Case Commentary: Pricewaterhouse Coopers Private Limited vs. Assistant Commissioner of Income Tax – High Court at Calcutta Quashes Assessment Order for Violation of Natural Justice
In a significant ruling, the High Court at Calcutta has allowed the writ petition of Pricewaterhouse Coopers Private Limited (the Petitioner) challenging the Assessment Order dated March 30, 2026 passed under Section 143(3) of the Income Tax Act, 1961 for Assessment Year 2024-25. The court quashed the order and consequential demand and penalty proceedings, citing gross violation of principles of natural justice. This case commentary delves into the facts, legal reasoning, and implications of the judgment, while remaining strictly within the provided source text and summary.
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Facts of the Case
The Petitioner, a consultancy company, filed its return of income for AY 2024-25 on November 29, 2024, declaring a loss of ₹52,27,57,732/-. Subsequently, on June 3, 2025, it modified the return to a loss of ₹42,51,35,850/-. The case was selected for scrutiny assessment by the National Faceless Assessment Centre (NFAC), which issued notices under Section 143(2) and Section 142(1). The Petitioner complied with all notices.
On December 22, 2025, the case was transferred to the Jurisdictional Assessing Officer (JAO) under Section 144B(8). The JAO issued further notices under Section 142(1) on January 27, 2026, March 6, 2026, and March 12, 2026, to which the Petitioner responded on March 13, 2026, March 19, 2026, and March 25, 2026.
The critical turning point was the show cause notice dated March 28, 2026, which alleged the Petitioner’s involvement in the acquisition of KSK Energy Ventures Ltd by Gland Celsus Bio Chemicals Pvt Ltd. The notice required a reply by March 30, 2026. The Petitioner complied on March 30, 2026, but on the same day, the JAO passed the impugned Assessment Order raising a demand of ₹87,20,87,760/- without granting any personal hearing or reasonable time.
The Petitioner argued that no opportunity of hearing was provided, and the reply was not considered. The revenue contended that the Petitioner had an alternative remedy of appeal, but the court rejected this, citing established exceptions for violation of natural justice.
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Reasoning of the High Court
The court, presided over by Hon’ble Justice Smita Das De, focused on two core issues: violation of principles of natural justice and the maintainability of the writ petition despite the availability of an alternative remedy.
1. Violation of Principles of Natural Justice
The court observed that the show cause notice was issued on March 28, 2026, requiring a reply by March 30, 2026. The Petitioner replied on March 30, 2026, but the Assessment Order was passed on the same day without affording any meaningful opportunity to be heard. This squarely violated the audi alteram partem rule, which mandates that no person shall be judged without a fair hearing.
The court relied on the CBDT Instructions No. 20/2015, 8/2017, 1/2018, and Circular No. 27/2019, which require issuance of a show cause notice prior to making disallowances. It also referred to the judgment in Inox Wind Energy Ltd vs ACIT (2024) 167 taxmann.com 572 (Gujarat), which held that proper show cause notice indicating proposed disallowances is mandatory, even when a case is transferred from NFAC to JAO. The court noted that the assessment order was thus vitiated by jurisdictional infirmity and procedural defects.
The judgment in Sahara India (Firm) vs CIT (2008) 300 ITR 403 (SC) was cited to emphasize that principles of natural justice must be read into statutory provisions unless explicitly excluded. Since no personal hearing was granted and the reply was not considered, the order was set aside.
2. Alternative Remedy – A Rule of Discretion, Not Bar
The revenue argued that the Petitioner should have filed an appeal under the Act. The court, however, held that writ jurisdiction under Article 226 of the Constitution is plenary and not ousted merely because an alternative remedy exists. Citing Godrej Sara Lee Ltd vs Excise and Taxation Officer (2023) SCC Online SC 95, the court distinguished between “entertainability” and “maintainability,” stating that the rule of alternative remedy is a rule of policy, convenience, and discretion, not a rule of law.
The court referenced the Supreme Court’s judgment in Whirlpool Corporation, Harbanslal Sahnia, Radha Krishan Industries, and Tin Box Company to support the view that where there is a violation of natural justice, a writ petition is maintainable. The court found that the Petitioner was denied a meaningful opportunity, which is a recognized exception to the alternative remedy rule.
3. Remand for Fresh Assessment
The court quashed the Assessment Order dated March 30, 2026, along with consequential demand and penalty proceedings, and remanded the matter to the Assessing Officer for fresh assessment. The direction was to complete the assessment within eight weeks after providing a meaningful opportunity of hearing, including considering all replies already filed.
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Conclusion
The High Court’s decision reaffirms the primacy of principles of natural justice in tax assessments. The order was quashed not on merits but on procedural infirmity—the complete denial of an effective opportunity to be heard. The court also clarified that writ jurisdiction under Article 226 can be invoked even when an alternative remedy exists, especially where the order is passed in haste without considering submissions. This judgment serves as a caution to tax authorities that the faceless assessment scheme, while efficient, cannot override fundamental fairness. The remand for fresh assessment ensures that the revenue’s rights are preserved, but only after due process.
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Frequently Asked Questions
Q1: What was the main reason for quashing the Assessment Order?
A: The High Court found that the Assessment Order was passed in violation of principles of natural justice. The show cause notice was issued on March 28, 2026, requiring reply by March 30, 2026, and the order was passed on the same day without granting a personal hearing or considering the reply.
Q2: Why did the court not ask the Petitioner to file an appeal instead?
A: The court held that the rule of alternative remedy is a rule of discretion, not a bar to maintainability. Where there is a gross violation of natural justice, writ jurisdiction under Article 226 can be invoked. The court relied on Godrej Sara Lee Ltd vs Excise and Taxation Officer and other Supreme Court precedents.
Q3: What is the significance of the case being transferred from NFAC to JAO?
A: The transfer under Section 144B(8) did not absolve the JAO from following due process. The court cited Inox Wind Energy Ltd to stress that show cause notice indicating proposed disallowances is mandatory even after transfer.
Q4: What was the demand raised in the quashed Assessment Order?
A: The Assessment Order raised a substantial demand of ₹87,20,87,760/- for AY 2024-25.
Q5: What happens now after the order is quashed?
A: The matter is remanded to the Assessing Officer for fresh assessment. The court directed completion within eight weeks after providing a meaningful opportunity of hearing, including considering all replies already filed by the Petitioner.
Q6: Can the revenue appeal against this High Court judgment?
A: The source text does not mention any appeal. However, under normal law, the revenue may appeal to the Supreme Court if the judgment involves a question of law. The court’s decision is final unless appealed.