The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed the department’s challenge to the jurisdiction of the Commissioner of Income Tax (Appeals), Pune-13, observing that the Department itself had allocated the taxpayer’s appeal to that authority through its automated system and the Assessing Officer had not objected during the appellate proceedings despite receiving an appeal memo.
The Bench of Vinay Bhamore (Judicial Member) and Dr. Dipak P. Ripote (Accountant Member) also rejected an interpretation of the relevant CBDT jurisdictional notification that would require a Transfer Pricing Officer’s order, an arm’s length price dispute and related penalties to exist simultaneously before CIT(A), Pune-13 could hear an appeal.
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The company, engaged in manufacturing animal feed, poultry feed, sugar and ethanol, along with power co-generation and allied activities, filed its return declaring nil income after claiming deductions under Chapter VI-A of the Income-tax Act, 1961.
During scrutiny assessment, the Assessing Officer referred the matter to the Transfer Pricing Officer (TPO). By an order dated May 4, 2023, the TPO accepted the taxpayer’s transaction values and proposed no transfer pricing adjustment.
Nevertheless, the Assessing Officer issued a draft assessment order under Section 144C on September 27, 2023, followed by a final assessment order dated October 30, 2023.
Before the CIT(A), the company argued that it did not qualify as an “eligible assessee” for the purposes of Section 144C. It submitted that no variation had arisen from the TPO’s order and that it was neither a non-resident nor a foreign company.
According to the company, the Assessing Officer could not invoke Section 144C or claim the resulting extended assessment timeline. It therefore contended that the final assessment was barred by limitation under Section 153.
The CIT(A), Pune-13 accepted the limitation objection and quashed the assessment by an order dated November 27, 2025, consequently deleting the additions.
The department challenged the authority of CIT(A), Pune-13 to decide the appeal.
Relying on the CBDT notification dated October 13, 2022, the Department argued that the Commissioner’s jurisdiction covered cases involving a TPO order and one or more grounds relating to the determination of arm’s length price under Chapter X, together with related penalties.
Since the TPO had proposed no adjustment and the taxpayer’s appeal did not involve an arm’s length price dispute, the Revenue maintained that CIT(A), Pune-13 lacked jurisdiction.
The taxpayer responded that it had electronically filed Form 35 and had no option to select the appellate authority. The assignment was made entirely through the Department’s electronic allocation mechanism.
Examining the Faceless Appeal Scheme, 2021, the Tribunal noted that the National Faceless Appeal Centre assigns appeals to a Commissioner (Appeals) through an automated allocation system.
It found that the company had no role in choosing CIT(A), Pune-13 and that the Department had not disputed this position.
The Tribunal observed that no reasons for the allocation were communicated to the taxpayer. Consequently, the company could not be faulted for pursuing its appeal before the authority to which the Department had assigned it.
A report obtained from CIT(A), Pune-13 showed that the National Faceless Appeal Centre had transferred the appeal to that office on July 16, 2024.
The Assessing Officer was subsequently informed through an appeal memo generated on the Income Tax Business Application portal on January 22, 2025. The memo sought information and specifically asked whether the officer wished to attend the hearing.
In a separate report, the Assessing Officer acknowledged receiving the memo but stated that no information had been submitted and none of the available options had been exercised. The officer argued that responding was discretionary and that the volume of appeal memos made individual action impracticable.
The Tribunal rejected the Revenue’s objection in these circumstances. It held that the Department had information about the allocation and an opportunity to participate, yet had raised no jurisdictional objection before the CIT(A).
It further noted that the National Faceless Appeal Centre, which allocated the appeal, and the departmental authority subsequently questioning that allocation both functioned under the CBDT.
On these facts, the Tribunal concluded that the department’s belated objection lacked merit.
The Tribunal also examined the department’s interpretation of the jurisdictional notification.
It explained that treating the notification’s references to a TPO order, an arm’s length price ground and related penalties as three cumulative requirements would produce an absurd result.
Under that construction, even a taxpayer challenging an arm’s length price adjustment could fall outside the Commissioner’s jurisdiction merely because no related penalty was challenged.
The Bench therefore accepted that all three conditions need not be satisfied together. A harmonious interpretation giving effect to the notification’s object supported CIT(A), Pune-13’s jurisdiction in the present case.
The Tribunal emphasised that the grounds and arguments before it concerned only the CIT(A)’s jurisdiction.
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