The Calcutta High Court has quashed an assessment order raising a tax demand of ₹87.20 crore against Pricewaterhouse Coopers Private Limited (PwC) after holding that the Income Tax Department failed to provide the assessee with a meaningful opportunity of hearing before finalising the assessment.

The bench of Justice Smita Das De has observed that the assessment proceedings suffered from a gross violation of the principles of natural justice, rendering the assessment order, consequential demand notice and penalty proceedings legally unsustainable.

The appellant/assessee, PwC had electronically filed its income tax return for the Assessment Year 2024-25, declaring a loss of over ₹52.27 crore, which was later revised to approximately ₹42.51 crore. Following scrutiny proceedings initiated by the National Faceless Assessment Centre (NFAC), the company responded to multiple notices issued under Sections 143(2) and 142(1)of the Income Tax Act.

Subsequently, the assessment was transferred from the NFAC to the Jurisdictional Assessing Officer (JAO) under Section 144B(8) of the Act. The JAO issued further notices seeking additional information, to which PwC furnished replies and supporting documents.

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The controversy arose when, on 28 March 2026, the Assessing Officer issued a show cause notice alleging that information received from the office of the Deputy Commissioner of Income Tax, Central Circle-3, Hyderabad indicated PwC’s alleged involvement in the acquisition of KSK Energy Ventures Ltd. by Gland Celsus Bio Chemicals Pvt. Ltd.

The notice sought clarification on whether PwC had rendered consultancy, professional or advisory services in relation to the acquisition and whether it had received any remuneration from the entities involved. PwC was directed to respond by 30 March 2026.

According to the company, it submitted its explanation on the stipulated date. However, on the very same day, the Assessing Officer proceeded to pass an assessment order under Section 143(3), raising a tax demand of ₹87.20 crorewithout granting any effective opportunity of hearing or personal interaction.

Before the High Court, PwC argued that it had consistently cooperated throughout the assessment proceedings. The income tax survey conducted at its premises related only to the affairs of one of its clients and not to PwC’s own taxable income. During the relevant previous year, it neither rendered consultancy services in connection with the acquisition nor raised invoices or earned any income from the transaction. The assessment order was passed without granting adequate time to respond to the allegations and without providing a personal or virtual hearing.

PwC relied upon several CBDT instructions and judicial precedents, including Inox Wind Energy Ltd., e-Shakti.com Pvt. Ltd., Sahara India (Firm) and Godrej Sara Lee Ltd., contending that issuance of a meaningful show cause notice and effective hearing are mandatory requirements before completing an assessment.

The Income Tax Department opposed the writ petition, contending that the assessee had been provided with multiple opportunities to furnish documents throughout the scrutiny proceedings.

The Department argued that the CBDT circulars relied upon by PwC were either inapplicable or related only to faceless assessments. The petitioner had an effective statutory appellate remedy under the Income Tax Act. Since the tax demand had already been adjusted against a subsequent year’s refund, the company could pursue the appellate mechanism instead of invoking the High Court’s writ jurisdiction.

Rejecting the Department’s preliminary objection regarding the availability of an alternative remedy, the Court reiterated that the existence of an appellate remedy does not bar the exercise of writ jurisdiction where there has been a clear violation of the principles of natural justice.

The High Court emphasised that merely issuing notices does not satisfy the requirements of natural justice.

The Court observed that an assessee must receive a real, effective and meaningful opportunity to explain the allegations before an adverse order involving serious civil consequences is passed.

It noted that the replies submitted by PwC were not meaningfully considered. The assessment order was passed in undue haste on the last day of limitation. The opportunity granted became a mere procedural formality rather than an effective safeguard. Such defects struck at the very decision-making process rather than merely affecting the merits of the assessment.

The Court also relied upon the Supreme Court’s decision in Tin Box Company v. CIT, holding that an assessment completed without proper opportunity of hearing cannot subsequently be cured during appellate proceedings.

The Calcutta High Court held that the writ petition was maintainable despite the availability of a statutory appeal. The assessment order dated 30 March 2026 suffered from gross violation of the principles of natural justice. The decision-making process itself stood vitiated due to denial of effective hearing. Consequently, the assessment order, demand notice and all connected penalty proceedings were liable to be quashed.

The Court remanded the matter to the Assessing Officer with directions to grant PwC a meaningful opportunity of personal hearing; allow the company to file detailed submissions and supporting material; complete the fresh assessment strictly in accordance with law within eight weeks from the date of the judgment.

The Court further clarified that the petitioner should not seek unnecessary adjournments and that the reassessment must be completed within the prescribed timeline.

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