ANIRUDHA MALLIK,MAYURBHANJ vs. ITO WARD-1, BARIPADA

In the appeal of the assessee, the assessee has raised the legal ground regarding reopening of the assessment and also the ground against the estimation of the income of the assessee.

In respect of the reopening, it was submitted by the ld. AR that in para 2 of the assessment order, the AO has categorically mentioned that the reopening has been done on the ground that there was a difference between purchases as recorded in the audited accounts and as the payment made to Indian Oil Corporation Limited (IOCL). It was the submission that in para 9 of his order, the AO categorically admits that the 2 assessee has been able to reconcile the difference of purchase figures. It was the submission that no addition has been made in respect of purchases. It was further submission that the AO went on to hold that there was ambiguity regarding correctness of the sale figure and in para 10 of the assessment order, the AO on the ground that the true value of the gross profit shown by the assessee was not verifiable, rejected the books of accounts of the assessee and estimated the income of the assessee at 4%. It was the submission that, at the outset, as the ground on which the reopening has been done itself no more survives in view of the fact that the purchases have been fully reconciled and accepted by the AO and no addition on such account has been made by the AO, the reopening and the consequential assessment itself is required to be quashed.

In regard to the estimation of income, it was submitted by the ld. AR that no comparable cases have been shown and in the absence of any comparable case, the income of the assessee could not be estimated at the whims and fancies of the AO. It was also submitted that when the gross profit of the assessee was itself at 2.5% as accepted by the AO, he could not have estimated the income of the assessee at a percentage higher than the gross profit.

In reply, ld. Sr. DR submitted that in regard to the issue of reopening in view of the Explanation 3 to Section147 of the Act, the reopening is validly made. Just because no addition has been made on the issue on which the reopening has been done, does not bar the AO 3 from making additions on other issues. It was the submission that the reopening was required to be upheld.

In regard to the estimation of income, it was submitted by the ld. Sr. DR that considering the nature of business of the assessee, the income of the assessee has been estimated at 4%. It was the submission that no evidence has been produced by the assessee to show that his income should be estimated at lower figures. It was the submission that the assessee has not been able to produce the evidence of the valuation of stock and this has resulted in rejecting the books. It was the submission that the opening stock and closing stock valuation was specifically not produced and it has been recorded in the assessment order. It was, thus, submitted that the appeal of the assessee is liable to be dismissed.

I have considered the rival submissions. A perusal of the assessment order clearly shows that in para 3, the AO has reopened the assessment specifically for the purpose that there is a difference of Rs.53,91,843/- alleged to have been understated in the purchases. A perusal of the assessment order at para 9 shows that the assessee has successfully reconciled the difference in the purchase figure. This has resulted into no addition being even proposed by the AO much less made. As the ground on which the reopening has been done itself no more survives and no addition has resulted from the reasons on which the reopening has been done, obviously the reasons of the reopening itself has failed and, therefore, the reopening proceedings itself has failed and assessment proceeding is quashed. Thus, I do so.