The Income Tax Appellate Tribunal (ITAT), Mumbai Bench held that the Assessing Officer (AO) cannot reopen the assessment merely on the basis of change of opinion and directed the AO to restrict the disallowance in respect of excess raw material wastage.
The assessee company, M/s Medley Pharmaceuticals Ltd. which is engaged in the business of manufacturing and trading of pharmaceutical products had filed its return of income for Assessment Year 2012-13, declaring its total income.
Original assessment in the case of the assessee was framed by the AO, vide his order passed under Section 143(3), and the income of the assessee was assessed at Rs.49,23,59,750/-.
Subsequently, the case of the assessee was reopened under Section 147 of the Act on the basis of the change of the opinion. In compliance with the notice issued under Section 148 of the Act, the assessee filed its return of income, declaring a total income of Rs. 29,29,14,990/-.
In the course of the assessment proceedings, the assessee was supplied the copy of the “reasons to believe” on the basis of which its case was reopened under Section 147 of the Act.
The assessee had assailed the reassessment order primarily on two grounds.
Firstly, the AO had reopened the concluded assessment of the assessee company merely on the basis of a change of opinion
Secondly, the AO had erred in disallowing the sales promotion expenses aggregating to Rs.6,25,53,800/- by wrongly bringing the said expenses within the realm of the “Explanation‟ to Section 37(1) of the Act.
The tribunal consisting of the Accountant Member, G. Manjunatha and Judicial Member, Ravish Sood held that as the reopening in the case had been resorted to by the AO on the basis of a “change of opinion” as regards the allowability of deduction of the sales promotion expenses, on the same set of facts and material as were there before his predecessor who had framed the regular assessment vide his order passed under Section 143(3), which in light of the settled position of law cannot be sustained, and on the said count itself is liable to be vacated.
Subscribe Taxscan Premium to view the Judgment
