PURPOSE OF SPECIALIZED CELL CREATED BY THE REVENUE DEPARTMENT TO DEAL WITH COMPLICATED AND COMPLEX ISSUES ARISING UNDER THE TRANSFER PRICING MECHANISM. THEREFORE, ON ACCOUNT OF THESE FACTS AND POSITION OF LAW THE REVIEW ORDER PASSED BY THE CIT WAS HELD FULLY JUSTIFIED. 10. THE HON'BLE APEX COURT IN THE CASE OF MALABAR INDUS TRIAL CO. LTD. VS CIT IN 243 ITR 83 (SC) HAS HELD THAT A BARE READING OF SEC TION 263 OF THE ACT MAKES IT CLEAR THAT THE PRE-REQUISITE TO EXERCISE OF JURISDI CTION BY THE CIT SUO MOTTO UNDER IT IS THAT THE ORDER OF THE ITO IS ERRONEOUS INSOFAR A S IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. THE CIT HAS TO BE SATISFIED OF TWIN CONDIT IONS, NAMELY, (I) THE ORDER OF AO SOUGHT TO BE REVISED IS ERRONEOUS, AND (II) IT IS P REJUDICIAL TO THE INTEREST OF REVENUE . IF ONE OF THEM IS ABSENT I.E. IF THE ORDER OF THE I TO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE INTEREST OF REVENUE OR IF IT IS NOT ERRONEOU S BUT IS PREJUDICIAL TO THE INTEREST OF REVENUE, RECOURSE CANNOT BE TAKEN U/S 263 OF THE AC T. IT ALSO HAS HELD THAT THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKE D TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO; IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION SHALL BE ATTRACTED. AN I NCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE RE QUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. IT HAS ALSO HELD THAT THE PHRASE 'PREJUDICIAL TO THE INTEREST OF REVENUE' IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEAN ING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE ITO, T HE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICI AL TO THE INTERESTS OF THE REVENUE. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REV ENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSI NG OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE, FOR EXAMPLE, WHEN AN ITO ADOPTS ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAK EN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. IT HAS BEEN HELD BY THE SUPRE ME COURT THAT WHERE A SUM NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING, THE ORDER PASSED BY THE ASSESSING OFFICER ACCEPTING THE SAME AS SUCH WILL BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. 11,, IN THE CASE OF GEE VEE ENTERPRISES VS ADDL.CIT 99 ITR 375 (DEL), IT IS HELD THAT THE ITO BEING NOT ONLY AN ADJUDICATOR BUT ALSO AN I NVESTIGATOR, HE CANNOT REMAIN PASSIVE IN THE FACT OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN EN QUIRY. THE CIT WAS JUSTIFIED IN EXERCISING HIS PROVISIONAL JURISDICTION ON THE GROU ND THAT THE ITO HAD NOT MADE SUFFICIENT ENQUIRIES BEFORE GRANTING REGISTRATION T O THE FIRM AND IT WAS NOT NECESSARY FOR THE CIT TO HAVE HIMSELF MADE ENQUIRES BEFORE CANCELLING THE ASSESSMENT. 11. THEREFORE, ON ACCOUNT OF THESE FACTS AND POSITION O F LAW, SINCE, THE AO HAS FAILED TO APPLY THE CBDT INSTRUCTION TO REFER THE C ASE TO THE TPO FOR THE DETERMINATION OF ARMS-LENGTH PRICE THEREBY, MAKING THE ASSESSMENT ORDER PASSED BY THE AO ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE AS PROVIDED VIDE EXPLANATION - 2(C) TO SECTION 263 OF THE ACT. THESE FACTS ON RECORD PROVE THAT THE ASSESSMENT ORDER PASSED BY THE AO IS WITHOUT PR OPER APPLICATION OF MIND AS WELL AS WITHOUT MAKING PROPER ENQUIRES INTO THE FAC TS AND FURTHER WITHOUT 7 CONSIDERING STATUTORY REGULATIONS APPLICABLE THEREO N. THEREFORE, THE ASSESSMENT ORDER U/S 143(3) OF THE ACT, DATED 20.01.2015, IS H EREBY SET ASIDE AND THE AO IS DIRECTED TO RE-ASSESS OR RE-COMPUTE THE INCOME OF T HE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR, BY CONDUCTING FURTHER INQUIRIES AS NECESSITATED AND AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND ALSO REFERRING THE CASE TO THE TPO FOR DETERMINATION OF ARMS-LENGTH PRICE IN RESPECT OF SPECIFIED DOMESTIC TRANSACTIONS CARRIED OUT WITH TH E AES AS PER FORM 3CEB AND FURTHER FOLLOWING THE INSTRUCTION NO. 15 OF 2015 DA TED 16.10.2015 OF THE CBDT. 7. DURING THE ARGUMENTS BEFORE US THE LD. AR MAINLY ARGUED THAT THE ASSESSMENT HAS BEEN COMPLETED EVEN BEFORE THE DECLA RATION OF INSTRUCTIONS BY THE CBDT AND THE CASE COULD NOT HAVE BEEN A SUBJECT MATTER OF PROVISIONS UNDER SECTION 263 OF INCOME TAX ACT,1961 BASED ON T HE CIRCULARS OR INSTRUCTIONS ISSUED BY THE CBDT POST ASSESSMENT AS THE CIRCULARS CANNOT BE TREATED TO HAVE AN EFFECT OF APPLICATION RETROSPECTIVELY. 8. LD. DR RELIED ON THE EXPLANATION 2(C) TO SECTION 263 OF THE ACT IN SUPPORT OF THE ORDER OF THE LD. PCIT. FOR READY REFERENCE T HE RELEVANT EXPLANATION OF THE SECTION READS AS UNDER: EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, IT IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEM ED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENU E, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER, (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR 9. WE HAVE HEARD LD. REPRESENTATIVE OF BOTH THE PAR TIES AND GONE THROUGH THE FACTS OF THE CASE. 10. WE FIND THAT THE RETURN WAS FILED ON 25/11/2014 AND THE ASSESSMENT ORDER WAS PASSED ON 08/03/2016 AFTER ACCORDING DUE OPPORT UNITY TO THE ASSESSEE. THE CLAIM OF THE DEDUCTION UNDER SECTION 80IC HAS BEEN ALLOWED TO THE EXTENT OF 25% BEING THE ELIGIBLE AMOUNT ON THE PROFIT AS THE ASSESSEE HAS CLAIMED THE DEDUCTION FOR THE SEVENTH YEAR. 11. TO DELIBERATE ON THE ISSUE THE CIRCULAR NO. 3/2 003 DT. 20/05/2003, INSTRUCTION NO. 15/2015 DT. 16/10/2015 AND INSTRUCT ION NO. 3/2016 DT. 10/03/2016 NEEDS TO BE EXAMINED IN DETAIL. INSTRUCTION NO. 3 WAS ISSUED ON 20TH MAY, 2003 TO P ROVIDE GUIDANCE TO THE TRANSFER PRICING OFFICERS (TPOS) AND THE ASSESSING OFFICERS (AOS) TO OPERATIONALISE THE 8 TRANSFER PRICING PROVISIONS AND TO HAVE PROCEDURAL UNIFORMITY. DUE TO A NUMBER OF LEGISLATIVE, PROCEDURAL AND STRUCTURAL CHANGES CARR IED OUT OVER THE LAST FEW YEARS, INSTRUCTION NO. 3 OF 2003 WAS REPLACED WITH INSTRUC TION NO. 15/2015, DATED 16TH OCTOBER, 2015. AFTER THE ISSUANCE OF INSTRUCTION NO . 15/2015, THE BOARD HAS RECEIVED SOME SUGGESTIONS AND QUERIES, WHICH HAVE B EEN EXAMINED IN DETAIL. ACCORDINGLY, THIS INSTRUCTION IS BEING ISSUED TO RE PLACE INSTRUCTION NO. 15 OF 2015. THIS INSTRUCTION IS APPLICABLE FOR BOTH INTERNATION AL TRANSACTIONS AND SPECIFIED DOMESTIC TRANSACTIONS BETWEEN ASSOCIATED ENTERPRISE S. 12. THUS AFTER ISSUE OF INSTRUCTION NO. 15/2015 DT. 16/10/2015, INSTRUCTION NO.3 /2003 LOOSES ITS RELEVANCE IN THE ABSENCE OF ANY EX PLICIT GUIDANCE PERTAINING TO ANY PART OF THE SAID INSTRUCTION. HENCE THE INSTRU CTION NO.15/2015 IS CONSIDERED GOOD FOR ALL THE PURPOSES. 13. THE PARA 3.1 OF THE INSTRUCTION DATED 16 TH OCT ,2015 READS AS UNDER . REFERENCE TO TRANSFER PRICING OFFICER (TPO) 3.1 THE POWER TO DETERMINE THE ARMS LENGTH PRICE ( ALP) IN AN INTERNATIONAL TRANSACTION IS CONTAINED IN SUB-SECTION (3) OF SECT ION 92C OF THE ACT. HOWEVER, SECTION 92CA OF THE ACT, INTER-ALIA, PROVIDES THAT WHERE THE ASSESSING OFFICER (AO) CONSIDERS IT NECESSARY OR EXPEDIENT SO TO DO, HE MA Y REFER THE COMPUTATION OF ALP IN RELATION TO AN INTERNATIONAL TRANSACTION TO THE TRANSFER PRICING OFFICER (TPO). SUB-SECTION (3) OF SECTION 92CA PROVIDES THAT THE T PO, AFTER TAKING INTO ACCOUNT THE MATERIAL AVAILABLE WITH HIM SHALL, BY AN ORDER IN WRITING, DETERMINE THE ALP IN ACCORDANCE WITH SUB SECTION (3) OF SECTION 92C OF T HE ACT. SUB-SECTION (4) OF SECTION 92CA PROVIDES THAT ON RECEIPT OF THE ORDER OF THE TPO, THE AO SHALL PROCEED TO COMPUTE THE TOTAL INCOME OF THE TAXPAYER IN CONFORMITY WITH THE A LP DETERMINED BY THE TPO. THUS, WHILE THE DETERMINATIO N OF ALP, WHEREVER REFERENCE IS MADE TO HIM, IS REQUIRED TO BE DONE BY THE TPO U NDER SUB SECTION (3) OF SECTION 92CA READ WITH SUB-SECTION (3) OF SECTION 92C, THE COMPUTATION OF TOTAL INCOME IN CONFORMITY WITH THE A LP SO DETERMINED BY THE TP O IS REQUIRED TO BE DONE BY THE AO UNDER SUB-SECTION (4) OF SECTION 92C READ WI TH SUB-SECTION (4) OF SECTION 92CA OF THE ACT. 3.2 IN ORDER TO MAKE A REFERENCE TO THE TPO, THE AO HAS TO FIRST SATISFY HIMSELF THAT THE TAXPAYER HAS ENTERED INTO AN INTERNATIONAL TRAN SACTION WITH AN ASSOCIATED ENTERPRISE. ONE OF THE SOURCES FROM WHICH THE FACTU AL INFORMATION REGARDING INTERNATIONAL TRANSACTION CAN BE GATHERED IS FORM N O. 3CEB FILED BY THE TAXPAYER, WHICH IS IN THE NATURE OF AN ACCOUNTANTS REPORT CO NTAINING BASIC DETAILS OF AN INTERNATIONAL TRANSACTION ENTERED INTO BY THE TAXPA YER DURING THE YEA R AND THE ASSOCIATED ENTERPRISE WITH WHICH SUCH TRANSACTION I S ENTERED INTO, THE NATURE OF DOCUMENTS MAINTAINED AND THE METHOD FOLLOWED. THUS, THE PRIMARY DETAILS REGARDING SUCH INTERNATIONAL TRANSACTIONS WOULD NOR MALLY BE AVAILABLE IN THE ACCOUNTANTS REPORT. THE AO CAN ARRIVE AT A PRIMA F ACIE BELIEF ON THE BASIS OF THESE DETAILS WHETHER A REFERENCE TO THE TPO IS NEC ESSARY. NO DETAILED ENQUIRIES ARE NEEDED AT THIS STAGE AND THE AO SHOULD NOT EMBA RK UPON SCRUTINISING THE CORRECTNESS OR OTHERWISE OF THE PRICE OF THE INTERN ATIONAL TRANSACTION AT THIS STAGE . HOWEVER, IN THE FOLLOWING SITUATIONS, THE AO MUST, AS A JURISDICTIONAL REQUIREMENT, RECORD HIS SATISFACTION THAT THERE IS AN INCOME OR A POTENTIAL OF AN INCOME ARISING AND/OR BEING AFFECTED ON DETERMINATION OF THE ALP O F AN INTERNATIONAL TRANSACTION BEFORE HE PROCEEDS TO DETERMINE THE ALP UNDER SUB-SECTION (3) OF SECTION 92C OF THE ACT OR TO REFER THE MATTER TO TH E TPO TO DETERMINE THE A LP UNDER SUB-SECTION ( 1) OF SECTION 92CA OF THE ACT: (A) WHERE THE TAXPAYER HAS NOT FILED THE ACCOUNTANT S REPORT UNDER SECTION 92E OF THE ACT BUT INTERNATIONAL TRANSACTIONS UNDERTAKEN B Y IT COME TO THE NOTICE OF THE AO; 9 (B) WHERE THE TAXPAYER HAS NOT DECLARED ONE OR MORE INTERNATIONAL TRANSACTION IN THE ACCOUNTANT S REPORT FILED UNDER SECTION 92E OF THE ACT AND THE SAID TRANSACTION OR TRANSACTIONS COME TO THE NOTICE OF T HE AO; AND (C) WHERE THE TAXPAYER HAS DECLARED THE INTERNATION AL TRANSACTION OR TRANSACTIONS IN THE ACCOUNTANTS REPORT FILED UNDER SECTION 92E OF THE ACT BUT HAS MADE CERTAIN QUALIFYING REMARKS TO THE EFFECT THAT THE S AID TRANSACTION OR TRANSACTIONS ARE NOT INTERNATIONAL TRANSACTIONS OR DO NOT IMPACT THE INCOME OF THE TAXPAYER. IN ALL THE ABOVE SITUATIONS, THE AO MUST PROVIDE AN OPPORTUNITY OF BEING HEARD TO THE TAXPAYER BEFORE RECORDING HIS SATISFACTION OR O THERWISE. FURTHER THESE INSTRUCTIONS CLEARLY STATES REGARDING THE APPLICABILITY THAT THE GUIDANCE IS APPLICABLE ONLY TO TRANSFER PRICING PRO VISIONS IN RESPECT OF INTERNATIONAL TRANSACTIONS. SIMILAR GUIDANCE IN RES PECT OF TRANSFER PRICING PROVISIONS PERTAINING TO SPECIFIED DOMESTIC TRANSACTIONS ARE U NDER CONSIDERATION OF THE CBDT. TILL SUCH TIME THE GUIDANCE PERTAINING TO SPE CIFIED DOMESTIC TRANSACTIONS IS NOT ISSUED, PARAGRAPH 3.5 OF THIS INSTRUCTION SHALL APPLY TO THE EFFECT THAT WHERE A CASE HAS BEEN SELECTED FOR SCRUTINY ON NON-TP PARAM ETERS AND THE CASE ALSO INVOLVES SPECIFIED DOMESTIC TRANSACTIONS WITH AES , THE CASE SHALL NOT BE REFERRED TO THE TPO IRRESPECTIVE OF THE VALUE OF THE SPECIFI ED DOMESTIC TRANSACTION OR AGGREGATE VALUE OF ALL SPECIFIED DOMESTIC TRANSACTI ONS. THE ONLY EXCEPTION TO THIS WOULD BE A CASE SELECTED FOR SCRUTINY ON NON-TP PAR AMETERS WHERE THE AO COMES TO KNOW THAT THE TAXPAYER HAS ENTERED INTO SP ECIFIED DOMESTIC TRANSACTION OR TRANSACT IONS BUT THE TAXPAYER HAS EITHER NOT FI LED THE ACCOUNTANTS REPORT UNDER SECTION 92E OF THE ACT OR HAS NOT DISCLOSED T HE SAID SPECIFIED DOMESTIC TRANSACTION OR TRANSACTIONS IN THE ACCOUNTANTS REP ORT FILED. IN SUCH EXCEPTIONAL SITUATIONS, THE AO MAY REFER THE MATTER TO THE TPO AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO THE TAXPAYER. 8. THIS INSTRUCTION ISSUES UNDER SECTION 119 OF THE ACT AND SUPERSEDES INSTRUCTION NO.3 OF 2003 WITH IMMEDIATE EFFECT. 14. THUS IT IS CLEAR THAT THE INSTRUCTION NO. 3/200 3 IS NO MORE VALID AND THE ASSESSING OFFICER SHALL NOT REFER THE MATTER TO TPO IRRESPECTIVE OF THE VALUE OF THE SPECIFIED DOMESTIC TRANSACTIONS. IN THE INSTANT CAS E THE TRANSACTIONS SHOWN BY THE ASSESSEE IN THE FORM 3CEB ARE DOMESTIC IN NATUR E. FURTHER INSTRUCTIONS WERE ISSUED ON 10/03/2016 VIDE INSTRUCTION NO. 03/2016. THE SAID INSTRUCTION STATES THAT INSTRUCTION NO. 3 OF 2003 WAS REPLACED WITH INSTRUC TION NO. 15/2015, DATED 16TH OCTOBER, 2015. AND THAT AFTER THE ISSUANCE OF INSTR UCTION NO. 15/2015, THE BOARD HAS RECEIVED SOME SUGGESTIONS AND QUERIES, WHICH HA VE BEEN EXAMINED IN DETAIL. THIS INSTRUCTION NO. 3/2016 IS APPLICABLE FOR BOTH INTERNATIONAL TRANSACTIONS AND SPECIFIED DOMESTIC TRANSACTIONS BETWEEN ASSOCIA TED ENTERPRISES. IT SAYS THAT IF A CASE HAS BEEN SELECTED FOR SCRUTINY ON A TP R ISK PARAMETERS WHICH BECOMES CLEAR FROM A PERUSAL OF THE REASONS FOR WHICH A PAR TICULAR CASE HAS BEEN SELECTED AND IF THE REASON OR ONE OF THE REASONS FO R SELECTION OF A CASE FOR SCRUTINY IS A TP RISK PARAMETER, THEN THE CASE HAS TO BE MANDATORILY REFERRED TO THE TPO BY THE AO, AFTER OBTAINING THE APPROVAL OF THE JURISDICTIONAL PCIT OR CIT. THUS THE REFERENCE TO TPO BECOMES COMPULSORY FROM T HE DATE OF ISSUE OF THIS CIRCULAR I.E; 10/03/2016. AND WE FIND THAT THE ASSE SSMENT IN THE INSTANT CASE HAS BEEN COMPLETED ON 08/03/2016. 10 HENCE IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NOT FOLLOWED THE CIRCULARS AS PER THE PROVISIONS OF EXPLANATION 2(C) OF SECTION 263 WHICH EMPOWERS THE PCIT TO REVISE THE ORDERS OF THE ASSES SING OFFICER. THE ASSESSING OFFICER COULD NOT HAVE FOLLOWED THE INSTRUCTION WHI CH DID NOT EXIST ON THE DATE OF PASSING OF THE ASSESSMENT ORDER. EITHER THE ASSE SSING OFFICER IS PROMPT TO COMPLETE THE ASSESSMENT OR THE REVENUE IS LATE IN I SSUING THE INSTRUCTIONS. 15. IN EITHER OF THE SITUATIONS AS THE END RESULT T HE ASSESSMENT COMPLETED CANNOT BE CONSTRUED AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE EVEN AS PER THE EXPLANATION 2(C) OF THE INCOME TAX ACT,1961. 16. AS A RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. SD/- SD/ - . .., # $, (SANJAY GARG ) ( DR. B.R.R. KUM AR, AM) / JUDICIAL MEMBER %& / ACCOUNTANT MEMBER 29/11/2018 ,/%!$0121$ COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. !' THE RESPONDENT 3. ( 3$ CIT 4. ( 3$45 THE CIT(A) 5. 16!$89*89:;<= DR, ITAT, CHANDIGARH 6. <>) GUARD FILE