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2022 (4) TMI 1022 - CALCUTTA HIGH COURTReopening of assessment u/s 147 - recorded reason that the expenditure on account of payment in question as ‘referral to doctors’ being an expense prohibited by law and is disallowable under explanation 1 to Section 37 (1) - HELD THAT:- Considering the submission of the parties, aims and object of the amended Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002, Explanation 1 to Section 37 (1) of the Income Tax Act, 1961, Circular No. 5/2012 dated 1st April, 2012 issued by Central Board of Direct Taxes and the judgment of the Hon’ble Supreme Court in the case of M/s Apex Laboratories Pvt. Ltd.[2022 (2) TMI 1114 - SUPREME COURT] our answer is in negative to the question as to whether Petitioner hospital is eligible and entitled to get deduction on expenditure by way of commission to the doctors as ‘referral to doctors’ for referring patients for treatment in its hospital as business expenditure under Section 37 (1) of the Income Tax Act, 1961? It is not entitled for deduction on such expenditure as a business expenditure and in view of the relevant regulations of amended Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 under which receiving of the same by the medical practitioner is prohibited and violation of which invites punishment and disciplinary proceedings against doctors. In my considered opinion petitioner being a participant in an act which is an offence and is prohibited by law is not entitled for any deduction under Section 37 (1) of the Income Tax Act, 1961, and the aforesaid nature of expenses are disallowable under Explanation 1 to Section 37. Legality and validity of initiation of impugned proceeding for reopening of assessment under Section 147 and issuance of notices under Section 148 - Admittedly after expiry of four years from the end of relevant assessment year on the selfsame material facts which were already available before the assessing officer at the time of regular assessment and without recording of any omission or failure on the part of the petitioner to disclose fully and truly any material fact necessary for assessment before the assessing officer in course of regular assessment proceeding - in the facts and circumstances of the case initiation of the impugned proceeding under Section147 of the Income Tax Act, 1961, is bad and not sustainable in law and is liable to be quashed. Thus since condition precedent for invoking Section 147 of the Income Tax Act, 1961, for reopening of assessments after expiry of four years from the end of relevant assessment years has not been fulfilled and the impugned reopening of assessment is on mere change of opinion, the impugned notices under Section 148 of the Income Tax Act, 1961 in both the Writ Petitions relating to assessment year 2011-12 and 2012-13 are held as bad and not sustainable in law - Decided partly in favour of assessee.
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