Assessment re-opening upheld despite no income assessment; CIT(A) deletes additions, Tribunal orders re-examination.

The Tribunal upheld the validity of the re-opening of assessment for the years 2005-06 and 2006-07 based on the belief of income escapement, although no income was ultimately assessed. The additions made by the Assessing officer regarding the difference in operating income were deleted by the CIT(A) due to lack of proper examination and verification. The Tribunal directed the Assessing officer to re-examine the issue considering the business practices and accounting methods of the assessee. The revenue's appeals were allowed for statistical purposes, and the assessee's appeals were dismissed.

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Issues:
1. Validity of re-opening of assessment for assessment years 2005-06 and 2006-07.
2. Addition made by Assessing officer regarding difference in operating income disclosed by the assessee.

Issue 1: Validity of re-opening of assessment
The Assessing officer re-opened the assessment for both years due to a difference between the operating income declared by the assessee and the amount shown in the TDS certificates. The assessee claimed the difference represented reimbursement of expenses incurred on behalf of clients, debited to an "Expenses recoverable account." The Assessing officer rejected this explanation, assessing the difference as income. The CIT(A) upheld the re-opening's validity but deleted the additions, accepting the assessee's explanation. The Tribunal held that the re-opening was valid based on the reasons recorded by the Assessing officer, even if no income was ultimately assessed. The difference in income led to a belief of income escapement, justifying the re-opening. The Tribunal upheld the CIT(A)'s decision for both years.

Issue 2: Addition of difference in operating income
The Tribunal noted a lack of examination by the Assessing officer during the original assessment regarding the accounting practice of the assessee. The CIT(A) deleted the additions based on sample bills and reconciliation statements provided by the assessee. The Assessing officer expressed concerns about possible income leakage and expense inflation without substantial evidence from the assessee. The Tribunal acknowledged that mere reimbursement of expenses does not generate assessable income. However, it found the AO did not properly verify the claim or appreciate the business practices of custom clearing agents. The Tribunal set aside the CIT(A)'s decision, directing the AO to re-examine the issue considering the trade practices and accounting methods of the assessee.

In conclusion, the Tribunal allowed the revenue's appeals for statistical purposes and dismissed the assessee's appeals, emphasizing the need for a fresh examination by the AO regarding the addition of the difference in operating income.

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