The Calcutta High Court has quashed a transfer pricing order under Section 92CA(3) of the Income Tax Act, holding that the failure to grant a mandatory personal hearing and record reasons vitiated the proceedings.
Calcutta HC Quashes Transfer Pricing Order Over Procedural Violation
The Calcutta High Court has quashed an order passed under Section 92CA(3) of the Income Tax Act, 1961, in a case where the transfer pricing adjustment was upheld without affording the assessee a personal hearing. The court emphasized that the statutory requirement of a personal hearing under Rule 44C of the Rules for the computation of arm's length price is mandatory, not optional.
The assessee challenged the order on grounds of denial of a fair opportunity and absence of reasoned findings. The court observed that revenue authorities misread the audit report and failed to record cogent reasons justifying the adjustment.
"Failure to grant personal hearing and record adequate reasons renders the order non-speaking and legally unsustainable,"the court held, citing settled jurisprudence on principles of natural justice.
This decision underscores the importance of procedural due process in transfer pricing disputes. Tax practitioners must ensure that all assessments under Chapter X of the Act strictly comply with Rule 44C, particularly the requirement to issue notice and grant opportunity of hearing before finalization. Non-compliance remains a potent ground for judicial intervention.
Citations
- Section 92CA(3), Income Tax Act, 1961
- Rule 44C, Income Tax Rules, 1962
