The Bombay High Court has highlighted jurisdictional conditions for reopening tax cases and distinguished previous ruling on sales promotion expenses.
The bench of Justice M. S. Sonak and Justice Jitendra Jain has observed that the details of expenses referred to in the reasons are from the profit and loss account, and the submissions made before the AO during the assessment proceedings vide letters dated 17 August 2010 and 8 September 2010. Only after the details of these very expenses were given during the regular assessment proceedings that the AO disallowed 2% of only gift articles by invoking Explanation 1 to Section 37(1) of the Act. Therefore, the impugned proceedings would amount to invoking powers of review, which Section 147 of the Act does not confer upon the AO. Therefore, there was no failure to truly and fully disclose material facts, and the issue was examined in the course of the assessment proceedings, therefore, the notice must be quashed and set aside.
The Petitioner/assessee filed its return of income along with a profit and loss account in which the claim of expenses on account of technical literature and books, gift articles and conference, training and refresher course expenses aggregating to Rs. 2,14,64,363/- was disclosed. The said return of income was selected for scrutiny assessment,and various details were called for, including more information concerning gift articles, technical literature and conference expenses.
The Petitioner, by various letters, filed the details on these very issues. On 30 November2010, an assessment order under Section 143(3) of the Act was passed in which 2% of the expenses incurred on gift articles were disallowed by following the order of CIT(A).
The notice under Section 148 of the Income Tax Act was issued, and the reasons for reopening were furnished on 6 October 2015. On 23 October 2015, the Petitioner raised objections to the reasons for reopening inter alia on the ground that there was no failure to disclose fully and truly all material facts necessary for the assessment and the reliance placed on the Central Board of Direct Taxes (CBDT) vide Circular No.5 of2012 was not available at the time of the assessment.
The Petitioner also made submissions on the applicability of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 and Explanation 1 toSection 37(1) of the Act and prayed for dropping the impugned proceedings. However, the Assessing Officer (AO) rejected the objections.
The petitioner contended that there is no failure to disclose fully and truly all material facts necessary for assessment. The proceedings are based on change of opinion since the issue was already subject matter of the assessment order and further the CBDT Circular No.5 of 2012 was not applicable for the assessment year under consideration.
The department contended that the Petitioner did not disclose during the assessment proceedings to whom the gifts were given and, therefore,there was a failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment.
The court held that proceedings would amount to invoking powers of review, which Section 147 of the Income Tax Act does not confer upon theAO. Therefore, on the count that there was no failure to truly and fully disclose material facts, and the issue was examined in the course of the assessment proceedings, therefore, the impugned notice must be quashed and set aside.
Case Details
Case Title: Mapra Laboratories Private Limited Versus UOI
Case No.: Writ Petition No.860 Of 2016
Date: 20 March 2025
Counsel For Appellant: Ajaykumar Rastogi, Senior Advocate a/w Mr. Anubhav Khowala i/b. Mr. Atul K. Jasani
Counsel For Respondent: Suresh Kumar
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