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

Income Tax Officer, M/s. Healthy Heart Foods, Ward-9(2), Vs HYDERABAD HYDERABAD [PAN: AAAFL7646M]

(Appellant) (Respondent)

For Revenue : Shri Rajat Mitra, DR For Assessee : Shri S. Rama Rao, AR

Date of Hearing : 15-04-2015 Date of Pronouncement : 10-06-2015

ORDER

PER B. RAMAKOTAIAH, A.M. :

This Revenue's appeal was filed against the order of the Commissioner of Income Tax(Appeals)-V, Hyderabad dated 31-07-2013 deleting the additions made by the Assessing Officer (AO) under the heads of suppression of sale at Rs. 13,51,045/- and un-explained expenditure of Rs. 2,65,05,466/-.

2. Briefly stated, assessee is carrying on the business of manufacturing of oil. For the FY.2007-08, the sale of oil amounted to Rs.67.30 Crores and assessee has offered income of Rs.6,17,660/-. AO in the course of scrutiny, obtained information from CTO, Jadcherla on ITA No.1495 /Hyd/2013 :- 2 -: M/s. Healthy Heart Foods

the purchase turnovers and sale turnovers as recorded in the Commercial Tax Department. On the basis of the amounts, AO arrived at a suppression of sale at Rs.13,51,045/-. In addition to that, AO also noticed that there is variation in the purchases from the figures furnished by the Sales Tax Department to the Books of Accounts of assessee, rejected explanation by assessee and made an addition of Rs.2,65,05,466/- as unexplained expenditure.

3. It was contended before Ld.CIT(A) that assessee furnished the reconciliation which was already given to AO and also additional evidence with reference to VAT returns. Considering the written submissions, additional evidence and Remand Report dt. 11-01-2012 Ld.CIT(A) deleted both the additions by stating as under:

"6.1 Before me, the appellant contended that there are two different types of sales i.e. APGST and CST sales. As far as CST sales are concerned, they are to be shown separately in the V A T returns filed and whereas for the periods April, 2007 to September, 2007, the CST turn over were also included in the total turn-over Therefore, the CST turn over for the period from April to September, 2007 was taken twice. The Commercial Tax Officer, Jadcherla, vide letter dated 16-08-20.11 certified the sale turn over to be Rs.66,70,30,237/-. The appellant also filed before me the monthly V AT returns filed which indicates that the CST sales for the said period was included twice. A statement of reconciliation was also filed which is extracted above. Therefore, I hold that the difference arose as the CST turn over for the months of April, 2007 to September, 2007 was taken twice. Hence, the addition made by the Assessing Officer cannot be sustained and accordingly the same is deleted.

7. Ground Nos.4 and 5 are with regard to the addition of Rs.2,65,05,460/- on the ground that there was unexplained expenditure. According to the Assessing Officer, there is a difference between the purchases reported in the VAT returns and the purchases as recorded in the books of account. The appellant explained that the purchases for the purpose of CST would include the packing material, chemicals, husk and other capital purchases like fixed assets etc. It is also submitted by the appellant that some ITA No.1495 /Hyd/2013 :- 3 -: M/s. Healthy Heart Foods

of the purchases are not taxable and are exempt and, therefore, would not be considered for sales tax whereas the purchases on capital account would not be accounted for in the Income-Tax Act. The appellant filed a reconciliation statement which is reproduced in the above paragraphs; The appellant submitted that an amount of Rs.2,25,99,476/- was an exempted purchase being imports and is shown by the C.T.O. in his certificate issued on 16-08-2011. Besides, the appellant also submitted that there are capital purchases. However, the appellant could not reconcile the difference of Rs.99,136/-. It is explained by the appellant that it has arisen on account of rounding of the rupees.

7.1 I find that the explanation made by the appellant as extracted above is reasonable in view of the fact that the Assessing Officer did not consider the purchases on capital account and the exempted purchases as mentioned by the appellant in the reconciliation statements. Therefore, I am inclined to agree with the appellant. However, as the appellant could not explain the difference of Rs.99,136/- on account of purchases, the addition of Rs.2,65,05,460/- is limited to Rs.99,136/-".

4. Revenue is aggrieved and raised the following grounds:

"1. The order of the Ld.CIT(A) is erroneous of facts and is not acceptable.

2. The Ld.CIT(A) erred in ignoring the information provided by the CTO, Jadcharla to the Assessing Officer vide letter dated 19-12- 2010, while allowing relief to the assessee.

3. The Ld.CIT(A) erred in not considering the remand report submitted by the AO.

4. The Ld.CIT(A) erred in holding that the variation in purchases is only on account of purchases which are capital in nature, ignoring the fact that the Assessing Officer already considered and arrived at after deducting an amount of Rs. 14,17,009/- on account of capital expenditure, from the total unreported purchases of Rs.2,79,22,475/-.

5. We have heard the Ld. DR and Ld. Counsel in detail and perused the Paper Book placed on record. The issue is one of reconciliation of ITA No.1495 /Hyd/2013 :- 4 -: M/s. Healthy Heart Foods

facts which assessee has explained before the AO as well as CIT(A). The mistake in fact pertains to the AO. In spite of clear explanation that there are exempted sales and exempted purchases which does not get reflected in CTO's orders, as they are concerned with only taxable sales and purchases, AO ignored the same. Ld.CIT(A) however, after giving due consideration to the various sales tax returns and the details of exempt purchases and sale, deleted the additions after due consideration of the facts involved. We do not see any reason to interfere with the order of CIT(A).

6. Before parting however, we would like to place following observations. AO passed the order on 28-12-2010 whereas in the body of the order, AO records the following:

"Though during the course of hearing, this is also one of the issues discussed the actual proposal was mooted on 30-12-2010 and communicated in writing to the assessee on 31-12-2010 at about 11AM. The assessee partner has submitted the following reply"

Thereafter, AO extracted assessee's reply reconciling the amounts and AO concluded his findings and made the additions. This indicates that the AO obtained last minute information from assessee for reconciling and still not satisfied with the reply to make the additions vide order dt. 28-12-2010. It seems trhat AO made up his mind to add as early as 28th December but made an attempt to get an explanation later. We were not impressed with the assessment back dating the order.

7. Not only that we have also perused the various amounts, which Ld.CIT(A) considered for reconciling the purchases, the reconciliation is as under:

ITA No.1495 /Hyd/2013 :- 5 -: M/s. Healthy Heart Foods

RECONCILIATION OF PURCHASES

Raw Material 62,15,19,498 Finished goods 57,11,261 Chemicals 39,39,472 Husk & Solid Fuel 70,31,408 Packing material 1,73,72,803 65,55,74,442 Add: 4% Fixed Asset 59,17,837 12.5% Fixed Asset 6,99,522 4% Others 3,27,190 12.5% Others 4,63,768 74,08,317 Less: CST purchase 53,22,999 Exempted Chem 4,41,811 Exempted Husk 68,04,305 Exempted packing 29,61,386 1,55,30,501 64,74,52,258 Purchases as per CTO's Report 64,73,53,159 Discrepancy 99,099

8. Thus, CIT(A)'s order requires to be confirmed. There is no merit in the Revenue's appeal. Since Revenue came in appeal in spite of clearly reconciling the facts un-necessarily burdening this forum with infructuous appeal, we levy cost of Rs. 100/- on the AO which should be collected and paid as per the rules. Revenue's appeal is dismissed.

Order pronounced in the open Court on 10th June, 2015.

Sd/- Sd/- (ASHA VIJAYARAGHAVAN) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 10th June, 2015

TNMM ITA No.1495 /Hyd/2013 :- 6 -: M/s. Healthy Heart Foods

Copy to :

1. The Income Tax Officer, Ward-9(2), 2nd Floor, D-Block, I.T. Towers, AC Guards, Hyderabad.

2. M/s. Healthy Heart Foods, 18-4-42/14, Shamsheer gunj, Hyderabad.

3. CIT(Appeals)-V, Hyderabad.

4. CIT-VI, Hyderabad.

5. D.R. ITAT, Hyderabad.

6. Guard File.