The Calcutta High Court quashed a transfer pricing order under Section 92CA(3) due to failure to grant a personal hearing and record reasoned findings, affirming procedural fairness in tax adjudication.
Calcutta HC Quashes Transfer Pricing Order for Procedural Violation
The Calcutta High Court has quashed a transfer pricing adjustment order passed under Section 92CA(3) of the Income Tax Act, 1961, citing denial of a personal hearing and absence of recorded reasons. The court emphasized that principles of natural justice are inviolable, even in technical tax proceedings.
The taxpayer had challenged the order arguing that no personal hearing was granted before the finalization of the transfer pricing assessment. The Department contended that show-cause notices sufficed. The High Court rejected this, holding that a personal hearing is a statutory requirement under Rule 44A(5) of the Income Tax Rules, 1962, especially where adjustments affect substantial income.
The failure to grant an opportunity of personal hearing and to record findings thereon vitiates the order, irrespective of the correctness of the proposed adjustment.
This ruling strengthens taxpayer rights in transfer pricing matters. Assessing Officers and Transfer Pricing Officers must now ensure strict compliance with hearing mandates before finalizing assessments. Legal teams should verify procedural adherence when challenging or defending such orders, particularly in pending or appellate stages.
Citations
- Section 92CA(3), Income Tax Act, 1961
- Rule 44A(5), Income Tax Rules, 1962
