1984 (12) TMI 162 - AT - Income Tax

Summary

Issues:
Reopening of assessment under section 147(b) and gross profit addition made by the ITO.

Analysis:
The appeal by the assessee was against the order of the CIT(A) upholding the reopening of the assessment under section 147(b) and confirming the gross profit addition made by the ITO. The assessment was originally completed under section 143(1) accepting the returned income. The reopening was based on an audit objection regarding the undervaluation of closing stock of bullion and silver ornaments. The assessee objected to the reopening, but the IAC concluded that the audit objection constituted information for reopening under section 147(b). The IAC also found the valuation of closing stock reasonable. The ITO accepted the closing stock valuation but disturbed the trading results, adding to the gross profit and disallowing certain expenses.

The CIT(A) upheld the reopening under section 147(b) and stated that the audit objection constituted information for reopening, even though ultimately there was no undervaluation. The CIT(A) held that once the assessment is reopened, the ITO can bring to assessment any other escaped income not covered by the original reasons for reopening. The assessee contended that there was no fresh information for reopening and referred to legal precedents. The Departmental Representative argued that the audit objection constituted information under section 147(b) and that the ITO was justified in disturbing the trading results.

The Tribunal considered various legal precedents and held that the audit objection constituted information for reopening under section 147(b). They also found that a subsequent change in the reasons for reopening would not invalidate the proceedings if they were validly initiated. The Tribunal upheld the reopening of the assessment proceedings based on the information from the audit party and rejected the objection that the assessment should not be enlarged to consider other issues. They partially allowed the appeal filed by the assessee.

In conclusion, the Tribunal upheld the reopening of the assessment under section 147(b) based on the audit objection regarding the undervaluation of closing stock. They also found that subsequent changes in the reasons for reopening would not invalidate the proceedings if they were validly initiated. The Tribunal partially allowed the appeal filed by the assessee.