What did the Tribunal hold?

The Tribunal held that the assessee did not reconcile the difference in purchases before the AO, and the explanation was submitted after the assessment was completed. The CIT(A) also failed to call for a remand report. Therefore, the matter was remitted back to the AO for fresh adjudication.

The Assessing Officer (AO) added Rs. 28.90 lakhs to the assessee's income, representing the difference between purchases debited in the Profit & Loss account and purchases declared in the VAT return. The CIT(A) deleted this addition, accepting the assessee's explanation and revised figures submitted after the assessment order was passed.

What were the issues?

Whether the CIT(A) erred in admitting fresh evidence without following Rule 46A and without calling for a remand report from the AO, and whether the deletion of the addition made by the AO was justified.

ITO vs Annachi Enterprises Pvt Ltd. | ITAT Chennai 2017

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI D.S.SUNDER SINGH

Pronounced: 26.05.2017

आदेश / O R D E R

PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER:

This is an appeal filed by the Revenue against the Order dated 17.10.2016 of Commissioner of Income Tax (Appeals)-1, Chennai, in (New No.ITA216/CIT(A)-1/2014-15 for the AY 2011-12 and raised the following grounds:

ITA No.3445/Mds/2016 :- 2 -:

The order of the learned CIT(A) is contrary to law, facts and circumstances of the case. 2.1 The learned CIT(A) erred in deleting the addition made with regard to the issue of difference in purchases as per the P & L Account and VAT return, to the tune of Rs. 28.90 lakhs? 2.2 The learned CIT(A) failed to consider the issue that the difference in purchases as quantified by the Assessing officer will have a consequent bearing on sales also, and a mere reconciliation of figures, would not suffice to find out the exact difference, on sales and purchases? 3.1 The Ld. CIT(A) erred in admitting fresh evidence in terms of reconciliation of purchases and sales with VAT returns, without adhering to the provisions of Rule 46A, and on this account also the order of the CIT(A) is bad in law? 3.2 The Ld.CIT(A) erred in not calling for a Remand Report from the Assessing Officer, as mandated under Rule 46A, since no reconciliation was furnished by the assessee during the course of assessment proceedings, whereas the same was furnished during the appellate proceedings only ? 4. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored.

2.0 All the grounds of the appeal are related to the addition of Rs.28.90 lakhs representing the difference in purchases account as per the Profit & Loss A/c and the VAT return. The assessee filed return of income admitting total income of Rs.12,26,470/- on 17.09.2010 for the AY 2011-

12.

During the assessment proceedings, the AO found that the assessee has admitted the purchases of of Rs.8,53,46,285/- in the Profit & Loss A/c and as per the VAT returns, the purchases were declared at Rs.8,24,55,300/- and there was a difference of Rs.28,90,985/- which was added back to the income.

3.0 Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A). The Ld.CIT(A) deleted the addition observing that the AO has missed/not considered the clarifications submitted by the assessee

ITA No.3445/Mds/2016 :- 3 -: vide letter dated 12/03/2014 as the assessment was passed on 10/03/2014. The relevant part of the CIT(A) is reproduced as under:

Addressing the issues raised with regard to purchases, in Para 2.3 of the Assessment Order the AO has worked out a differential of Rs.28,90,985/- as being excess purchase claimed by the appellant. This has been done after adopting purchases debited to P & L a/c at Rs.8,53,46,285/- and purchases as per VAT returns at Rs.8,24,55,300/-. In this regard the appellant has clarified that the AO has erred in adopting correct figures. It was explained that the AO has taken the Form-I value, being the first, page of the return, whereas, the purchase annexures show the purchases to be accounted at Rs.8,31,01,461/- which the AO has ignored or missed to have taken. The balance of Rs.22,44,828 (Rs.8,53,46,285 – Rs.8,31,01,461) was intimated to the VAT department by the appellant vide its letter and revised VAT return filed on 17.9.2012 on which consequently Input Tax Credit (ITC) was denied. AO has also been informed of this by the appellant vide its letter filed in tapal on 12.3.2014 which missed the attention of the AO, the assessment order being dated 10.03.2014.

4.0 Aggrieved by the Order of the Ld.CIT(A), the Department is on appeal before us.

Appearing for the Revenue, the Ld.DR argued that at the time of assessment, the assessee has not furnished the reconciliation statement and the assessee has furnished the fresh evidence in the form of reconciliation of purchase of sales with VAT returns. The same information was not placed before the AO. Therefore, the information submitted before the AO would constitute a fresh evidence and an opportunity should be given to the AO but the Ld.CIT(A) allowed the appeal of the assessee without giving opportunity as required under Rule 46A of Income Tax Rules. Therefore, the Ld.DR vehemently argued that the case should go back to the file of AO for verification and reconciliation of the difference in purchases.

5.0 We heard the rival submissions and perused the material placed on record.

ITA No.3445/Mds/2016 :- 4 -:

The assessee has debited a sum of Rs.8,53,46,285/- in Profit & Loss account and it was noticed by the AO that as per the VAT return, the purchases were Rs.8,24,55,300/- and there was a difference of Rs.28,90,985/- which is not reconciled by the assessee before the AO.

Before the Ld.CIT(A) the assessee stated that the AO has erroneously taken the Form-I value in the VAT return which is being first page of the VAT return whereas in annexures purchases were accounted at Rs.8,31,01,461/- after reducing the adjustments and the difference of Rs.22,44,828/- was intimated to the VAT Department by the assessee and consequently input tax credit was denied and the AO has also been informed vide letter dated 12.03.2014 filed in Tapal. In this case from the order of the Ld.CIT(A), it is clear that the assessee has not clarified/reconciled the difference in purchases before the AO. The assessment was completed in this case on 10.03.2014 and the assessee has submitted information on 12.03.2014 i.e. after completion of the assessment and the A.O. could not consider the same. The Ld.CIT(A) also has not called for the Remand Report. Therefore, we are of the considered opinion that the case should go back to the file of the AO for reconciliation and verification of the difference in purchases account with the VAT return. Therefore, we remit the matter back to the file of the AO with a direction to give an opportunity to the assessee to submit explanation and reconciliation of the difference in purchases and decide the issue afresh on merits.

ITA No.3445/Mds/2016 :- 5 -:

6.0 In the result, the appeal of the Revenue is allowed for statistical purposes.

Order pronounced in the Open Court on 26th May, 2017, at Chennai.

ITO, CHENNAI vs. ANNACHI ENTERPRISES PVT LTD., CHENNAI

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

Recent GST High Court judgments