B. RAMAKOTAIAH, ACCOUNTANT MEMBER 
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER

ORDER

The order of the Bench was delivered by

Smt. Asha Vijayaraghavan, Judicial Member - This appeal by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-III, Hyderabad, dated August 14, 2013 for the assessment year 2006-07.

The assessee is a company deriving income from medical and diagnostic services. It has filed its return of income for the assessment year 2006-07 on November 29, 2006, declaring total income of Rs. 12,70,390. The Assessing Officer completed the assessment on September 16, 2011 under section 143(3) read with section 147 of the Act. The Assessing Officer disallowed the expenditure of Rs. 22,00,000 and determined the total income at Rs. 33,44,590.

The facts of the case are that the assessee-company was deriving income from medical and diagnostic services and it filed its return of income for the current assessment year on November 29, 2006. After processing, the case was converted into scrutiny and assessment under section 143(3) of the Income-tax Act, 1961 was completed on March 28, 2008. The case was reopened to verify whether expenditure on replacement of picture tube in the CT scanner was capital expenditure or a revenue expenditure. The assessee had claimed as expenditure of Rs. 32,35,411 towards maintenance of plant and machinery. Out of this amount Rs. 22 lakhs was claimed to have been incurred towards replacement of CT scanner. Since the assessee could not provide any details regarding the purchase of CT scanner, the Assessing Officer held that the amount of Rs. 22 lakhs was capital expenditure. Accordingly, the same was disallowed by giving the following reasons :

"Moreover, CT scanners or their parts are not commonly available commodities and there would be only a handful of dealers who supply such items. As such, it is strange and surprising that the assessee could not provide the name of the supplier. As the assessee could not discharge the onus cast on it to prove the authenticity of the transaction, the claim of expenditure of Rs. 22,00,000 towards CT scanner is rejected and is bought to tax."

During the appeal proceedings before the Commissioner of Income-tax (Appeals), the assessee argued that notice under section 148 had been issued on March 30, 2011 after four years and there was no default on the part of the assessee in providing inaccurate particulars or in not providing adequate information. It was further stated that in the assessment year 2005-06, expenditure on the replacement of tube of CT scanning machine had been held by the Commissioner of Income-tax (Appeals)-III to be a revenue expenditure.

The Commissioner of Income-tax (Appeals) observed that the order of the then Commissioner of Income-tax (Appeals)-III will not help the case of the assessee as it dealt with an entirely different issue, i.e., whether the expenditure on replacement of tube of the scanner is capital or revenue in nature. It does not go into the issue of reopening of assessment at all. The Commissioner of Income-tax (Appeals) observed that in the current year the scanner has been replaced as per the assessment order.

The Commissioner of Income-tax (Appeals) further observed that the assessment year in question is 2006-07 and this assessment year ends on March 31, 2007. The proviso referred to by the assessee comes into play after a period of four years from the end of the assessment year has expired. In this case that period expires on March 31, 2011. The notice under section 148 was issued on March 30, 2011 as per para 2 of the assessment order and at this point of time the period of four years had not expired. Accordingly, the proviso did not come into play and there was no requirement on the part of the Assessing Officer to show that there was any default committed by the assessee or that the assessee had not provided full and true material information necessary for the assessment.

The Commissioner of Income-tax (Appeals) held that once four years have elapsed, the conditions for reopening become stringent and the Assessing Officer has to bring on record the omission or failure on the part of the assessee. On the other hand before this period there is no such stipulation and the Assessing Officer has been given much wider leverage to reopen the cases by only recording his belief. In the current case the proviso has not yet come into play as already discussed supra. The Assessing Officer was very much within his rights to reopen the case. Accordingly, the Commissioner of Income-tax (Appeals) confirmed the action of the Assessing Officer. Aggrieved with such order of the Commissioner of Income-tax (Appeals), the assessee is in appeal before us with the following grounds of appeal :

Learned counsel for the assessee reiterated the submissions made before the lower authorities and the learned Departmental representative on the other hand, stated that the Commissioner of Income-tax (Appeals)'s order is to be confirmed.

Learned counsel for the assessee further submitted before us that in the case of Agricultural Produce Market Committee v. ITO [2013] 355 ITR 384 (Guj) the Gujarat High Court held that notice for reopening of assessment was based on information of revenue audit party and not that of the Assessing Officer. It was held that reassessment is not valid. Learned counsel for the assessee also relied on the decision in the case ofJagat Jayantilal Parikh v. Deputy CIT [2013] 355 ITR 400 (Guj) wherein it was held that notice on the basis of audit objection is not valid. Learned counsel for the assessee also relied on the decision in the case of Maruti Suzuki India Ltd. v.Deputy CIT [2013] 356 ITR 209 (Delhi) wherein held that there was a mere change of opinion and the notice of reassessment was held not valid and liable to be quashed. Learned counsel for the assessee also relied on the decision in the case of Vishwanath Engineers v. Asst. CIT [2013] 354 ITR 211 (Guj) wherein it was held that having previously examined the nature of expenditure and having accepted it during the original assessment, it was not open to the Assessing Officer to reexamine the question. Any such attempt on the part of the Assessing Officer would be based on only on a change of opinion. It was held that reopening of assessment even within four years would not be permissible.

We have heard both parties. The co-ordinate Bench of the Tribunal in the case of ITO v. Object Connect India P. Ltd.[2014] 29 ITR (Trib) 518 (Hyd), has dismissed the appeal of the Revenue on the ground that there was absolutely no fresh information provided or collected in the re-assessment proceedings. The Tribunal has held as follows (page 527) :

"Moreover, the co-ordinate Bench in the case of S. Ranjit Reddy in I. T. A. No. 292/Hyd/2012 and others observed as follows :

'Now, undoubtedly an order of the assessment which has been passed in subsequent assessment year may furnish a foundation to reopen an assessment for an earlier assessment year. However, there must be some new facts which come to light in the course of assessment for the subsequent assessment year which emerge in the order of the assessment. Otherwise, a mere change of opinion on the part of the Assessing Officer in the course of assessment for a subsequent assessment year would not by itself legitimise reopening of assessment for an earlier year. The point we make it clear herein is that whether in the course of assessment proceedings for subsequent year certain additional information is obtained by the Revenue which was not available to it in the course of assessment for an earlier year, that may legitimately be utilised as a ground for reopening of assessment of the earlier year. Whether the reopening has taken place within four years that may legitimately give rise to an inference of escapement of income. The new information which has come to the knowledge of the Revenue, therefore, constitutes tangible material. If there is a fresh material that that would not preclude the Assessing Officer to reopen the assessment for an earlier year on the basis of fresh material which has come to light in the course of assessment for a subsequent assessment year.'

In view of the ratio laid down by the hon'ble Delhi High Court in case of Usha International [2012] 348 ITR 485 (Delhi) [FB] and the observations of the co-ordinate bench in the case of S. Ranjit Reddy, we are of the opinion that the Commissioner of Income-tax (Appeals) has rightly quashed the reopening of assessment made by the Assessing Officer under section 147 of the Act by observing that there was absolutely no fresh information provided or collected. Accordingly, we uphold the order of the Commissioner of Income-tax (Appeals) and dismiss the grounds raised by the Revenue on this issue."

Respectfully following the various decisions on this issue and especially of the co-ordinate Bench in the case of ITO v. Object Connect India P. Ltd. [2014] 29 ITR (Trib) 518 (Hyd), we allow the assessee's appeal.

In the result, the appeal of the assessee is allowed.