Case Note & Summary
The petitioner, SHL (India) Private Limited, an Indian company and part of the SHL Group, United Kingdom, filed a writ petition under Article 226 of the Constitution of India challenging the final assessment order dated 6th April 2021 passed by the National e-Assessment Centre, Delhi under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income Tax Act, 1961 (IT Act) for the Assessment Year 2017-2018. The petitioner also challenged the notice of demand under Section 156 and penalty notice under Section 274 read with Section 270A of the IT Act. The petitioner had filed its return of income on 30th March 2018 declaring total income of Rs.1,01,31,750/-. During the assessment year, the petitioner had entered into international transactions with its Associated Enterprise (AE) and had filed Form 3CEB along with the return. The case was selected under the Computer Assisted Scrutiny Scheme (CASS). The Assessing Officer passed a draft assessment order under Section 144C of the IT Act proposing certain additions. The petitioner filed objections before the Dispute Resolution Panel (DRP), but the DRP did not consider them as they were not filed within the prescribed time. Subsequently, the final assessment order was passed without providing any show-cause notice or opportunity of hearing to the petitioner. The petitioner contended that the final assessment order was passed in violation of principles of natural justice as no show-cause notice was issued and no opportunity of hearing was given before passing the order. The respondents argued that the petitioner had not filed objections within the time limit and therefore the DRP could not consider them, and the final order was valid. The court held that the failure to provide a show-cause notice and opportunity of hearing before passing the final assessment order violated the principles of natural justice. The court quashed the final assessment order, notice of demand, and penalty notice, and remanded the matter back to the Assessing Officer for fresh consideration after providing a show-cause notice and opportunity of hearing to the petitioner. The court directed that the petitioner be given a reasonable opportunity to present its case.
Headnote
A) Constitutional Law - Article 226 - Writ Jurisdiction - Challenge to Assessment Order - Petitioner challenged final assessment order under Article 226 of the Constitution of India on grounds of violation of principles of natural justice. Court held that failure to provide show-cause notice and opportunity of hearing before passing final assessment order renders the order invalid and liable to be quashed. (Paras 1, 10-15) B) Income Tax - Transfer Pricing - Section 144C - Draft Assessment Order - Objections - The Assessing Officer passed a draft assessment order under Section 144C of the Income Tax Act, 1961, but the Dispute Resolution Panel (DRP) did not consider the petitioner's objections as they were not filed within the prescribed time. However, the final assessment order was passed without providing a show-cause notice or opportunity of hearing to the petitioner. Court held that the failure to provide natural justice vitiates the assessment order. (Paras 3-9, 16-20) C) Income Tax - Natural Justice - Show-Cause Notice - Opportunity of Hearing - The court emphasized that principles of natural justice require that before passing any adverse order, the assessee must be given a show-cause notice and an opportunity of being heard. The absence of such opportunity renders the order invalid. (Paras 10-15)
Issue of Consideration
Whether the final assessment order passed under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income Tax Act, 1961, without providing a show-cause notice and without considering the petitioner's objections to the draft assessment order, is valid in law.
Final Decision
The court quashed the final assessment order dated 6th April 2021, the notice of demand under Section 156, and the penalty notice under Section 274 read with Section 270A of the IT Act. The matter was remanded back to the Assessing Officer for fresh consideration after providing a show-cause notice and opportunity of hearing to the petitioner.
Law Points
- Natural justice
- Show-cause notice
- Opportunity of hearing
- Transfer pricing
- Draft assessment order
- Objections
- Section 144C
- Income Tax Act
- 1961
- Article 226
- Constitution of India
