Akula Bullabbai and Enterprises, Tanuku and Akula Bullabbai & Others V. Income Tax Officer, Ward-2, Tanuku

ITTA/128/2005

AI Insights

The case involves two appeals by Akula Bullabbai and Enterprises against the Income Tax Officer, Ward-2, Tanuku, concerning the assessment year 1992-1993. The primary issue was the estimation of gross profit and the allowable deductions on expenses claimed by the appellants, who were Abcari (Excise) Contractors. The Assessing Officer had estimated the gross profit and allowed only 50% of the expenses as deductions, which was upheld by the Commissioner of Income Tax (Appeals) and the Tribunal. The appellants sought relief from the High Court, referencing a similar case (CIT v. R.Narayanarao) where the court had set a precedent for a more favorable profit estimation for similar businesses. The Income Tax Department did not oppose the appellants' request for a similar judgment.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 799933 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 21-11-2017
• Assessment Year: misc
• Other Referred Cases: CIT v. R.Narayanarao (AP), A.Sanyasi Rao's case {1989} 178 ITR 31 (AP)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: B SARMA
• Assessee Lawyers: Y RATNAKAR
• Keywords: Assessment; Deductions; Gross Profit; Income Tax; Excise Contractors
• Section: 143(3); 250

Judgement Text

"THE HON'BLE SRI JUSTICE C.V.NAGARJUNA REDDY AND THE HON'BLE SRI JUSTICE T.AMARNATH GOUD I.T.T.A.Nos. 128 & 134 OF 2005 DATED 21ST NOVEMBER, 2017 ITTA.No.128 of 2005: Between: Akula Bullabbai and Enterprises, Tanuku … Appellant AND Income Tax Officer, Ward-2, Tanuku … Respondent ITTA.No.134 of 2005: Between: Akula Bullabbai & Others … Appellants AND Income Tax Officer, Ward-2, Tanuku … Respondent Counsel for the appellants : Sri Y.Ratnakar Counsel for the respondent : Sri B.Narasimha Sarma Sr. Standing Counsel for Income Tax THE COURT MADE THE FOLLOWING CVNR, J. & TA, J. itta_128&134_2005 2 COMMON JUDGMENT: (per Hon'ble Sri Justice C.V.Nagarjuna Reddy) Both these appeals arise out of common order dated 29.11.2004 in ITA.No.85/V/99 and ITA.No.88/V/99 on the file of the Income Tax Appellate Tribunal, Visakhapatnam (for short, 'the Tribunal'). 2. The assessees are Abcari (Excise) Contractors for the assessment year 1992-1993. The Assessing Officer, while passing of the orders under Section 143(3) read with Section 250 of the Income Tax Act, 1961, estimated gross profit and allowed only 50% of expenses as allowable deductions. The assessees were unsuccessful before the Commissioner of Income Tax (Appeals) and also before the Tribunal. Hence, they filed these appeals. 3. Sri Y.Ratnakar, learned counsel for the appellants/assessees, submitted that in CIT v. R.Narayanarao (AP)1, a Division Bench of this Court disposed of the appeals arising out of the subject assessment year i.e., 1993-94. The operative part of the said judgment reads as under: “As seen from the purchase price and sales recoveries, there is a wide variation. In some cases, it is more than nine (9) times 1 (2011) 338 ITR 625 (AP) CVNR, J. & TA, J. itta_128&134_2005 3 and in some other cases less than seven (7) times. Given the fact that there is no price fixed by the Government for sale of arrack and it is generally a seller’s market, to assume that the gross profit would be at 1% of the estimated sales, in our considered view, is low. Accepting the total sale price at eight (8) times of the purchase price, we feel it appropriate to hold that 2% of the estimated sale value, after considering all types of deductions mentioned hereinabove, would be reasonable. Indeed, the Division Bench of this Court in A.Sanyasi Rao’s case {1989} 178 ITR 31 (AP) found that in some cases the profit margin was higher in arrack business. Therefore estimating the net profit at 2% of the estimated sales or 16% of the purchase price (the Tribunal estimated at 8% of the purchase price) would not be unreasonable. In the result, for the above reasons, we set aside the orders of the Income Tax Appellate Tribunal impugned in these appeals directing that the net profit be estimated at 2% of the estimated sales or 16% of the purchase value whichever is higher. All the appeals shall stand disposed of accordingly. In the facts and circumstances of the case, we make no order as to costs.” 4. Learned counsel for the appellants requested for passing a similar order in these cases also. Sri B.Narasimha Sarma, learned Senior Standing Counsel for Income Tax Department, has fairly not opposed this submission. CVNR, J. & TA, J. itta_128&134_2005 4 5. Following the aforementioned judgment, these appeals are also allowed with the direction that the Assessing Officer shall make fresh assessment based on the above reproduced part of the judgment in R.Narayanarao (supra). ___________________________ C.V.NAGARJUNA REDDY, J. ___________________________ Date: 21-11-20-17. T.AMARNATH GOUD, J. TJMR "