CIT(A) Can’t Issue Directions to TPO Who Was Exercising Independent Powers u/s 92CA | ITAT

Case Details: ACIT vs. Knowledge Infrastructure Systems Pvt. Ltd. - [2024] 164 taxmann.com 349 (Delhi-Trib.)

Judiciary and Counsel Details

• Anil Chaturvedi, Accountant Member & Anubhav Sharma, Judicial Member
• R.S. Singhvi & Stayajeet Goel, CA for the Appellant.
• Mrinal Kumar, Sr. DR for the Respondent.

Facts of the Case

The assessee company was engaged in importing and delivering coal to various PSUs, private sector/steel/cement, and other utilities. It also traded power in India, regulated by CERC (Central Electricity Regulatory Commission).

During the assessment proceedings, the Assessing Officer (AO) referred the case to the Transfer Pricing Officer (TPO) for the determination of Arm’s Length Price (ALP) in respect of ‘International Transaction’ entered into by the assessee with its Associated Enterprises (AEs). The TPO made an adjustment on account of Corporate Guarantee commission, Remuneration paid to key management personnel and Interest on trade receivables.

Aggrieved by the order, the assessee preferred an appeal to the CIT(A). During the proceedings, the CIT(A) directed TPO to verify the assessee’s claim that interest is not charged on outstanding receivables either from AEs or non-AEs and accordingly give relief to the assessee.

Considering the direction issued by CIT(A) as invalid, the TPO preferred an appeal to the Tribunal.

ITAT Held

The Delhi Tribunal held that the CIT(A) directed the TPO to verify the assessee’s claim that interest was not charged on outstanding receivables from AEs and Non-AEs. The CIT(A) had the power to call for evidence of the assessee at its level and then proceed to decide the matter afresh as per powers under section 250(4) read with section 251(1) of the Act. However, the CIT(A) only passed a direction to the AO/TPO to call for evidence of the assessee, which was outside the scope of section 250(4) read with section 251(1).

Thus, when the Appellate powers of CIT(A) are considered within the ambit of section 250(4) read with section 251(1), no such directions could have been issued by the CIT(A) to the TPO, who is exercising independent powers under section 92CA.