Reassessment notices under Section 148 of the Income-tax Act cannot be issued after four years unless there is a failure to disclose material facts, which was not established in this case.

JUDGMENT :

Jitendra Jain, J.

1. Heard learned counsel for the parties.

2. Rule. Rule made returnable immediately at the request and with the consent of the learned counsel for the parties.

3. This petition challenges a notice under section 148 of the Income -tax Act, 1961 (the Act) dated 30 March 2021 for the assessment year 2013-14.

4. The petitioner filed its return of income on 30 November 2013. The said return was selected for scrutiny assessment and the petitioner in the course of the assessment proceedings, pursuant to various queries raised by the assessing officer, filed various details, including the details on which the impugned proceedings are initiated.

5. On 22 February 2017, an assessment order under section 143(3) of the Act was passed disallowing certain percentage of expenses on samples given to doctors on the ground that same constitutes sale promotion expenses incurred on the doctor. The said order is a subject matter of an appeal. We are informed that the said appeal is pending as of today.

6. On 30 March 2021, impugned notice under section 148 of the Act was issued for reopening the case calling upon the Petitioner to file its return of income since the assessing officer had reasons to believe that the income has escaped assessment. The petitioner on 23 April 2021, filed its return of income in response to notice under Section 148 of the Act and on 26 April 2021 requested for reasons for reopening the case. On 29 April 2021, the reasons were furnished to the petitioner. On 13 May 2021, the petitioner objected to the said reasons on various grounds and the said objections were rejected by the assessing officer vide order dated 1 February 2022.

7. It is on the above backdrop that the petitioner is before this Court challenging the notice under Section 148 of the Act and the order rejecting the objections.

8. We have heard learned counsel for the petitioner and the respondent.

9. The reasons as furnished reads as under:

10. Admittedly, the reassessment notice under section 148 has been issued after the expiry of four years from the end of the assessment year 2013-14. In this case, an assessment under Section 143(3) of the Act was completed on 22 February 2017. Therefore, first proviso to Section 147 of the Act gets attracted. The said proviso states that if an assessment is made under Section 143(3) of the Act, same cannot be reopened after a period of four years from the end of the relevant assessment year unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Therefore, the precondition for reopening the case after the expiry of four years is that there has to be a failure to disclose fully and truly all material facts necessary for the assessment. It is also well settled that whether such failure is there or not has to be seen based on the reasons as recorded which we have reproduced above.

11. On a perusal of the reasons reproduced above, it cannot be said that there was any failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment. In paragraph 2 of the reasons, it is stated that the assessee has debited an amount of Rs. 30,65,000/- towards security deposit against the interest income under the head of other income in the Profit & Loss account. In paragraph (ii) of the reasons recorded, it is stated that the assessee has debited an amount of Rs.55,14,07,000/- under the head Exceptional items to the Profit & Loss account which included an amount of Rs. 30,68,34,000/- towards expenses on rationalisation of the manufacturing site. In paragraph (iii) of the reasons, again there is a reference to Export Incentive receivable appearing in balance-sheet. In paragraph (iv) of the reasons, it is stated that the assessee had debited an amount of Rs.26,84,50,749/- to the Profit & Loss account. In the said paragraph, it is admitted that certain percentage of this expenditure was disallowed in the as