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TMI Blog2023 (2) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the assessment proceedings. The Petitioner was only obliged to disclose the material primary facts and was certainly not obliged to refer to the statutory provisions or the regulations of 2002 at the time of fling the return or during the course of the assessment proceedings. Circular No.5/2012 referred to the position of the regulations of 2002 after its amendment in the year 2009 and, therefore, neither the circular nor regulation 6.8 incorporated w.e.f. 10 December 2009 would be applicable to the instant case pertaining to assessment year 2008-09. It is settled that law to be applied is the one that is in force in the relevant assessment year, unless otherwise provided expressly or by necessary implication - CIT Vs. Insthmian Steamship Lines [ 1951 (11) TMI 1 - SUPREME COURT] and Reliance Jute Industries Ltd. Vs. Commissioner of Incometax [ 1979 (10) TMI 2 - SUPREME COURT] . Since the CBDT Circular No.5/12 as also Regulation 6.8 of 2002, were not applicable to the case of the Petitioner for the relevant assessment year 2008-09, there would be no tangible material or basis for the assessing officer to have reason to believe that income for the said assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44C read with Section 143(3) of the Act. 8. With regard to issue of dis-allowance on account of gift expenses, the Order of assessment reads as under : The assessee had claimed gifts amounting to Rs.2,31,82,889/- during the year as apart of sale promotion expenses. The assessee was asked to furnish the details of these gifts made along with the name of the recipient of the gift, the reason for giving these gifts and resultant beneft accrued to the company. The assessee was not able to furnish these details, in as much as the names of the recipients could not be furnished. Accordingly, the genuineness of these expenses is in doubt and the assessee has not been able to establish that these have been incurred wholly and exclusively for the purpose of business. Accordingly, on an estimate basis, 10% of these expenses are disallowed and an addition of Rs.23,18,288/- is made to the total income of the assessee. Penalty proceedings u/s 271(1) (c) have been initiated. 9. Notice dated 27 March 2015 impugned in the present Petition, was issued under Section 148 of the Act, which sought to re-assess the income of the Petitioner for the assessment year 2008-09 on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r re-opening from the Pr. CIT-2, Mumbai. 10 From a reading of the reasons, it thus, becomes clear that the basis for re-opening of the assessment was based upon the following :- (i) that the Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 on 10 December 2009 imposed a prohibition on the medical practitioner and their professional associations form taking any Gifts, Travel facility, Hospitality, Cash or monetary grant from the pharmaceutical and allied health sector industries. (iii) that the Board had issued a Circular No.5 of 2012 in that regard. (iii) that since there was a prohibition as referred to above, by explanation to Section 37(1), which envisages denial of expenses which are incurred for the purpose, either offence or prohibited by law. (iv) that the claim of the expenses being expenses prohibited by law were inadmissible under Section 37(1). (v) that, therefore, the expenses incurred on gift items, travel facility, hospitality, cash or monetary grant given to the heath care professionals amounting to Rs.231.82 lakhs being prohibited, could not have been allowed as revenue expenditures. (vi) th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our years from the end of the relevant assessment year. According to the proviso to Section 147, in a case where an assessment under sub-section (3) of Section 143 or this Section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to the tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose inter alia fully and truly all material facts necessary for his assessment for that assessment year. It is also an admitted fact that in the present case the Order of assessment dated 16 December 2015 passed by the assessing officer was an Order under Section 143(3) of the Act. 16. On the basis of the reasons furnished to the Petitioner, which form basis for re-assessment, it is seen that while the assessing officer had alleged that that the assessee had failed to disclose fully and truly all material facts necessary for assessment, the reasons do not at all reflec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceedings. The Petitioner was only obliged to disclose the material primary facts and was certainly not obliged to refer to the statutory provisions or the regulations of 2002 at the time of fling the return or during the course of the assessment proceedings. 18. The argument of learned Counsel for the Revenue justifying an action of the assessing officer for re-opening the assessment is untenable for the reason that the assessment u/s 143(3) of the Act could only be re-opened in terms of Section 147 of the Act and not otherwise. The argument that the claim was allowed contrary to the Board Circular issued in the year 2012 would not by itself authorize the assessing officer unless the jurisdictional conditions prescribed under the proviso to Section 147 had been satisfied, which in the present case, does not appear to have been satisfied at all. The impugned notice is liable to be quashed and set aside on this ground alone. 19. The other contention of Mr. Madhur Agarwal, learned Counsel for the Petitioner was that the Circular dated 1 August 2012 issued by the CBDT and the amendment incorporated in regulation 6.4 of the Regulations of 2002 in 2009 were not at all applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alth sector industry; a medical practitioner shall follow and adhere to the stipulations given below :- (a) Gifts : A medical practitioner shall not receive any gift from any pharmaceutical or allied health care industry and their sales people or representatives. (b) Travel facilities : A medical practitioner shall not accept any travel facility inside the country or outside, including rail, air, ship, cruise tickets, paid vacations, etc. from any pharmaceutical or allied healthcare industry or their representatives for self and family members for vacation or for attending conferences, seminars, workshops, CME programme etc. as a delegate. (c) Hospitality : A medical practitioner shall not accept individually and hospitality like hotel accommodation for self and family members under any pretext. (d) Cash or monetary grants : A medical practitioner shall not receive any cash or monetary grants from any pharmaceutical and allied healthcare industry for individual purpose in individual capacity under any pretext. Funding for medical research, study etc. can only be received through approved institutions by modalities laid down by law/rules/guide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided expressly or by necessary implication - CIT Vs. Insthmian Steamship Lines [1951] 20 ITR 572 (SC) and Reliance Jute Industries Ltd. Vs. Commissioner of Incometax [1979] 2 Taxman 417 (SC). 27. Learned Counsel for the Respondents, Mr. Suresh Kumar, placed reliance upon the case of Apex Laboratories (P) Ltd. Vs. Deputy Commissioner of Income-tax LTU [2022] 135 taxmann.com 286 (SC). This was a case where the assessee being a pharmaceutical company had incurred expenditure by giving freebies to the medical practitioners and accordingly, claimed exemption for the said expenditure under Section 37(1) of the Act for the assessment year 2010-11. The assessing officer partially allowed the exemption claimed by the assessee on the expenses so incurred by placing reliance upon Circular No.5/12. The CIT (Appeals), Tribunal, as also the jurisdictional High Court upheld the said Order and subsequently, also by the Apex Court. 28. However, in the aforementioned case, two features needs to be highlighted, firstly, that the claim before the Apex Court pertained to the assessment yea 2010-11, to which amendment incorporated in the Regulations 2009 was squarely applicable. The seco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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