TP Order Issued Without Digital Signature or Authentication Invalid in Law: ITAT Quashes ₹85 Crore Transfer Pricing Adjustment [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench has quashed transfer pricing adjustments aggregating to ₹85 crore made against the assessee and held that a Transfer Pricing (TP) order issued without a digital signature or proper authentication is invalid in law and cannot form the basis of assessment proceedings.

The dispute arose from a transfer pricing order purportedly passed under Section 92CA(3) of the Income Tax Act, 1961 proposing adjustments of ₹82.28 crore on account of Advertisement, Marketing and Promotion (AMP) expenditure and ₹2.72 crore relating to interest paid on Compulsorily Convertible Debentures (CCDs). The total substantive adjustment amounted to ₹85 crore.

The assessee UCWeb Mobile Private Limited challenged the validity of the TP order before the Tribunal, contending that the order relied upon by the Revenue was undated, unauthenticated and did not bear any digital signature of the Transfer Pricing Officer (TPO). It was argued that such an order failed to satisfy the statutory requirements and the prescribed procedure governing electronic proceedings.

The Revenue department on the other hand submitted that a signed copy of the order had been dispatched to the assessee through registered post and therefore the objection raised by the assessee was untenable.

The Tribunal observed that no signed or authenticated TP order had been produced before it. The bench further noted that the order had been released without any authentication rendering it legally defective.

The two-member bench comprising M. Balaganesh (Accountant Member) and Sudhir Kumar (Judicial Member) allowed the appeals filed by the assessee for the Assessment Years 2017-18 and 2018-19 and held that the impugned TP order was not a valid order in the eyes of law. The bench observed that an order issued without authentication cannot acquire legal enforceability merely because consequential assessment proceedings were undertaken on its basis.

The Tribunal held that orders passed under the e-proceedings regime must be digitally authenticated in accordance with the procedure prescribed by the Central Board of Direct Taxes (CBDT). Failure to comply with such mandatory requirements vitiates the proceedings.

Accordingly the bench held that the transfer pricing order suffered from a fundamental legal defect, the Tribunal quashed the assessment and allowed the assessee’s appeals for both assessment years.

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