2026 (2) TMI 573 - HC - Income Tax

Supply of relied upon agreements in transfer pricing assessment required to protect right to defend; redaction allowed.

Tax assessment under section 92CA(3) requires production of copies of relied upon agreements because denial impairs the assessee's right to a fair ... Validity of order passed u/s 92CA(3) - copies of the referred agreements denied - Authority to supply relied upon documents - right to fair opportunity to defend - petitioner submitted that unless copies of the agreements are supplied to the petitioner, it cannot take defence as required inasmuch as the ‘parties involved in the agreements’ and the ‘nature of agreements’ so also the ‘activities involved’ may differ from business to business HELD THAT:- It is the settled position of law that any authority is bound to provide copies of the relied upon documents. There may be variety of agreements and factors including the ‘nature of business’ and the ‘nature of transactions’ and the ‘goodwill involved’ of a contracting party. Since the issue raised by the respondent is that the petitioner had paid excess royalty, we are of the view that unless copies of the agreements, on the basis whereof, the TPO is proceeding against the petitioner are provided to the petitioner, its right to defend his cause will be adversely impacted. We are, therefore, persuaded to allow the writ petition and set aside the order as the same has been passed without providing copies of the relied upon agreements to the petitioner. The order passed by the TPO is set aside and he is directed to supply copies of the relied upon agreements to the petitioner on or before 15.02.2026. He may redact the name of the parties to maintain confidentiality of the parties. Issues: Whether an order passed under Section 92CA(3) of the Income Tax Act, 1961, without supplying copies of the agreements relied upon by the authority, is vitiated for failure to provide the assessee an opportunity to defend and thereby breaches principles of natural justice and procedural fairness.Analysis: The issue concerns whether denial of copies of relied-upon agreements impairs the assessee's ability to file a meaningful reply on transfer pricing adjustments. Consideration includes the relevance of the nature and terms of agreements to comparability and pricing, the requirement that relied documents be made available so the assessee can identify parties, contractual clauses and transactional specifics, and the possibility of redaction to protect confidentiality. The timelines for filing replies and passing final orders were assessed in light of the need to supply documents and permit effective response within expanded time limits.Conclusion: The order passed under Section 92CA(3) of the Income Tax Act, 1961, without supplying copies of the relied-upon agreements is set aside. The authority is directed to supply the relied-upon agreements (with permitted redactions) and to allow specified time for filing a reply and for passing a fresh order, thereby vindicating the assessee's right to disclosure and to a fair opportunity to be heard.