The Calcutta High Court has quashed a transfer pricing order passed under Section 92CA(3) of the Income Tax Act, 1961, holding that the failure to grant a personal hearing and record adequate reasons vitiated the proceedings.
Calcutta HC Quashes Transfer Pricing Order for Violating Rules of Natural Justice
The Calcutta High Court has set aside a transfer pricing adjustment order passed under Section 92CA(3) of the Income Tax Act, 1961, due to the failure to grant the assessee a personal hearing and record reasoned findings. The court emphasized that non-observance of principles of natural justice, particularly a personal hearing before finalizing transfer pricing adjustments, renders the order legally unsustainable.
The tribunal noted that the Assessing Officer proceeded to finalize the transfer pricing determination without affording the assessee an opportunity to present its case despite specific requests. Further, the court held that the reasons recorded were perfunctory and did not demonstrate a meaningful application of mind to the facts and submissions of the taxpayer.
The requirement of recording reasoned orders and granting personal hearings under Rule 10C(4) of the Income Tax Rules, 1962, is not a mere formality but a substantive safeguard ensuring fairness.
This ruling reinforces the necessity for tax authorities to strictly follow procedural safeguards in transfer pricing assessments. Practitioners should ensure that clients are vigilantly afforded hearings and that all orders contain substantive, case-specific reasoning. The decision will serve as a precedent against arbitrary or ex parte transfer pricing determinations.
Citations
- Section 92CA(3), Income Tax Act, 1961
- Rule 10C(4), Income Tax Rules, 1962
