The Bombay High Court has quashed the income tax reassessment proceedings against a Pharmaceutical Company, Pfizer Limited on the grounds that the Assessing Officer (AO) considered promotional expenses in original proceedings.
The bench of Justice M.S. Sonak and Justice Jitendra Jain has observed that the reassessment proceedings if permitted would amount to the proceedings based on change of opinion and review of the assessment order, which power the Income Tax Act does not confer upon the assessing officer under Section 147 of the Income Tax Act.
The original income return for AY 2009-10 was filed on 30 September 2009 and revised on 25 March 2011. The return was selected for scrutiny assessment by issuing notice under Section 142(1) of the Income Tax Act.
During the assessment proceedings, various details were sought for including details relating to promotional expenses and allowability of such expenses in the light of the CBDT Circular No.5 of 2012. The petitioner vide various letters filed the details of these promotional articles and the submissions on allowability of such expenditure in the light of CBDT Circular No.5 of 2012.
In the assessment order under Section 143(3) of the Income Tax Act passed on 18 April 2013, 1/3rd of the expenses on promotional article were disallowed and an assessment order was passed. Being aggrieved on the disallowance, an appeal was filed by the petitioner and the Commissioner of Income Tax (Appeals) confirmed 1/3 disallowance on promotional articles.
The notice under Section 148 of the Income Tax Act was issued for reassessment of income. Vide communication dated 5 October 2016, the reasons for reopening were furnished. Briefly the reason admits that the issue of promotional expenses was a subject matter of assessment proceedings and 1/3rd of such expenses were disallowed and since the entire expenditure was not disallowed in view of the CBDT Circular No.5 of 2012 the reassessment proceedings were initiated.
The petitioner protested to these reasons by filing detailed objections interalia on the ground that there is no failure to disclose fully and truly all material facts necessary for the assessment, the issue was examined by the assessing officer and was also subject matter of appeal and therefore there was no escapement of income.
An order rejecting the objections raised was passed. In the said order, it was stated that CBDT Circular No.5 of 2012 was not considered by the petitioner and therefore, there was failure on the part of the petitioner to disclose the material facts. The order further states that there is no bar on reopening the assessment to correct the view of the predecessor and since in the assessment order, there was ad hoc disallowance, the proceedings cannot be said to be based on change of opinion.
The court noted that the proceedings are initiated after a period of 4 years from the end of relevant assessment year and therefore the pre- condition for reopening the case as per first proviso to Section 147 of the Income Tax Act is that there has to be a failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment.
The court held that the issue was already concluded by the CIT(A) before the initiation of the impugned proceedings and therefore even on this count, the reassessment proceedings are without jurisdiction.
Case Details
Case Title: Pfizer Limited Versus DCIT
Case No.: Writ Petition No.2922 Of 2016
Date: 20 March 2025
Counsel For Appellant: Madhur Agrawal i/by Mr. Atul K Jasani
Counsel For Respondent: Suresh Kumar
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