Section 263 of the Income Tax Act, provides for revision of orders which are
erroneous and prejudicial to the interests of the revenue. The power under this
section permits a PCCIT / CCIT / PCIT / CIT to call for and examine the record of
any proceedings under this Act. In a case where he considers the order passed by
the Assessing Officer (AO) or Transfer Pricing Officer (TPO) to be erroneous and
prejudicial to the interests of the revenue, he may pass an order of revision.

The order of revision may result in enhancement or modification or cancellation of
the order and directing a fresh order to be made. It can be seen that the fresh order
may be an order of assessment where the error and prejudice lies in such order. It
can also be seen that the fresh order can also be an order passed u/s.92CA by the
TPO where the error and prejudice is in the order of the TPO

Having a look at the provisions relating to Transfer Pricing it can also be seen that
section 92CA(4) specifically provides that the AO is to pass an order in conformity
with the Arm’s Length Price (ALP) determined by the TPO. The brief question that is
sought to be discussed is the jurisdiction of the PCCIT / CCIT / PCIT / CIT to revise
an order. The PCCIT / CCIT / PCIT / CIT may be an officer who has jurisdiction over
the AO but not over the TPO since the jurisdictional PCCIT / CCIT / PCIT / CIT of the
TPO may be a different officer. It is only logical to conclude that the PCCIT / CCIT /
PCIT / CIT having jurisdiction over the concerned subordinate authority is the PCCIT
/ CCIT / PCIT / CIT who will have jurisdiction to revise the order.

Let us take an example where the PCIT at Mumbai has jurisdiction over the TPO but
the PCIT at Delhi has jurisdiction over the AO (particularly in cases where
assessments are being framed by the NaFAC). In such a case, where there is an
error in the order of the TPO it is the PCIT at Mumbai who would have jurisdiction to
revise the order since the error and prejudice exists in the order of the TPO.

However, if unconnected to the determination of the ALP an error has been
committed by the AO which is prejudicial to the interests of the revenue, the PCIT at
Delhi would have jurisdiction to revise the order. Though the error committed by the
TPO will manifest itself in the order passed by the AO, it is but clear that the error
itself which is in the TPOs order cannot be revised by the PCIT having jurisdiction
over the AO and can only be revised by the PCIT having jurisdiction over the TPO.
Any other conclusion would lead to a situation where a non-jurisdictional PCIT will be
able to revise an order of an officer who is not within his jurisdiction.

At this stage it is worth repeating an understanding that even where there is an error
and prejudice in the TPO’s order, no error or prejudice can be said to exist on the
determination of ALP in the assessment order particularly in the light of section
92CA(4) which specifically provides that the AO is bound to compute the total
income only in conformity with the ALP as determined by the TPO.

Income Tax, # 263, # Jurisdiction, # TPO, # AO, # NaFAC, # error, # prejudice