M/S.pos Hyundai Steelmanufacturing Pvt. Ltd.,F-70, Sipcot Industrial Park,Irungattukottai, Nh-4,Bangalore Highway,Sriperumbudur - 602 105 v. The Commissioner Of Incometax (Appeals)

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM: THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MS.JUSTICE R.N.MANJULA M/s.POS Hyundai SteelManufacturing Pvt. Ltd.,F-70, SIPCOT Industrial Park,Irungattukottai, NH-4,Bangalore Highway,Sriperumbudur - 602 105. Vs ...Appellant The Commissioner of IncomeTax (Appeals) - 3, Aayakar Bhawan,Mahatma Gandhi Road, Chennai....Respondent PRAYER: Appeal filed under Section 260A of the Income Tax Act,1961 against the order dated 26.04.2017 in I.T.A.No.30/Mds/2017passed by the Income Tax Appellate Tribunal, Chennai 'D' Benchfor the assessment year 2003-04. Preferred against the Order of the Commissioner of Income Tax(Appeals)-3, 121, Mahatma Gandhi Road, Chennai 600 034 dated30/09/2016 made in ITA.No. 08/2006/07 /CIT (A)-3 preferredagainst the order of the income Tax Officer (OSD)), CompanyCircle V (2), Chennai dated 28/02/2006 made in PAN.No. . For Appellant: Mr.R.Sandeep Bagmar This appeal, filed by the assessee under Section 260A ofthe Income Tax Act, 1961 (for short, the Act), is directedagainst the order dated 26.04.2017 in I.T.A.No.30/Mds/2017passed by the Income Tax Appellate Tribunal, Chennai 'D' Bench('the Tribunal' for brevity) for the assessment year 2003-04. https://hcservices.ecourts.gov.in/hcservices/ 2. The appeal was admitted on 23.01.2019 to decide thefollowing substantial questions of law:"1. Whether on the facts andcircumstances of the case, the revised orderpassed by the Assessing Officer u/s 154 iswithout jurisdiction and is liable to bequashed?2. Whether on the factsandcircumstances of the case, the Tribunal wasright in summarily rejecting the TNMM MethodadoptedbytheAppellant,withoutappreciating the limitations in applying theCUP Method?3. Whether on the factsandcircumstances of the case, the Tribunal wasright in holding that the Appellant isestopped from changing the most appropriatemethodduringtheassessmentproceedings/appellate proceedings withoutappreciating the need and merit of the newmethod for determination of arm's lengthprice? 4. Whether on the facts and in thecircumstances of the case, the Tribunal wasright in confirming the rejection ofadjustment made for quantity discount givento the Non-AE which is otherwise to beallowed in view of Rule 10B(3)?5. Whether on the factsandcircumstances of the case, the Tribunal wasright in remanding the issue of tradingsegment to the CIT(A) when all the facts toadjudicate the issue were before it nadapplicability of CUP Method is itself inquestion?" 3. The assessee is a Joint Venture Company promoted bythree Korean Multi-Nationals, Hyundai Corporation (HC), PohangIron & Steel Company (POSCO) and POSCO Steel Service and SalesCompany (POSTEEL) for manufacture of steel sheets and componentsout of cold rolled steel coils for supply predominantly toHyundai Motor India Limited (HMIL) and other Automobile andWhite Goods Industries. 4. For the assessment year under consideration, i.e. AY2003-04, the assessee filed its return of income on 28.11.2003declaring a total income of Rs.2,74,72,658/-. The return wasprocessed and the case was selected for scrutiny. As theaggregate value of international transaction made by theassessee exceeded Rs.5 crores, the case was referred to the https://hcservices.ecourts.gov.in/hcservices/ Transfer Pricing Officer (hereinafter referred to as 'TPO').During the year, the assessee imported steel coils from HyundaiCorporation, Korea and Hyundai Hysco, Korea and adopted theComparable Uncontrolled Price Method (CUP) as the MostAppropriate Method (MAM) to arrive at Arm's Length Price (ALP). 4. For the assessment year under consideration, i.e. AY2003-04, the assessee filed its return of income on 28.11.2003declaring a total income of Rs.2,74,72,658/-. The return wasprocessed and the case was selected for scrutiny. As theaggregate value of international transaction made by theassessee exceeded Rs.5 crores, the case was referred to the https://hcservices.ecourts.gov.in/hcservices/ Transfer Pricing Officer (hereinafter referred to as 'TPO').During the year, the assessee imported steel coils from HyundaiCorporation, Korea and Hyundai Hysco, Korea and adopted theComparable Uncontrolled Price Method (CUP) as the MostAppropriate Method (MAM) to arrive at Arm's Length Price (ALP). 5. The assessee had two schemes of activities, namely theTrading Segment and Manufacturing Segment. For the transactionsin the manufacturing segment, the assessee computed the ALP bytaking the weighted average price of its imports and theweighted average price of the unrelated importer. The assesseemade an adjustment of 5% towards volume discount as the importvolume of the unrelated importer is 12 times more than theassessee's import of the same grade. In the transfer pricingstudy prepared and submitted before the TPO, the assessee didnot provide any analysis to compute the ALP for the materialsimported in the trading segment. 6. The Assessing Officer completed the assessment underSection 143(3) of the Act by order dated 28.02.2006 and madesome additions and disallowances and restricted the transferpricing adjustment to Rs.28,36,273/-. Thereafter, the TPO, videorder dated 16.03.2006, rejected the assessee's comparison byweighted average method and the claim of volume discount, andproposed an adjustment of Rs.58,07,322.24/- in the manufacturingsegment. The TPO compared the steel coil grades purchased in thetrading segment with the purchases made in the manufacturingsegment and proposed an adjustment of Rs.2,69,34,151.10/-. Bydoing so, the TPO rejected the assessee's claim that there aredifferences in quality of steel grades purchased in the tradingsegment and these coils are not identical to the steel purchasedin the manufacturing segment. The Assessing Officer, afterconsidering the adjustment made by TPO, rectified the assessmentorder dated 28.02.2006 by exercising his powers under Section154 of the Act read with Section 92CA(4) by order dated30.05.2006 confirming the additions made by the TPO. 7. The assessee would state that though they did notchallenge the jurisdiction of the Assessing Officer to exercisepowers under Section 154, this being a jurisdictional issue, theassessee is not precluded from raising such a contention for thefirst time before this Court. It is submitted that the order ofrectification passed under Section 154 is without jurisdictionas there was no mistake apparent from the records as on the dateof which the assessment was completed under Section 143(3) byorder dated 28.02.2006. It is further submitted that thesubsequent order of the TPO dated 16.03.2006 will not make theorder of assessment dated 28.02.2006 rectifiable under Section154 of the Act. 8. The assessee filed appeal against the assessment orderbefore the Commissioner of Income Tax (Appeals)-3, Chennai(hereinafter referred to as 'CIT(A)'). The assessee raisedadditional grounds before the CIT(A) stating that it usedTransactional Net Margin Method (TNMM) as the most appropriatemethod for computing the ALP and provided an analysis on thesame. 8. The assessee filed appeal against the assessment orderbefore the Commissioner of Income Tax (Appeals)-3, Chennai(hereinafter referred to as 'CIT(A)'). The assessee raisedadditional grounds before the CIT(A) stating that it usedTransactional Net Margin Method (TNMM) as the most appropriatemethod for computing the ALP and provided an analysis on thesame. 9. The CIT(A) called for a Remand Report from the TPO andaccordingly, a report dated 10.02.2016 was submitted statingthat during the TP proceedings, the assessee had adopted CUPmethod as the MAM in the TP documentation and resorting to TNMMis only an after thought. Further, in TP analysis, only in theabsence of internal comparables, external comparables will betaken for comparability purpose using TNMM. Further, the TPOheld that in the assessee's case, internal comparables areavailable and all other factors that would be analysed for CUPmethod are also satisfied and hence, CUP is the most suitablemethod. Further, the TPO stated that the prices of the Non-Associated Enterprises (AE) are much less than the prices of theassessee company and as the prices of Non-AE and AE are aftervolume discount, further allowance for volume discount was notcalled for. 10. After perusal of the Remand Report, the CIT(A), byorder dated 30.09.2016, confirmed the transfer pricing orderdated 16.03.2006 and the Remand Report dated 10.02.2016 and heldthat the CUP method is the most appropriate method. Further, theCIT(A) confirmed the order of the TPO and the Remand Report andheld that the allowance for volume discount is not called for. 11. Aggrieved by the order of the CIT(A), the assesseefiled appeal before the Tribunal. The appeal was partly allowedby order dated 26.04.2017, which is impugned in this appeal. TheTribunal held that the assessee itself adopted CUP method in itsTP study, which was accepted by the TPO/Assessing Officer andcannot seek for substitution of another method as MAM as itwould lead to reopening of assessment. Further, the Tribunalheld that the assessee is a Joint Venture Company of HyundaiCorporation and expects more concessions than unrelatedcompanies and the assessee neither demonstrated with bills thatit did not get volume discount nor did it produce any agreementbetween AE and Non-AE companies for such volume discounts.Therefore, the claim of adjustment on account of volume discountwas rejected. With regard to the claim of non-comparability ofsteel purchased in the trading segment, the Tribunal remandedthe matter back to the file of the CIT(A) for adjudication. 12. Mr.R.Sandeep Bagmar, learned counsel for theappellant made his submissions on the substantial questions of https://hcservices.ecourts.gov.in/hcservices/ law, which have been framed for consideration. 12. Mr.R.Sandeep Bagmar, learned counsel for theappellant made his submissions on the substantial questions of https://hcservices.ecourts.gov.in/hcservices/ law, which have been framed for consideration. 13. With regard to substantial question of law No.1, itwas submitted that the TPO does not have jurisdiction to conducta transfer pricing adjustment once the assessment has beencompleted by the Assessing Officer under Section 143(3) of theAct. The Assessing Officer, in the order dated 28.02.2006, hasaccepted the ALP, as computed by the assessee, and exercised hisjurisdiction under Section 92C(3) and completed the assessment.The TPO has no jurisdiction to parallely exercise power underSection 92CA, after completion of the assessment by theAssessing Officer. This is so because the TPO is ceased to havejurisdiction on completion of the assessment vide order dated28.02.2006. Further, it is submitted that the Assessing Officer,under the guise of invoking his power under Section 154 of theAct, seeks to review the assessment order dated 28.02.2006,which is impermissible as the subsequent order of the TPO cannotbe a ground to invoke the provisions of Section 154 to rectifyan order of assessment when there is no "mistake apparent on therecord". The Assessing Officer in fact has exercised powersvested by the Commissioner under Section 263 of the Act andtherefore, the order is without jurisdiction. In support of suchcontention, reliance was placed on the decision of the Hon'bleSupreme Court in the case of T.S.Balaram, ITO Vs. VolkartBrothers and others [(1971) 82 ITR 50 (SC)]. 14. The learned counsel for the appellant requested theCourt to deal with substantial question of law Nos.2 and 3together. It is submitted that it is a settled position thatthere is no estoppel in law and the duty of the AssessingOfficer is to compute the total income in accordance with theprovisions of the Act. In support of such contention, reliancewas placed on the decision of the Hon'ble Supreme Court in thecase of Kanwar Singh Saini Vs. High Court of Delhi [(2012) 4 SCC307. Further, it is submitted that the assessment year underconsideration was the second year of implementation of Chapter Xof the Act and the law was evolving as to how to determine theMAM and therefore, the tax payer is not estopped from pointingout a mistake in the assessment, though such mistake is a resultof evidence adduced by the tax payer. In support of thiscontention, the learned counsel referred to the decision of theDelhi High Court in the case of PCIT Vs. Matrix CellularInternational Services P. Ltd. [ITA.No.484 of 2017, dated22.11.2017]. Reliance was also placed on the decision of theHigh Court of Punjab and Haryana in the case of CIT, ChandigarhVs. M/s.Quark Systems India Pvt. Ltd. [ITA.No.594 of 2010, dated16.05.2011]. It is further submitted that the determination ofapproximate ALP is the key factor, for which MAM has to befollowed and if at any stage of the proceedings, it is foundthat by adopting one of the prescribed methods, other than chosen earlier, the most appropriate ALP can be determined. Itis submitted that in the assessee's case, TNMM is the MAM overCUP method. Further, the learned counsel referred to thesubsequent assessment order where the assessee has adopted theTNMM as the MAM and the same was accepted by the AssessingOfficer/TPO. chosen earlier, the most appropriate ALP can be determined. Itis submitted that in the assessee's case, TNMM is the MAM overCUP method. Further, the learned counsel referred to thesubsequent assessment order where the assessee has adopted theTNMM as the MAM and the same was accepted by the AssessingOfficer/TPO. 15. With regard to the substantial question of law No.4,the learned counsel submitted that in the CUP method, necessaryadjustments are required to be made in order to arrive at theALP. By referring to Rule 10B(1)(a)(ii), it is submitted thatthe price can be adjusted to account for any differences betweenthe international transaction and in the assessee's case, on thebasis of the letter issued by one of its AE, who supplied to thethird party comparable, had stated that it had offered volumediscount based on the quantity purchased. Further, it issubmitted that under Rule 10B(3), if accurate adjustments arenot made to a comparable to eliminate effects of materialevidences, then such comparable ceases to be an uncontrolledtransaction and consequently, no ALP can be determined on thebasis of that comparable. In this regard, reliance was placed onthe decision of the High Court of Bombay in the case of PCIT Vs.M/s.Merck Ltd. [ITA.No.726 of 2017, dated 16.09.2019. 16. With regard to the substantial question No.5, thelearned counsel for the appellant submitted that the Tribunalought not to have remanded the matter with regard to the issueof trading segment when all the facts to adjudicate the issuewere brought before it and applicability of CUP method itselfwas in question. On this issue, it is submitted that foradopting CUP method, there is a requirement of high degree ofcomparability in products, functions performed, contractualterms, characteristics and volume of transactions, etc., and inthe assessee's case, comparison of PSCEN with SPCEN-HMI is notappropriate. It is further submitted that the grades of steelimported for the trading segment are very specific in nature inorder to cater to the requirements of HMI. This is because thesteel used for automobile industry is different from steel usedfor goods and appliances. Therefore, SPCEN cannot be acomparable for SPCEN-HMI under CUP method. It is furthersubmitted that comparison of prices of the grades of steelimported by the appellant to its manufacturing segment andtrading segment is incorrect, as there is differences inspecifications and quality. The assessee sought to support thisstand by producing Mill Test Certificate for the imports made bythem. Therefore, SPCEN and SPCEN-HMI cannot be comparables interms of Rule 10B(3) read with Rule 10B(1)(a) and consequently,CUP method cannot be adopted. Further, it is submitted that theremand order of the Tribunal to ascertain comparables in tradingsegment for applying CUP method is a futile exercise as there are no comparables available and therefore, the supplementarytransfer pricing study and adopting TNMM as the MAM should beaccepted. 17. On the above grounds, the learned counsel for theappellant sought for interference with the order passed by theTribunal and answering the substantial questions in favour ofthe assessee. 18. Mr.T.Ravikumar, learned Senior Standing Counselappearing for the respondent submitted that the assessee hadsubmitted a note with reference to the information and documentsrequired to be provided under Section 92D and 92E of the Act,wherein, they have, in no uncertain terms, stated that havingregard to the nature of transaction and their activity and theproduct which they deal with the available data, the assesseehad adopted the most appropriate method of CUP method. Further,the assessee stated that the data required for externalcomparables may be difficult to obtain and interpret or it maybe incomplete. Therefore, they have chosen the internalcomparables of comparable uncontrolled transaction price method. 18. Mr.T.Ravikumar, learned Senior Standing Counselappearing for the respondent submitted that the assessee hadsubmitted a note with reference to the information and documentsrequired to be provided under Section 92D and 92E of the Act,wherein, they have, in no uncertain terms, stated that havingregard to the nature of transaction and their activity and theproduct which they deal with the available data, the assesseehad adopted the most appropriate method of CUP method. Further,the assessee stated that the data required for externalcomparables may be difficult to obtain and interpret or it maybe incomplete. Therefore, they have chosen the internalcomparables of comparable uncontrolled transaction price method. 19. The assessee produced a letter from HyundaiCorporation addressing to the TPO dated 10.02.2006 with regardto offering of volume discount to overseas customers. It isfurther submitted that the TPO issued show cause notice dated03.03.2006 with regard to three issues, namely non-maintenanceof transfer pricing documentation; SPCD and SPCEN grade steeland SPCEN-HMIT and SPCD-HMI grade steel. 20. On the first issue, the TPO stated that the assesseefailed to keep, maintain and produce the TP documentation forinternational transactions representing purchase of 12751.31 MTof steel to initiate penalty proceedings under Section 271AA ofthe Act. With regard to the second issue, the TPO proposed tomake adjustments to the import price of SPCD and SPCEN gradesteel. On the third issue, after taking note of the reply, whichwas filed by the assessee, the TPO stated that as per theassessee company's claim that the materials SPCEN and SPCEN-HMI,SPCD and SPCD-HMI are not identical and hence not comparable, isnot tenable as the assessee could not prove the difference inquality with documentary evidence. Further, the TPO stated thatthe assessee has submitted the sale invoice copies of similartransactions made in India by TISCO and claimed that thepurchase price is comparatively low. The TPO proposed that thisclaim could not be accepted as the company has an obligationwith Tamil Nadu Government to purchase 30% of their raw materialrequirements from local market and thus, it becomes a controlledtransaction. The TPO also referred to the 'Statistics on Ironand Steel Industry in 2003' published by OECD. Thus, the TPOstated that the sale transactions of the assessee company made with Non-Associate Enterprises with regard to material SPCEN andSPCD are taken as comparables for comparing with the sale priceof SPCEN-HMI and SPCD-HMI made to AE. On doing so, difference inprice totals to the tune of Rs.2,69,34,151.10 and this is to beadjusted to the purchase price of materials. 21. The assessee was called upon to submit theirobjections for the adjustment proposed. The assessee submittedtheir reply dated 13.03.2006 requesting to drop the proposal inthe show cause notice dated 03.03.2006. The reply was on themerits of the matter as to how they seek to sustain theircontention. 22. The TPO passed orders dated 16.03.2006 under Section92CA(3) confirming the proposal in the show cause notice andheld that CUP method is the MAM. The Assessing Officer issuedshow cause notice dated 28.03.2006. In the said notice, underthe column "particulars of mistake proposed to be rectified", itwas stated that the ALP is less than the actual import price ofparticular grade. Hence, there will be an addition to the totalincome taken for tax purposes. The assessee submitted theirreply dated 29.05.2006. Thereafter, the Assessing Officer passedorders dated 30.05.2006 under Section 154 read with Section 92CA(4) of the Act. 22. The TPO passed orders dated 16.03.2006 under Section92CA(3) confirming the proposal in the show cause notice andheld that CUP method is the MAM. The Assessing Officer issuedshow cause notice dated 28.03.2006. In the said notice, underthe column "particulars of mistake proposed to be rectified", itwas stated that the ALP is less than the actual import price ofparticular grade. Hence, there will be an addition to the totalincome taken for tax purposes. The assessee submitted theirreply dated 29.05.2006. Thereafter, the Assessing Officer passedorders dated 30.05.2006 under Section 154 read with Section 92CA(4) of the Act. 23. The assessee challenged the order by filing an appealbefore the CIT(A). The CIT(A) called for a remand report fromthe TPO, which was submitted on 10.02.2016, wherein the TPOstated that CUP method is the suitable method. The CIT(A) passedorder dated 30.09.2016 and after referring to the remand report,observed that the assessee is resorting to approbate andreprobate and this is one of the species of estoppel. Further,the CIT(A) agreed with the Assessing Officer that CUP method isthe MAM. Thus, the CIT(A) held that the TPO's order has answeredthe assessee's arguments and in view of the findings given bythe Assessing Officer in his remand report and the speakingorder passed by the TPO, the addition was confirmed and theappeal was dismissed. 24. Aggrieved by the same, the assessee went on appealbefore the Tribunal and expect for the issue raising thesubstantial question of law No.5, all other issues were decidedagainst the assessee and the issue arising in question No.5 wasremanded to the CIT(A) for adjudication based on the requestmade by the assessee, for which the Revenue did not object.25. It is submitted that the issue relating to thejurisdiction of the Assessing Officer to invoke Section 154 ofthe Act was never raised before the Assessing Officer or the CIT(A) or the Tribunal and such being the case, the assessee is notthe person aggrieved over the same and the issue has become final. Furthermore, the jurisdictional issue should have beenraised by the assessee at the earliest point of time. 27. Thus, it is submitted that unless the finding of thefact is challenged as perverse, the assessee is precluded fromraising such a contention for the first time before this Court.28. Further, reference was made to the scope of Section154 of the Act and that it falls in Chapter XIV, which dealswith procedure for assessment and it is submitted that thisaspect has been lucidly brought out in the decision inK.Ravindranathan Nair. 29. The learned Senior Standing Counsel referred to Rules10B(2), 10B(3), 10B(4), 10B(5), 10D(3)(e), 10D(4) and 10D(5).These rules were referred to buttress the submission regardingthe data, which is to be furnished by the assessee and how itspeaks of the current year's data and also speaks of the data tobe made available if the current year data is not available andalso mentioned about the agreements and other records andwhatever documents were furnished by the assessee during theassessment proceedings was to justify CUP method as the MAM.Therefore, it is submitted that the plea of jurisdiction cannotbe raised by the assessee at distance of time. 30. Further, it is submitted that the assessee cannotplead that the rule of consistency has to be adopted, sinceadmittedly, the assessments, which have been referred to by thelearned counsel are all assessments, which are subsequent to theassessment order under consideration in this appeal and insupport of such contention, reliance was placed on the decisionsof the Hon'ble Supreme Court in the cases of CIT Vs Oswal AgroMills Limited [(2009) 313 ITR 24, C.K.Gangadharan and another https://hcservices.ecourts.gov.in/hcservices/ 30. Further, it is submitted that the assessee cannotplead that the rule of consistency has to be adopted, sinceadmittedly, the assessments, which have been referred to by thelearned counsel are all assessments, which are subsequent to theassessment order under consideration in this appeal and insupport of such contention, reliance was placed on the decisionsof the Hon'ble Supreme Court in the cases of CIT Vs Oswal AgroMills Limited [(2009) 313 ITR 24, C.K.Gangadharan and another https://hcservices.ecourts.gov.in/hcservices/ Vs. CIT [(2008) 304 ITR 0061], Catholic Syrian Bank Ltd. Vs. CIT[(2012) 343 ITR 0270]. Therefore, it submitted that substantialquestion of law No.1 may be answered against the assessee. 31. With regard to substantial question of law Nos.2 and3, the learned Senior Standing Counsel had elaborately referredto the factual matrix as to how the TPO has assigned reasons tosustain his conclusion that CUP method is the MAM and as to howthe CIT(A) confirmed the orders passed by the TPO as well asobservations and findings recorded in the remand report.Therefore, it is submitted that it is not a case of change ofthe most appropriate method nor it would be a case of estoppel,but it is a confirmation done by the authority considering thefacts and figures. Therefore, the learned counsel prayed foranswering substantial question Nos.2 and 3 against the assessee. 32. With regard to substantial question of law No.4, thelearned Senior Standing Counsel referred to the relevant portionof the findings recorded by the Assessing Officer, the TPO, theremand report and the order of the CIT(A) as confirmed by theTribunal and submitted that the reasoning is fully justified,more particularly when the appropriate method was held to be theCUP method. 33. With regard to substantial question of law No.5, itis submitted that the assessee cannot seek to question theremand as the assessee is the one who sought for the matter tobe remanded to the CIT(A) for adjudication and the Revenue didnot make any objection for remanding the matter back to the CIT(A), which has been specifically recorded by the Tribunal inparagraph 9.0 of the impugned order. 34. On the above grounds, the learned Senior StandingCounsel appearing for the respondent sought for dismissal of theappeal. 35. We have elaborately heard Mr.R.Sandeep Bagmar,learned counsel for the appellant-assessee and Mr.T.Ravikumar,learned Senior Standing Counsel appearing for the respondent-Revenue. 36. As noticed above, the learned counsel for theappellant was fair in submitting that the question ofjurisdiction of the Assessing Officer to exercise power underSection 154 of the Act was never raised at any earlier point oftime and being raised for the first time in this appeal. 37. It is the submission of the learned counsel for theappellant that the said issue involves jurisdiction of theAssessing Officer to invoke power under Section 154 and no new https://hcservices.ecourts.gov.in/hcservices/ facts are brought before the Hon'ble Court and the same ispurely a question of law to be adjudicated under Section 260(A)of the Act. 38. The following dates would be relevant before weproceed to take note of the relevant facts and law on thesubject. 36. As noticed above, the learned counsel for theappellant was fair in submitting that the question ofjurisdiction of the Assessing Officer to exercise power underSection 154 of the Act was never raised at any earlier point oftime and being raised for the first time in this appeal. 37. It is the submission of the learned counsel for theappellant that the said issue involves jurisdiction of theAssessing Officer to invoke power under Section 154 and no new https://hcservices.ecourts.gov.in/hcservices/ facts are brought before the Hon'ble Court and the same ispurely a question of law to be adjudicated under Section 260(A)of the Act. 38. The following dates would be relevant before weproceed to take note of the relevant facts and law on thesubject. 39. On 21.11.2005, a reference was received by the TPOunder Section 92CA(1) from the Assessing Officer, wherein theAssessing Officer made the reference for determination of ALPwith reference to all transactions reported in Form No.3CEBfiled by the assessee. Accordingly, a notice under Section 92CA(2) was issued to the assessee on 28.11.2005 to furnish thedetails called for in an enclosed questionnaire. The assesseesubmitted the details called for in the questionnaire on13.01.2006 and the AGM (Finance) of the assessee companyattended the hearings conducted by the TPO on various dates.While the matter was in issue before the TPO and the assesseewas extending full cooperation to the proceedings, the AssessingOfficer passed an order under Section 143(3) of the Act on28.02.2006. The contention of the appellant is that in theassessment order, the Assessing Officer made an adjustment ofALP and added a sum of Rs.28,36,273/- to the total incomeTherefore, it is submitted that the Assessing Officer has becomefunctus officio and cannot rectify or revise his order, aftercompleting his assessment vide order dated 28.02.2006. The TPO,after hearing the assessee on various dates, passed an orderdated 16.03.2006 under Section 92CA(3). 40. In the later part of this judgment, we shall go intothe findings rendered by the TPO. The TPO directed the AssessingOfficer to compute the total income of the assessee inaccordance with Section Sub-Section (4) of Section 92C of theAct, after giving an opportunity to the assessee andsimultaneously clarified that the findings and discussions areapplicable only in respect of the reference received for theassessment year 2003-04 and not for subsequent assessment years. 41. Pursuant to such order, the Assessing Officer issuednotice under Section 154 of the Act. In the notice, theAssessing Officer stated that she proposed to rectify the defectwith regard to ALP, which is less than the actual import priceof particular grade and hence, there will be an addition to thetotal income taken for tax purposes. 42. The assessee submitted their reply dated 29.05.2006referring to their earlier reply dated 13.03.2006 filed to theshow cause notice dated 30.03.2006 and the written submissionsdated 20.02.2006 filed before the TPO. Further, the assessee https://hcservices.ecourts.gov.in/hcservices/ also referred to all other communications filed for submissionof documents, offering clarification and technical explanationfor the difference in quality of import material. Further, theassessee stated that the TPO had compared the transaction date,import price wherever it is higher only and ignored thetransactions the import prices are lower and did not considerthe volume discount offered by supplier and a 5% variationallowed by CBDT Circular dated 23.08.2001. Further, with regardto ALP for SPCEN and SPCD Trading grades, the assessee statedthat the TPO had compared the import price of unidentical goods,which are not of same quality. Accordingly, the assessee prayedfor dropping the total loading of Rs.2,99,05,100/- to theinternational transactions towards the ALP. also referred to all other communications filed for submissionof documents, offering clarification and technical explanationfor the difference in quality of import material. Further, theassessee stated that the TPO had compared the transaction date,import price wherever it is higher only and ignored thetransactions the import prices are lower and did not considerthe volume discount offered by supplier and a 5% variationallowed by CBDT Circular dated 23.08.2001. Further, with regardto ALP for SPCEN and SPCD Trading grades, the assessee statedthat the TPO had compared the import price of unidentical goods,which are not of same quality. Accordingly, the assessee prayedfor dropping the total loading of Rs.2,99,05,100/- to theinternational transactions towards the ALP. 43. Thus, it is seen that the assessee, at no point oftime, questioned the jurisdiction of the Assessing Officer toimplement the directions of the TPO vide order dated 16.03.2006.The thin line of argument, which is now placed before us, is byreferring to the printed notice form under Section 154, whichwas issued to the assessee. 44. As noticed above, the assessment order dated28.02.2006 is an order passed under Section 143(3) of the Actand not an order passed under Section 92C(3) of the Act. This isevident from the preamble portion of the assessment order incolumn No.13. The assessee did not raise any contention beforethe TPO that either the reference made to him under Section 92CA(1) was erroneous or without jurisdiction or that the TPO has nojurisdiction to deal with the matter on account of theassessment order dated 28.02.2006 under Section 143(3) of theAct. 45. In our opinion, the assessee was conscious that theycannot raise such an objection because the order of referencewas made and received by the TPO on 21.11.2005, much prior tothe order passed under Section 143(3). Even thereafter, theassessee had an opportunity to question the jurisdiction of theTPO as the TPO had issued notice under Section 92CA(2), dated28.11.2005, whereunder the assessee was directed to furnishdetails and a questionnaire was appended to the notice. Theassessee did not raise any objection with regard to thejurisdiction but complied with the demand in the notice dated28.11.2005 and submitted the details called for in thequestionnaire on 13.01.2006. 46. The order passed by the TPO shows that the assesseehad cooperated in the proceedings and their authorizedrepresentative, i.e. AGM (Finance) of the company, has attendedthe hearings on various dates. Therefore, it will not lie in themouth of the assessee to now state that the entire proceedingsare vitiated and that the order passed by the TPO under Section92CA(3) of the Act would be a paper order. The TPO issued directions to the Assessing Officer to compute the total incomeof the assessee in accordance with Section Sub-Section (4) ofSection 92C of the Act. This is a mandate prescribed in thestatute. The TPO also directed the Assessing Officer to affordan opportunity to the assessee. directions to the Assessing Officer to compute the total incomeof the assessee in accordance with Section Sub-Section (4) ofSection 92C of the Act. This is a mandate prescribed in thestatute. The TPO also directed the Assessing Officer to affordan opportunity to the assessee. 47. Precisely, the Assessing Officer has complied withthe directions of the TPO in its letter and spirit. The noticeclearly states that the ALP being less than the actual price ofa particular grade, there has to be an addition to the totalincome taken for tax purposes. The assessee clearly understoodthe implication as they were aware of the TPO's order dated16.03.2006, which was after affording full opportunity to theassessee. Therefore, the assessee thought fit not to questionthe jurisdiction of the Assessing Officer in issuing a notice ina form prescribed for notice under Section 154 of the Act. Thereply given by them, dated 29.05.2006, is on merits and not awhisper about the alleged jurisdiction of the Assessing Officerto issue the notice. The Assessing Officer passed the orderunder Section 92CA(4) of the Act and this being a mandate underthe statute, the Assessing Officer had to follow. Once again,the assessee was fully aware of the implications and presumablyfor such reason, did not raise any objections as regards thevalidity of the notice dated 28.03.2006, when they filed appealbefore the CIT(A) in February, 2011. In any event, what isrelevant is "substance" over "form". The conduct of the assesseeclearly demonstrates that they rightly understood the legalposition and the present attempt of the assessee to question thejurisdiction of the Assessing Officer deserves to be rejected. 48. That apart, the grounds and additional ground ofobjections show that the validity of the notice dated 28.03.2006was never called in question. The CIT(A) called for a remandreport from the TPO. If, according to the Assessing Officer, theorder of assessment dated 30.05.2006 passed under Section 92CA(4) is a nullity, it would have been well open to the assesseeto raise such a contention before the CIT(A) and seek forsetting aside the order. Rather, the assessee reconciledthemselves with the direction issued by the CIT(A) to the TPO bycalling for a remand report. The assessee was given anopportunity after the remand report was received and they madetheir submissions by way of additional submissions dated28.09.2016. In the said additional submissions, no where thejurisdiction of the Assessing Officer has been questioned. TheCIT(A) proceeded to decide the matter on merits and passedorders dated 30.09.2016. The assessee carried the matter onappeal to the Tribunal and once again, the assessee never raisedany contention with regard to the validity of the notice dated28.03.2006. Thus, considering this factual situation, we are ofthe clear view that the present attempt of the assessee is not tenable and accordingly rejected. 49. We have elaborately set out the facts in thepreceding paragraph to demonstrate that the argument before usis not on the question of jurisdiction, but it is entirelycouched on facts qua the conduct of the assessee, which wouldclearly preclude the assessee from raising such a questionalleging the same to be a substantial question of law. tenable and accordingly rejected. 49. We have elaborately set out the facts in thepreceding paragraph to demonstrate that the argument before usis not on the question of jurisdiction, but it is entirelycouched on facts qua the conduct of the assessee, which wouldclearly preclude the assessee from raising such a questionalleging the same to be a substantial question of law. 50. Though the Revenue had placed reliance on thedecision of the Hon'ble Supreme Court in the case of SamtelIndia Ltd. Vs. CIT, Delhi [(2012) 25 taxmann.com 535], thelearned counsel for the appellant would submit that looking intothe facts, this decision will support the assessee. However,what is required to be seen in the said decision is the ratiolaid down with regard to Section 154, which falls under ChapterXIV of the Act. It is pointed out by the Revenue that Section154 finds place in Chapter XIV which deals with Procedure forAssessment. Section 154 deals with rectification of mistakeapparent from the record. Chapter XIV not only deals withassessment and re-assessment and it also deals with re-computation and the object of re-computation is to assess(quantify) the correct taxable income and such re-computation ofa correct taxable income is a matter of procedure. This decisionsquarely explains the procedure of assessment as settled down inChapter XIV of the Act and Section 154 falls under the saidChapter. 51. At the risk of reputation, we may point out that theassessment order dated 28.02.2006 is an order under Section 143(3) and not an order under Section 92C(3) of the Act. 52. The argument of the assessee before us is that theAssessing Officer has exercised jurisdiction under Section 92C(3) and the TPO parallely cannot exercise his power underSection 92CA. On facts, the assessee is wrong. 53. Reference to the TPO was as early as on 21.11.2005.The assessee submitted the details called for in thequestionnaire on 13.01.2006 furnishing all relevant informationand participated in the proceedings before the TPO, whichculminated in an order dated 16.03.2006 under Section 92CA(3)with a direction to the Assessing Officer to compute the totalincome in accordance with Sub-Section 4 of Section 92 of theAct. 54. Thus, the assessee having been fully aware of thefactual position, the faint attempt made before us alleging thequestion to be a substantial question of law is not sustainable. 55. The question pertaining to the jurisdiction of theAssessing Officer to issue notice dated 28.03.2006 is not a pure https://hcservices.ecourts.gov.in/hcservices/ question of law but greatly entwined into the factual thicket.Thus, the assessee, having not objected to any of the orderspassed by all the hierarchy of authorities on the said ground,is wholly precluded from raising such a contention before thisCourt for the first time alleging the same to be a substantialquestion of law. 56. We draw support to this conclusion from not only thedecision in Samtel India Ltd., but the decision inK.Ravindranathan Nair, wherein it was held that unless thefinding of the Tribunal on facts is perverse, the question ofconsidering the correctness of the order in an appeal underSection 260A of the Act would not arise. The decision inMangalore Ganesh Beedi Works would also support the saidconclusion, more particularly, the observations contained inparagraphs 19 and 20, wherein reference was made to the decisionin K.Ravindranathan Nair. The decisions in Ramanlal Kamdar andAnjuga Chit Fund (P) Ltd. would also support our conclusion. 57. Thus, for the above reasons, substantial question oflaw No.1 is answered against the assessee. 58. The substantial questions of law 2 and 3 are taken uptogether as requested by the learned counsel for the appellant. 57. Thus, for the above reasons, substantial question oflaw No.1 is answered against the assessee. 58. The substantial questions of law 2 and 3 are taken uptogether as requested by the learned counsel for the appellant. 59. The assessee would submit that the authorities andthe Tribunal was of the view that the assessee is estopped fromcontending that the TNMM is the MAM after having adopted the CUPmethod in their TP study at the first instance. There can be noquarrel about the legal position which has been laid down inMatrix Cellular International Services P. Ltd. and M/s.QuarkSystems India Pvt. Ltd. (supra), wherein it has been held thatuse of one method in a transfer pricing report does not estoppethe assessee from later claiming that another method is the mostappropriate one, provided that it is the correct position. 60. But, in the case on hand, we find that the TPO, atthe first instance, did not foreclose the assessee solely on theground of estoppel. To explain this position, we may refer tothe order passed by the TPO dated 16.03.2006 under Section 92CA(3) of the Act. In paragraph 6 of the order, the TPO referred tothe method adopted by the assessee, namely the CUP method, asthe MAM to arrive at the ALP. The reason for adoption of CUPmethod and the step involved in arriving at the ALP by theassessee was clearly spelt out in the transfer pricing document.After reproducing the relevant portion of the transfer pricingdocument, the TPO proceeded to consider as to what would be theappropriate method. In paragraph 6.2, analysis of ALP has beendone. The 6 steps and the computation of the ALP for theassessment year is given in a tabulated form. In a note below https://hcservices.ecourts.gov.in/hcservices/ the tabulated form, it has been stated as follows:"Note * The import price as determined using anuncontrolled Transactions is more than theactual import price from the AssociatedCompany. Hence, the Arm's Length Price is theactual import price.** A Comparable Uncontrolled transactions isnot available for this imported material." 61. The TPO has observed that from the steps listed downin his order, it is clear that the assessee company has adoptedweighted average method for comparison of the transactions andRule 10A of the Income Tax Rules, 1962 clearly gives thedefinition of uncontrol