Reference to Transfer Pricing Officer [Section 92CA] :
This section provides for a procedure for reference to a Transfer Pricing Officer (TPO) of any issue relating to computation of arm‟s length price in an international transaction. The procedure is as under –
(1) The option to make reference to TPO is given to the Assessing Officer. He may make this reference if he considers it necessary or expedient to do so. This option is not available to the assessee.
(2) The Assessing Officer has to take the approval of the CIT before making such a reference.
(3) Any Joint /Deputy/Assistant Commissioner of Income Tax, authorised by CBDT, can be appointed as TPO.
(4) When such reference is made, TPO can call upon the assessee to produce evidence in support of the computation of arm‟s length price made by him.
(5) The TPO can also determine the ALP of other international transactions identified subsequently in the course of proceedings before him [Sub-section (2A)].
(6) Where in respect of an international transaction, the assessee has not furnished the report under section 92E and such transaction comes to the notice of the TPO during the course of proceeding before him, the transfer pricing provisions shall apply as if such transaction is referred to the TPO by the Assessing Officer under section 92CA(1) [Sub-section (2B)].
(7) Further, the retrospective insertion of sub-section (2B) shall not empower the Assessing Officer either to assess or reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of t he assessee under section 154, for any assessment year for which the proceedings have been completed before 1st July, 2012. Therefore, the power given to the TPO under subsection (2B) to determine arm‟s length price in respect of the transaction not reported by the assessee, can be exercised only in respect of the cases pending before the Assessing Officer and completed assessments cannot be reopened by exercising such power [Sub-section (2C)]
(8) The TPO has to pass an order determining the arm‟s length price after considering the evidence, documents, etc. produced by the assessee and after considering the material gathered by him. He has to send a copy of his order to Assessing Officer as well as the assessee.
(9) The order of the Transfer Pricing Officer determining the arm’s length price of an international transaction is now binding on the Assessing Officer and the Assessing Officer shall proceed to compute the total income in conformity with the arm’s length price determined by the Transfer Pricing Officer [Sub-section (4)].
(10) In order to provide sufficient time to the Assessing Officer to complete the assessment in a case where reference is made to the Transfer Pricing Officer, sub-section (3A) has been inserted in section 92CA to provide for determination of arm’s length price of international transactions by the Transfer Pricing Officer at least 60 days before the expiry of the time limit under section 153 or section 153B for making an order of assessment by the Assessing Officer. This provision would apply in a case where reference is made on or after 1.6.2007 or in a case where reference is made before that date but the order of the Transfer Pricing Officer is pending on that date [Sub-section (3A)].
(11) The TPO has power to rectify his order under section 154 if any mistake apparent from the record is noticed. If such rectification is made, the Assessing Officer has to rectify the assessment order to bring it in conformity with the same.
(12) The TPO can exercise all or any of the powers specified in clause (a) to (d) of section 131(1) or section 133(6) or section 133A for determination of arm‟s length price once the above reference is made to him.