Calcutta High Court quashed a transfer pricing adjustment order under Section 92CA(3) of the Income Tax Act, holding that failure to grant a personal hearing and record reasoned findings violates principles of natural justice.
Transfer Pricing Order Set Aside for Violation of Natural Justice
The Calcutta High Court invalidated a transfer pricing assessment order issued under Section 92CA(3) of the Income Tax Act, 1961, due to the assessing officer's failure to grant a personal hearing and articulate sufficient reasons. The taxpayer had challenged the adjustment of international transactions on grounds of procedural unfairness.
The court held that when the Transfer Pricing Officer (TPO) proposes adjustments, the assessee has a right to be heard, especially where factual disputes arise. The record showed no evidence of an opportunity being provided to the taxpayer to respond to the proposed adjustments, nor were adequate reasons recorded to justify the final order.
"An order passed without granting personal hearing and without recording independent application of mind is liable to be quashed for violation of natural justice."
This ruling underscores the mandatory nature of procedural safeguards in transfer pricing proceedings. Practitioners must ensure compliance with hearing notices and maintain documentation to demonstrate adherence. The decision may impact pending cases where TPO orders lack personal hearing records or reasoned analysis.
Citations
- Income Tax Act, 1961, Section 92CA(3)
