M/s.Gowri Gopal Hospital, Secunderabad V. Income Tax Officer, Ward-2(2), Hyderabad

ITA 1330/HYD/2013

• Counselvise Citation: 133022514 RSA 2013
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 03-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KIRAN KATTA
• Assessee Lawyers: K K GUPTA
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1330/HYD/2013 ASSESSMENT YEAR 2006-07 M/S. GOWRI GOPAL HOSPITAL PVT. LTD. HYDERABAD PAN: AACCS9035Q VS. THE INCOME TAX OFFICER WARD-2(2) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI K.K. GUPTA RESPONDENT BY: SRI KIRAN KATTA DATE OF HEARING: 10 .0 7 .2014 DATE OF PRONOUNCEMENT: 18 .07.2014 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-III, HYDERABAD DATED 14 TH AUGUST, 2013 FOR ASSESSMENT YEAR 2006-07. 2. 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 29.11.200 6, DECLARING TOTAL INCOME OF RS. 12,70,390/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT ON 16.09.2011 U/S 143(3) R.W.S 147 OF THE ACT . THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE OF RS. 22,00,00 0 AND DETERMINED THE TOTAL INCOME AT RS. 33,44,590. 3. F ACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WAS DERIVING INCOME FROM MEDICAL AN D DIAGNOSTIC SERVICES AND IT FILED ITS RETURN OF INCOME FOR THE CURRENT ASSES SMENT 2 ITA NO. 1330/HYD/2013 M/S. GOWRI GOPAL HOSPITAL PVT. LTD. ============================ YEAR ON 29.11.2006. AFTER PROCESSING, THE CASE WAS CONVERTED INTO SCRUTINY AND ASSESSMENT U/S 143(3) O F THE INCOME -T AX ACT , 1961 WAS COMPLETED ON 28.03.2008. THE CASE WAS REOPENED TO VERIFY WHETHER EXPENDITURE ON REPLACEMENT OF PICTURE TUBE IN CT SCANNER WAS CAPIT AL EXPENDITURE OR A REVENUE EXPENDIT URE . THE ASSESSEE HAD CLAIMED AS EXPENDITURE OF RS. 32,35,411 TOWARDS MAINTENANCE OF PLANT AND MACHINERY. OUT OF THIS AMO UNT RS. 22 LAKH WAS CLAIMED TO HAVE BEEN INCURRED TOWARDS REPLACEMENT OF CT SCANNER. SINCE THE ASSESSEE COULD NOT PROVIDE ANY DETAILS REGARDING THE PURCHASE OF CT SC ANNER, THE ASSESSING OFFICER HELD THAT THE AMOUNT OF RS. 22 LAKH 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.' 4. DURING THE APPEAL PROCEEDINGS BEFORE THE CIT(A), THE ASSESSEE ARGUED THAT NOTICE U/S 148 HAD BEEN IS SUED ON 30.03.2011 AFTER FOUR YEARS AND THERE WAS NO DEF AULT ON THE PART OF THE ASSESSEE IN PROVIDING INACCURATE PARTICULARS OR IN NOT PROVIDING ADEQUATE INFORMATIO N. IT WAS FURTHER STATED THAT IN THE ASSESSMENT YEAR 2005 -06, EXPENDITURE ON THE REPLACEMENT OF TUBE OF CT SCANNI NG MACHINE HAD BEEN HELD BY CIT(A)-III TO BE A REVENUE EXPENDITURE. 3 ITA NO. 1330/HYD/2013 M/S. GOWRI GOPAL HOSPITAL PVT. LTD. ============================ 5. THE CIT(A) OBSERVED THAT THE ORDER OF THE THEN CIT(A)-III WILL NOT HELP THE CASE OF THE ASSESSEE A S IT DEALT WITH AN ENTIRELY DIFFERENT ISSUE I.E., WHETHER THE EXPENDITURE ON REPLACEMENT OF TUBE OF THE SCANNER I S CAPITAL OR REVENUE IN NATURE. IT DOES NOT GO INTO THE ISSUE OF REOPENING OF ASSESSMENT AT ALL. THE CIT(A) OBSE RVED THAT IN THE CURRENT YEAR THE SCANNER HAS BEEN REPLA CED AS PER THE ASSESSMENT ORDER. 6. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSMENT YEAR IN QUESTION IS 2006-07 AND THIS ASSESSMENT YEA R ENDS ON 31.03.2007. THE PROVISO REFERRED TO BY THE ASSESSEE COMES INTO PLAY AFTER A PERIOD OF FOUR YEA RS FROM THE END OF THE ASSESSMENT YEAR HAS EXPIRED. IN THI S CASE THAT PERIOD EXPIRES ON 31.03.2011. THE NOTICE U/S 1 48 WAS ISSUED ON 30.03.2011 AS PER PARA 2 OF THE ASSESSMENT ORDER AND AT THIS POINT OF TIME THE PERI OD OF FOUR YEARS HAD NOT EXPIRED. ACCORDINGLY, THE PROVI SO DID NOT COME INTO PLAY AND THERE WAS NO REQUIREMENT ON THE PART OF THE ASSESSING OFFICER TO SHOW THAT THERE WA S ANY DEFAULT COMMITTED BY THE ASSESSEE OR THAT THE ASSES SEE HAD NOT PROVIDED FULL AND TRUE MATERIAL INFORMATION NECESSARY FOR THE ASSESSMENT. 7. THE CIT(A) HELD THAT ONCE FOUR YEARS HAVE ELAPSED, THE CONDITIONS FOR REOPENING BECOME STRINGENT AND T HE ASSESSING OFFICER HAS TO BRING ON RECORD THE OMISSI ON 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 LEVERAG E TO REOPEN THE CASES BY ONLY RECORDING HIS BELIEF. IN THE CURRENT CASE THE PROVISO HAS NOT YET COME INTO PLAY AS 4 ITA NO. 1330/HYD/2013 M/S. GOWRI GOPAL HOSPITAL PVT. LTD. ============================ ALREADY DISCUSSED SUPRA. THE ASSESSING OFFICER WAS VERY MUCH WITHIN HIS RIGHTS TO REOPEN THE CASE. ACCORDI NGLY, THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OF FICER. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS OF APPE AL: 1. THE REOPENING OF ASSESSMENT IS AGAINST THE LAW. THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) (SCRUTINY). THERE IS NO FRESH MATERIAL THAT CAME TO THE FILE OF ASSESSING OFFICER, TO WARRANT REOPENING U/S 147. 2. THE REPLACEMENT COST OF 'PICTURE TUBE' WAS HELD AS REVENUE EXPENDITURE IN THE ASSESSMENT YEAR 2002-03 BY THE CIT(A) VIDE ORDER DATED 28/09/2005. 3. THE INCOME TAX OFFICER'S ACTION IN REOPENING AMOUNTS TO 'CHANGE OF MIND' ON THE SAME ISSUE WHICH ACTION IS UNLAWFUL. 4. THE ASSESSMENT WAS REOPENED AFTER 4 YEARS, AS THE NOTICE DATED 30-03-2011 WAS SERVED AFTER 1-04-2011. 5. ON THE ABOVE AND OTHER GROUNDS THAT MAY ARISE DURING THE APPEAL, THE ASSESSEE REQUESTS FOR AN ORDER DIRECTING THE ALLOWANCE OF THE CLAIMED EXPENDITURE IN FULL, OR/AND HOLDING THE RE-OPENING AS INVALID. 8. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND T HE LEARNED DR ON THE OTHER HAND, STATED THAT THE CIT(A )'S ORDER IS TO BE CONFIRMED. 9. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED BEFORE US THAT IN THE CASE OF AGRICULTURE PRODUCE MARKET COMMITTEE VS. ITO (355 ITR 0384) (GU J) 5 ITA NO. 1330/HYD/2013 M/S. GOWRI GOPAL HOSPITAL PVT. LTD. ============================ THE GUJARAT HIGH COURT HELD THAT NOTICE FOR REOPENI NG OF ASSESSMENT WAS BASED ON INFORMATION OF REVENUE AUDI T PARTY AND NOT THAT OF ASSESSING OFFICER. IT WAS HE LD THAT RE-ASSESSMENT IS NOT VALID. THE LEARNED COUNSEL FO R THE ASSESSEE ALSO RELIED ON THE DECISION IN THE CASE OF JAGAT JAYANTILAL PARIKH VS. DCIT (354 ITR 0400) (GUJ) WHE REIN IT WAS HELD THAT NOTICE ON THE BASIS OF AUDIT OBJECTIO N IS NOT VALID. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO R ELIED ON THE DECISION IN THE CASE OF MARUTI SUZUKI INDIA LTD . VS. DCIT (356 ITR 209) (DEL) WHEREIN HELD THAT THERE WA S A MERE CHANGE OF OPINION AND THE NOTICE OF RE-ASSESSM ENT WAS HELD NOT VALID AND LIABLE TO BE QUASHED. THE L EARNED COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE DECISIO N IN THE CASE OF VISWANATH ENGINEERING VS. ACIT (354 ITR 021 1) 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 ASSESSI NG OFFICER TO RE-EXAMINE THE QUESTION. ANY SUCH ATTEM PT 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. 10. WE HAVE HEARD BOTH THE PARTIES. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. OBJECT CONNECT INDIA PVT. LTD. (029 ITR (TRIB) 0518, HAS DISMISSED THE APPEAL OF THE REVENUE ON THE GROUND T HAT THERE WAS ABSOLUTELY NO FRESH INFORMATION PROVIDED OR COLLECTED IN THE RE-ASSESSMENT PROCEEDINGS. THE TR IBUNAL HAS HELD AS FOLLOWS: 6 ITA NO. 1330/HYD/2013 M/S. GOWRI GOPAL HOSPITAL PVT. LTD. ============================ 'MOREOVER, THE COORDINATE BENCH IN THE CASE OF S. RANJIT REDDY AND OTHERS IN ITA 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 HONBLE DELHI HIGH COURT IN CASE OF USHA INTERNATIONAL (SUPRA) AND THE OBSERVATIONS OF THE COORDINATE BENCH IN CASE OF S. RANJIT REDDY AND OTHERS (SUPRA), WE ARE OF THE OPINION THAT THE CIT(A) HAS RIGHTLY QUASHED THE REOPENING OF ASSESSMENT MADE BY THE ASSESSING OFFICER U/S 147 OF THE ACT BY OBSERVING THAT THERE WAS ABSOLUTELY NO FRESH INFORMATION PROVIDED OR 7 ITA NO. 1330/HYD/2013 M/S. GOWRI GOPAL HOSPITAL PVT. LTD. ============================ COLLECTED. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE.' 11. RESPECTFULLY FOLLOWING THE VARIOUS DECISIONS ON THI S ISSUE AND ESPECIALLY OF THE CO-ORDINATE BENCH IN TH E CASE OF ITO VS. OBJECT CONNECT INDIA P. LTD. (SUPRA), WE ALLOW THE ASSESSEE'S APPEAL. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 18 TH JULY, 2014 SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 18 TH JULY, 2014 TPRAO COPY TO: 1. M/S. GOWRI GOPAL HOSPITAL PVT. LTD., C/O. SRI K.K. GUPTA, CHARTERED ACCOUNTANT, 3464, DUNDOO VIHAR, R.P. ROAD, SECUNDERABAD-500 003. 2. THE INCOME TAX OFFICER, WARD - 2(2), IT TOWERS, AC GUARDS, HYDERABAD. 3. THE CIT(A) - III , HYDERABAD. 4. THE CIT - II , HYDERABAD. 5. THE DR, A - BENCH, ITAT, HYDERABAD.