Relief to Pfizer: Bombay HC Quashes Reopening of Assessment on Promotional Expenses, Terms It Change of Opinion [Read Order]

The High Court of Bombay quashed the reopening of assessment initiated under Section 148 of Income Tax Act,1961 against Pfizer Limited for Assessment Year 2009–10, holding that the reassessment was based on a mere change of opinion.

Pfizer Limited,petitioner-assessee,filed its return for AY 2009–10 on 30 September 2009 and revised it on 25 March 2011. The case was taken up for scrutiny, and details of promotional expenses were called for. The petitioner submitted the required information and referred to CBDT Circular No. 5 of 2012.

On 18 April 2013, the Assessing Officer(AO) disallowed one-third of the promotional expenses in the assessment order. This disallowance was confirmed by the Commissioner of Income Tax(Appeals)[CIT(A)] on 1 September 2014.

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Later, on 29 March 2016, a notice was issued under Section 148 to reopen the case, stating that the entire expense should have been disallowed. The reasons, shared on 5 October 2016, admitted that the issue was already examined earlier but claimed the full disallowance was missed.

The petitioner objected on 18 October 2016, saying all facts were disclosed and the issue was already decided. These objections were rejected on 15 November 2016, with the department stating that the Central Board of Direct Taxes(CBDT) Circular was not properly considered earlier.

The petitioner then filed a writ petition, which was admitted by the Court.

The division bench of Jitendra Jain(Judge) and M.S.Sonak(Judge) heard both parties and noted that the reassessment notice was issued after four years. As per the law, reassessment after four years is allowed only if the taxpayer failed to fully and truly disclose all facts. But in this case, the Court found that the issue of promotional expenses was already examined during the original assessment.

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The petitioner had submitted all details and responded to specific queries raised by the AO. Based on those submissions, one-third of the expenses was disallowed in the original assessment, and the rest was allowed. This showed that there was no failure to disclose facts.

The Court held that reopening the case on the same issue amounted to a change of opinion, which is not allowed. It also noted that the issue had already been decided by the CIT(A) before the reassessment notice was issued, so reassessment was not valid.

The Court referred to its earlier decision in Abbot India Ltd. vs. ACIT, where reassessment was quashed in similar circumstances.

It quashed the notice dated 29 March 2016 and allowed the petition.

To Read the full text of the Order CLICK HERE

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