Summary: The Calcutta High Court in Pricewaterhouse Coopers Private Limited Vs ACIT held that an assessment order passed under Section 143(3) of the Income-tax Act without providing a meaningful and effective opportunity of hearing is liable to be quashed for violating the principles of natural justice. The assessee had filed its return declaring a loss, and after scrutiny proceedings were transferred from the National Faceless Assessment Centre to the Jurisdictional Assessing Officer, a show cause notice was issued requiring a reply by 30 March 2026. Although the assessee submitted its response on the stipulated date, the Assessing Officer passed the assessment order on the very same day, raising a tax demand of about ₹87.21 crore without considering the reply or granting a proper hearing. The Court held that the availability of a statutory appeal does not bar writ jurisdiction where procedural fairness is challenged. It quashed the assessment order, demand notice, and penalty proceedings, and remanded the matter for fresh assessment within eight weeks after granting an effective opportunity of hearing.
Calcutta HC order that The existence of an alternative appellate remedy does not bar the exercise of writ jurisdiction where the challenge is to the decision-making process itself and not merely to the merits of the assessment.
Ratio Decidendi
An assessment order passed under Section 143(3) of the Income-tax Act without granting a meaningful and effective opportunity of hearing is liable to be quashed as being violative of the principles of natural justice. The existence of an alternative appellate remedy does not bar the exercise of writ jurisdiction where the challenge is to the decision-making process itself and not merely to the merits of the assessment.
Brief Facts:
The petitioner filed its return declaring a loss for AY 2024-25, which was initially processed under Section 143(1) resulting in a substantial refund. The case was selected for scrutiny under the Faceless Assessment Scheme. Subsequently, the assessment was transferred from the National Faceless Assessment Centre (NFAC) to the Jurisdictional Assessing Officer (JAO). On 28 March 2026, the Assessing Officer issued a show cause notice based upon information allegedly received from the Investigation Wing regarding the acquisition of KSK Energy Ventures Ltd.The petitioner was directed to furnish its reply by 30 March 2026.The petitioner submitted its explanation on 30 March 2026 itself. However, on the very same day, the Assessing Officer passed an assessment order under Section 143(3), raising a tax demand of approximately ₹87.21 crore, without granting any meaningful opportunity of hearing or considering the reply.
Issues:
1. Whether the assessment order passed under Section 143(3) was liable to be quashed for violation of the principles of natural justice.
2. Whether the writ petition under Article 226 was maintainable despite the availability of the statutory appellate remedy under the Income-tax Act.
Findings of the Court:
The Calcutta High Court answered both issues in favour of the assessee.The Court held that although ordinarily an assessee should avail the statutory appellate remedy, the rule of alternative remedy is only a rule of self-imposed restraint. It does not apply where there is a gross violation of the principles of natural justice or where the assessment suffers from jurisdictional or procedural infirmities.The Court observed that merely issuing notices does not satisfy the requirement of natural justice. The opportunity provided must be real, meaningful and effective. In the present case, the assessee was required to respond by 30 March 2026 and the assessment order itself was passed on the same date, rendering the opportunity illusory. The court relied on catena of decisions and finally the High Court:
- quashed the assessment order dated 30 March 2026;
- quashed the consequential demand notice and penalty proceedings;
- remanded the matter to the Assessing Officer for fresh assessment after granting a meaningful opportunity of personal hearing and
- permitting the assessee to file a detailed reply with supporting materials;
- directed that the fresh assessment be completed within eight weeks in accordance with law.
Key Takeaways:
This judgment reiterates that procedural fairness is the foundation of a valid assessment. Even under the faceless assessment regime or after transfer to the Jurisdictional Assessing Officer, the Assessing Officer must provide an effective and meaningful opportunity of hearing. Where an assessment is completed in undue haste, particularly at the end of the limitation period, and the assessee is deprived of a real opportunity to respond, the assessment is liable to be quashed notwithstanding the availability of an appellate remedy.
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