The Delhi High Court has upheld the reopening of Pernod Ricard India Private Limited’s assessment for Assessment Year 2013–14 over a difference of approximately ₹8.12 crore between sales disclosed in its VAT returns and those recorded in its books for income tax purposes.

The Bench of Justice Dinesh Mehta and Justice Aditi Choudhary dismissed the company’s challenge to the reassessment notice, holding that its explanation for the turnover difference required examination during assessment proceedings. The judgment was delivered on October 8, 2026. 

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The petitioner/assessee which manufactures and sells alcoholic beverages, filed its income tax return for AY 2013–14 declaring income of approximately ₹1,104.61 crore. Following a transfer pricing adjustment of approximately ₹14.88 crore, an assessment order was passed on December 23, 2016, under Section 143(3), read with Section 144C of the Income Tax Act, 1961.

A survey conducted on March 27, 2019, subsequently brought discrepancies in turnover to the department’s attention. The Assessing Officer issued a notice under Section 148 on March 31, 2021. The company’s objections to reopening were rejected on March 22, 2022, prompting the writ petition.

According to the recorded reasons, VAT returns reflected sales to the Canteen Stores Department of approximately ₹189.87 crore, while the company’s books recorded corresponding sales of approximately ₹181.75 crore. The Assessing Officer treated the difference of approximately ₹8.12 crore as indicating income escaping assessment. 

The company explained that differences arose from the manner in which turnover was computed under State VAT laws. Its reconciliation referred to the use of maximum retail price for VAT purposes and the treatment of excise duty, freight and local sales tax.

It also argued that the original scrutiny assessment had examined all relevant aspects, that reopening beyond four years required a failure to disclose material facts fully and truly, and that the Assessing Officer had acted on information received from investigative authorities without independently applying his mind.

The Court held that the correctness of the company’s reconciliation was a factual matter. Its explanation could be examined by the Assessing Officer against the applicable State laws and supporting records during reassessment proceedings. Such questions could not be resolved while deciding preliminary objections or in the Court’s writ jurisdiction. 

Rejecting the company’s disclosure argument, the Bench observed that its counsel could not establish that the VAT returns had been filed before or shown to the Assessing Officer during the original assessment.

Since the reassessment notice rested on the difference between turnover disclosed in the VAT returns and sales reported for income tax purposes, the Court held that the Assessing Officer was justified in invoking the extended limitation period and issuing the notice on the facts of the case. 

The Bench further noted that the notice was issued on March 31, 2021, before the new reassessment regime took effect on April 1, 2021. Consequently, the procedure under Section 148A did not apply.

The Court examined the disposal of objections under the earlier framework, referring to the Supreme Court’s decision in GKN Driveshafts (India) Ltd. v. ITO. It concluded that, although the order rejecting objections might not have been well worded, it met the legal requirements and the proceedings did not warrant being dropped at the outset. 

While dismissing the petition, the High Court expressly clarified that it had not decided the merits of the company’s explanations or transactions.

The appellant/assessee remains free to raise all available pleas, except the jurisdictional plea, before the Assessing Officer during reassessment. The officer must consider those submissions in accordance with law. The ruling therefore permits reassessment to proceed; it does not finally establish that the turnover difference represents taxable income.

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