Pricewaterhouse Coopers Pvt. Ltd. Vs DCIT (ITAT Kolkata)
CIT(A) Cannot Avoid Deciding Grounds and Ask Assessee to File Another Appeal: ITAT Deprecates Repeated Passing of Such Orders
Summary: The Kolkata Bench of the Income Tax Appellate Tribunal has strongly deprecated the practice of Commissioners (Appeals) passing orders without granting a hearing and without adjudicating the grounds raised by the assessee.
The Tribunal expressed surprise at an order in which the CIT(A), instead of deciding the appeal on merits, identified alleged defects in the assessment order, issued directions concerning the incorporation of a transfer-pricing adjustment and informed the assessee that it could pursue another appeal against the order giving effect to the appellate order.
Holding that the assessee’s substantive grounds had not been adjudicated and that no opportunity of hearing had been provided, the Tribunal set aside the first appellate order and restored the entire matter to the CIT(A) for fresh adjudication on merits.
Background of the case
Pricewaterhouse Coopers Pvt. Ltd. filed an appeal before the CIT(A), National Faceless Appeal Centre, against the assessment for Assessment Year 2021-22.
The dispute involved a transfer-pricing adjustment of ₹48,11,000, proposed through an order passed by the Transfer Pricing Officer under Section 92CA(3) on 18 September 2023.
When the appeal came before the CIT(A), no notice of hearing was issued to the assessee. Nevertheless, the appellate authority proceeded to dispose of the appeal on the basis of the statement of facts and grounds filed with the appeal.
Instead of recording findings on the grounds raised by the assessee, the CIT(A) observed that the transfer-pricing adjustment made by the TPO had apparently not been incorporated in the assessment order. The CIT(A) stated that it was not known whether the assessee or the Assessing Officer had communicated or accepted the variations proposed by the AO or TPO.
The CIT(A) thereafter requested the Assessing Officer to incorporate the transfer-pricing adjustment of ₹48,11,000 while giving effect to the appellate order. Curiously, the order referred to an appeal-effect order under Section 254 and stated that the assessee was free to file an appeal against such order.
Assessee’s contention before the Tribunal
The assessee contended that its appeal had been disposed of without issuing any hearing notice and without affording it an opportunity to explain the facts or address the issues arising from the assessment and transfer-pricing proceedings.
Although the CIT(A) had reproduced the statement of facts and grounds of appeal, he had not decided the grounds on their merits.
The assessee, therefore, requested the Tribunal to restore the matter to the CIT(A) so that an effective opportunity of hearing could be granted and the appeal could be properly adjudicated.
The Departmental Representative fairly stated that the Revenue had no objection to the issues being restored to the CIT(A) for fresh adjudication after granting an adequate opportunity of hearing.
ITAT’s observations
The Tribunal found from the first appellate order that the CIT(A) had attempted to point out faults and defects in the assessment order. However, despite recording the assessee’s statement of facts and grounds, the CIT(A) had consciously avoided adjudicating the issues raised in the appeal.
The order itself demonstrated that no opportunity of hearing had been granted to the assessee.
The Tribunal took particular exception to the CIT(A)’s observation that the assessee was free to exercise its “judicial liberty” by filing another appeal against the order giving effect to the appellate order. In a pointed observation, the Tribunal stated that the assessee undoubtedly knew its legal remedies.
The Bench expressed surprise that such an appellate order had been passed at all. It further observed that similar orders were being repeatedly passed by Commissioners (Appeals) and categorically stated that such orders deserved to be deprecated.
However, the Tribunal refrained from commenting further upon the conclusions recorded by the CIT(A), since the substantive issues had not been adjudicated on merits.
Decision of the Tribunal
The Tribunal set aside the order of the CIT(A) and restored all the issues raised in the appeal to the first appellate authority for fresh adjudication on merits.
Accordingly, the assessee’s appeal was partly allowed for statistical purposes.
The Tribunal did not adjudicate the correctness or otherwise of the transfer-pricing adjustment of ₹48,11,000. Nor did it delete or confirm the adjustment. All substantive issues remain open for examination by the CIT(A) after providing the assessee an adequate opportunity of hearing.
Author’s comments
The order reiterates that the Commissioner (Appeals) is not merely an administrative authority but a quasi-judicial appellate authority. Once a valid appeal is filed, the CIT(A) must examine and decide the grounds raised by the appellant through a reasoned and speaking order.
Under Section 250(6), the appellate order must be in writing and state the points for determination, the decision on those points and the reasons for the decision. Merely reproducing the statement of facts and grounds, pointing out defects in the assessment order and leaving the controversy to be pursued through another round of litigation does not satisfy this statutory obligation.
The reference in the CIT(A)’s order to the Assessing Officer giving appeal effect “under Section 254” is also unusual. Section 254 governs orders of the Income Tax Appellate Tribunal, whereas an order passed by the CIT(A) is ordinarily under Section 250. Further, directing the assessee to challenge a future appeal-effect order cannot substitute the obligation to decide the pending appeal on merits.
There is another important natural justice concern. If the appellate authority notices that a transfer-pricing adjustment has not been incorporated in the assessment and proposes a direction that may enhance the assessee’s liability, the assessee must first be put on notice and granted an effective opportunity to respond. An appellate proceeding cannot be converted into a mechanism for indirectly increasing liability without observing the safeguards applicable to enhancement.
The decision is therefore significant not because it determines the transfer-pricing controversy, but because it reinforces appellate discipline: every ground raised must be considered, the assessee must be heard, and the decision must contain clear findings supported by reasons. The remedy for an incomplete assessment order is not an incomplete appellate order followed by another appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, KOLKATA BENCH
This is an appeal filed by the assessee against the order of the CIT(A), NFAC, Delhi [hereinafter referred to as the ‘CIT(A)’] in appeal no.NFAC/2020-21/10310445 dated 10.12.2025 for the assessment year 2021-22.
2. Shri K. M. Gupta, AR represented on behalf of the assessee and Shri Gayasuddin Ansari, CIT-DR represented on behalf of the revenue.
3. It was submitted by the ld. AR that when the matter came before the ld. CIT(A), no notice of hearing has been issued by the ld. CIT(A) to the assessee. However, on the basis of statement of facts and grounds of appeal raised by the assessee, the ld. CIT(A) has disposed off the appeal wherein he has given the finding in para 4 of his order which reads as follows:
4. CONCLUSION DRAWN is that the TP adjustment made by the Transfer Pricing Officer on reference to the TPO do not incorporate the TP adjustment proposed. It is not known whether the assessee/assessing officer had communicated/accepted the proposed variations made by the AO/TPO. Considering these the assessing officer is requested to incorporate the entire body of TP adjustment made through the Transfer Pricing Order under section 92CA(3) was passed on 18 September 2023 making transfer pricing adjustments of Rs. 48,11,000. The assessing officer while giving appeal effect u/s 254 shall incorporate the body of the TP order. The assessee is free to file an appeal against the order u/s 254 giving effect to this appeal order.
3.1 It was the submission that the appeal has been disposed off without hearing the assessee and it is prayed that the assessee may be granted an opportunity to represent before the ld. CIT(A).
4. In reply, the ld. CIT-DR has submitted that he has no objection if the issues are restored to the file of the ld. CIT(A) for re-adjudication after granting adequate opportunity of being heard.
5. We have considered the rival submissions. A perusal of the order of the ld. CIT(A) shows that in para 4 of his order, the ld. CIT(A) has tried to point the faults and defects in the assessment order which has been passed. Even though, he recorded the statement of facts and the grounds of appeal as raised by the assessee, he has decided not to adjudicate on the said facts. There is also no opportunity granted to the assessee as is evident from the order of the ld. CIT(A). It is also noticed that the ld. CIT(A) has been kind to the assessee in directing that the assessee is free to exercise his judicial liberty of filing the appeal against the order u/s 254 giving effect to the appeal-order. Admittedly, we are sure that the assessee knows its legal remedies. It is surprising that such an order has been passed by the ld. CIT(A) and it is also being noticed that such orders are being repeatedly passed by CIT(A)s. Thus, such orders are to be deprecated. We are not stating anything more on the conclusions drawn by the ld. CIT(A). However, as no findings have been given by the ld. CIT(A) in respect of issues raised by the assessee, the order of the ld. CIT(A) is set aside and the issues in the appeal are restored to the file of the ld. CIT(A) for adjudication on merits.
6. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 10/09/2026.
