M/S Healthy Heart Foods, , Hyderabad vs Department Of Income Tax

2. Briefly stated, the assessee is a partnership firm, filed its

return of income on 29.09.2009 admitting income from

manufacture of edible oil and vegetable refined oil with a gross

total income of Rs.9,66,180/-. AO completed the assessment and

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assessed the income of the assessee at Rs.1,53,92,693.

Aggrieved, assessee filed appeal before the CIT (A).

3. With respect to addition of Rs.16,13,275 on account of

difference in sales as reported to the Commercial Tax Officer and

as recorded in the books of accounts, AO compared the figures of

sales as per VAT returns and Trading account in the books of the

assessee on the one hand and the sales as reported by the CTO

Jadcherla vide her letter dated 23.11.2011 in response to the

enquiry from the AO, on the other hand and found a difference of

Rs.16,13,275 as follows:

Sales as per VAT returns provided VAT (Rs.) 83,31,10,720 by the assessee CST (Rs.) 1,29,63,131 Total (Rs.) 84,60,67,064 Sales as per trading account Sales as per VAT statement and VAT (Rs.) 83,47,17,208 CST statement provided by CST (Rs.) 1,29,63,131 Total (Rs.) 84,76,80,339

4. Assessee explained that there was an error for the month of

December in the certificate dated 23.11.2011. The assessee

relied on a certificate dated 16.6.2011. The turnover for

December, 2008 was Rs.10,03,68,648 whereas as per the

certificate dated 23.11.2011, the turnover was Rs.10,19,71,512

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(i.e. a difference of Rs.16,13,275/-). Since there was a difference

between the two letters viz., 16.06.2011 & 23.11.2011, AO did

not accept the letter dated 23.11.2011 obtained by the assessee

and added the sum of Rs.16,13,275 to the total income.

5. As per the certificate dated 16.06.2011, the turnover for

December is stated to be Rs.10,03,68,648 and the annual

turnover is Rs.83,31,14,360. This is also the figure reported in

the monthly return for VAT for December, 2008. The data as per

the CTO's statement dated 23.11.2011 is as follows:

Turnover for Dec. 2008 Rs.10,19,71,512

Output Tax Rs. 40,14,746

The AR submited that the tax payable @ 4% on the turnover of

Rs.10,19,71,512 should have been Rs.40,78,860 whereas if the

turnover is accepted to be Rs.10,03,68,648, the tax payable

recorded in the statement is correct.

6. The ld CIT (A) held as follows:

"4.3 I have considered the facts on record. There is very clearly a discrepancy between the certificates dated 16.06.2011 and dated 23.11.2011, both issued by the CTO Jadcherla. The proper course for the AO would have been to refer the matter to the CTO for verification. Though this has not been done, I find that reconciliation of the discrepancy is possible on the

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basis of the other documents and information available on record".

4.4 The turnover of Rs.10,03,68,648 is evidenced by the monthly return for VAT for December, 2008 as well as the certificate of the CTO, Zadcherla dated 16.06.2011. Further as pointed out by the AR, the computation of tax does not match with the turnover reflected in the certificate dated 23.11.2011. The fact that the assessee's cl;aim is in confirmity with the VAT return as well as the certificate dated 16.6.2011 and the fact of the mismatch between the turnover and the tax payable in the certificate dated 23.11.2011 lends support to the view that the figure reflected in the certificate dated 16.6.2011 is the correct figure. The addition of Rs.16,13,275 is therefore, directed to be deleted".

7. The Revenue has filed Ground Nos. 2 & 3 as follows:

"2. The ld CIT (A) has erred in completely ignoring the information provided by the CTO Jadcherla vide letter dated 23.11.2011 in allowing relief to the assessee.

3. The ld CIT (A) has erred in not allowing an opportunity to the AO to correlate the contradictory statements provided by the CTO Jadcherla and instead has erred in finding a correlation between the VAT return and the certificate dated 16.06.2011 issued by the CTO".

8. The ld DR pointed out that there is a discrepancy between

the certificate dated 16.6.2011 and 23.11.2011 both of which

has been issued by the CTO Jadcherla and the proper course

would be to refer the matter to the CTO for verification and

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hence the same should be sent back to the AO directing him to

verify the same.

9. We have heard the ld Counsel for the assessee wherein he

has submitted that there was a mistake committed by the CTO

which has been proved by the production of monthly statements

filed before the said authorities. The ld Counsel for the assessee

further pointed out in the statement relied on by the AO, the tax

shall be taken at Rs.40,14,746. Such tax is worked out at 4% of

the turnover. At the rate of 4% the tax of Rs.40,14,746 would be

correct, if the output is taken at Rs.10,03,68,648, whereas if the

figures shown is Rs.10,19,71,512 were to be true, the tax

payable would work out to Rs.40,78,860. Hence, it was brought

to the notice of the AO that there is an error in the VAT ledger

a/c. Hence we confirm the order of the CIT (A) wherein he has

held that the fact of the miss-match and the turnover in the

certificate dated 23.11.2011 support the view that the figure

reflected in the certificate dated 16.6.2011 is the correct figure.

This ground of appeal is decided against the Revenue.

10. Ground Nos. 4 & 5 raised by the Revenue are as follows:

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ITA No.1537 of 2012 Healthy Heart Foods Hyderabad

"4. The ld CIT (A) has erred in holding that the variation in purchases is only on account of non taxable purchases being reported in the category of taxable purchases in the schedule to the P&L a/c.

5. The ld CIT (A) has erred in holding that the total purchases reflected in the VAT return and as reflected in the schedule to P&L a/c are one and same".

11. With regard to the addition of Rs.97,59,696 towards

difference in purchase of oil (raw material), as per the details of

purchases in the VAT returns of the assessee the assessee had

claimed to have made the following purchases of oil (raw

material):

S.No Item Claimed as Claimed as Total (Rs.) taxable for exempt for sales tax sales tax purpose (Rs.) (Rs.) 1 Oil (Raw 47,50,15,042 34,36,95,803 81,87,97,740* material) unloading charges *including unloading charges of Rs.86,895

On the other hand, the assessee had recorded the following

purchases of oil under the head 'raw material' in the schedules

to the P&L a/c.

1 Crude Rice bran oil (AP VAT) Rs.7,50,05,246 purchase a/c 2 Crude Sunflower Oil (AP VAT) Rs.36,96,03,148

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Purchase a/c 3 Crude Ground Nut oil (AP VAT) Rs.3,04,93,543 Purchase a/c 4 Crude Sunflower Oil (CST) Purchase Rs.96,72,803 a/c 5 Crude Palmoline Oil (Import) Rs.12,34,25,000 Purchase a/c 6 Crude Sunflower Oil (Import) Rs.21,05,98,000 Purchase a/c TOTAL Rs.81,87,97,740

12. The AO held that the taxable raw materials (S.No.1 to 4 as

per schedule above) amounted to Rs.48,47,74,740 whereas the

taxable raw materials as per the VAT return was

Rs.47,50,15,042. He brought the difference of Rs.97,59,696 to

tax as an excess claim of purchases.

13. In the course of appellate proceedings, the AR has

submitted that all the purchases were supported by the requisite

vouchers and evidences and the AO had also not found any

evidence to the contrary. The AR also submitted that the total

purchases, including both taxable and exempt purchase, as per

the books tallied with the figures in the VAT returns.

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ITA No.1537 of 2012 Healthy Heart Foods Hyderabad

14. The CIT (A) examined the facts as stated in the assessment

order and as submitted by the AR.

15. The CIT (A) held as follows:

"The total purchases (including both taxable and exempt purchases) is identically reported in the schedule to the P&L a/c and in the VAT Return. It is, therefore, reasonable to accept, as submitted by the AR that the differences have arisen due to some of the non taxable purchases being reported in the taxable category of purchases in the schedule to the P&L a/c. For the purpose of the income tax assessment proceedings, the distinction between taxable and non taxable purchase is irrelevant and it does not really matter whether a particular purchase has been recorded by the assessee under one or the other category so long as the purchase is genuine. What is crucial in this case is that the total purchases as reflected in the VAT return and as reflected in the schedule to the P&L a/c is the same. Hence, the addition is directed to be deleted and the ground of appeal was allowed".

16. AO observed that there is a difference between the figures

shown in the VAT returns against the purchases and the

purchases as recorded in the final accounts. The total purchases

of the raw material according to the assessee was

Rs.81,87,97,740. The details of such purchase are submitted in

the schedules to the final accounts. The AO at page No.5 of the

order mentions that the total purchases are tallying with the

schedules and the tables. However, AO mentions that the taxable

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raw material is shown in the schedules at Rs.48,47,74,738 and

whereas the exempted turnover was Rs.33,40,23,000 as against

the figures shown in the table of Rs.47,50,15,042 and

Rs.34,36,95,803. According to the AO there is a difference of

Rs.97,59,696 in the exempted raw material purchases and

therefore, arrived at such an addition in the assessment order.

17. It was submitted that such an addition is not justifiable as

the total purchases according the assessee and according to the

AO is the same. In the circumstances, no addition should have

been made by the AO.

18. The ld Counsel for the assessee further explained the

difference as arrived at by the AO as follows:

" It can be seen at pages 3 and 4 the details of the sales tax paid on the purchases are noted. The total taxable purchases was Rs.58,99,78,683 and the exempted turnover was Rs.36,25,91,033. The total purchases amounted to Rs.81,67,97,740 which tallies with the figures as obtained from the Commercial Tax Department by the AO. AO mentions that some of the taxable turnover was wrongly shown in the exempted turn over and therefore, the AO is of the view that the difference of Rs.97,59,696 is to be added".

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19. In this regard it was submitted that the assessee furnished

details of the raw material purchased month-wise for each of the

category before the AO. It was also submitted that the purchases

include all types of purchases of assets which is not taken to

trading account, packing material, consumables, husk,

chemicals, finished goods separately. Assessee also shown the

books of accounts to the AO mentioning that the total of the

purchases effected are tallying with the figures as furnished by

the assessee to the Sales Tax Department.

20. It was submitted that there was no excess purchases

recorded by the assessee. Each purchase made by the assessee

is supported by evidence. It is also not the case of the AO that

the purchases are not supported by the vouchers and evidences.

Further at page 61, statement by the sale tax authorities total is

tallying.

21. We find that the total purchases as reflected in the VAT

return and as reflected in the schedule to the P&L a/c is the

same and hence we confirm the order of the CIT (A) and dismiss

the grounds raised by the Department on this issue.

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ITA No.1537 of 2012 Healthy Heart Foods Hyderabad

22. In the result, appeal filed by the Revenue is dismissed.

Order pronounced in the Open Court on 25th March, 2015.

Sd/- Sd/- (P.M. Jagtap) (Asha Vijayaraghavan) Accountant Member Judicial Member

Hyderabad, dated 25th March, 2015.

Vnodan/sps Copy to:

1. Income Tax Officer Ward 9(2) 2nd Floor, D Block, IT Towers, AC Guards Hyderabad

2. M/s Healthy Heart Foods, H.No.18-4-42/14 Shamsher Gunj, Hyderabad

3. The CIT(A)-VI Hyderabad

4. The CIT - VI Hyderabad

5. The DR, ITAT, Hyderabad

6. Guard File

By Order

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