Balaji Wines, Hyderabad V. Income Tax Officer, Ward-15(3), Hyderabad

ITA 1050/Hyd/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4971 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 23-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNKU SRINIVASUDR
• Assessee Lawyers: A V RAGHURAM
• Keywords: Unexplained investment; Business income
• Section: 143(3); 68

Judgement Text

ITA NO 1050 OF 2018 BALAJI WINES HYDERABAD. PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1050/HYD/2018 (ASSESSMENT YEAR: 2014-15) M/S. BALAJI WINES HYDERABAD PAN; AAMFB9482D VS INCOME TAX OFFICER WARD 15(3) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHURAM FOR REVENUE : SHRI SUNKU SRINIVASU,DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2015-15 AGAIN ST THE ORDER OF THE CIT (A)-7, HYDERABAD, DATED 15.03. 2018. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE LEARNED CIT (A) IS ERRONEOUS BOTH ON FACTS AND IN LAW IN SO FAR AS IT IS PREJUDICIAL TO THE AS SESSEE. 2. THE ACTION OF THE LEARNED CIT (A) CONFIRMING THE ESTIMATION OF INCOME FROM WINE SHOP AT 5% OF STOCK PUT TO SALE AS AGAINST 3% BEING APPROVED BY THE TRIBUNAL IS CONTRARY TO TH E PRINCIPLES OF JUDICIAL DISCIPLINE. 3. THE ACTION OF THE LEARNED CIT (A) CONFIRMING TH E ADDITION OF RS.2,16,700 OUT OF THE ADDITION OF UNEXPLAINED INVE STMENT INSPITE OF THE FAVOURABLE REMAND REPORT BY THE AO, THAT TOO WITHOUT PUTTING IT TO THE ASSESSEE. 4. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT T HE PARTNER WHO INVESTED WAS IN BUSINESS FOR LAST SEVERAL YEARS AND THE DATE OF HEARING : 11.10.2018 DATE OF PRONOUNCEMENT : 24.10.2018 ITA NO 1050 OF 2018 BALAJI WINES HYDERABAD. PAGE 2 OF 4 AMOUNT IS NOT HIGH TO HOLD THAT IT COULD BE UNEXPLA INED AND THEREBY ERRED IN CONFIRMING THE ADDITION OF RS.2,16 ,700. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, E NGAGED IN THE BUSINESS OF RUNNING A RETAIL WINE SHOP, FILED I TS RETURN OF INCOME FOR THE A.Y 2014-15 ON 29.09.2014 DECLARING TOTAL INCOME OF RS.11,99,840. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO REQUIRED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT. THE ASSESSEE SUBMITTED THAT IT IS NOT IN A POSITION TO PRODUCE THE BOOKS OF ACCOUNT AND ADMITTED THE INCOM E ON ESTIMATION BASIS. THE AO ESTIMATED THE INCOME AT 5% OF THE COST OF GOODS PUT TO SALE. 3. THEREAFTER, THE AO VERIFIED THE P&L A/C AND OBSE RVED THAT THE ASSESSEE WAS REQUIRED TO PAY RS.78,18,750 AS LICENSE FEE AND THE ASSESSEE HAS PAID THE SAME. THE ASSESSEE WA S REQUIRED TO PRODUCE THE SOURCES FOR THE FIRST INSTALMENT OF RS. 34,66,700 AS THE BALANCE WAS PAID THROUGH BUSINESS RECEIPTS. DUE TO THE FAILURE OF THE ASSESSEE TO PRODUCE THE EVIDENCE, TH E AO TREATED THE SAME AS UNEXPLAINED INVESTMENT CREDIT U/S 68 OF THE ACT AND BROUGHT IT TO TAX. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A) ALONG WITH THE EVIDENCE WITH REGARD TO THE UNEXPLAINED INVESTMENT U/S 68 OF THE ACT. THE CIT (A) CONFIRMED THE ESTIMATION OF INCOME AT 5% AND AS REGARD THE UNEXPL AINED CASH CREDITS, HE ACCEPTED THE ASSESSEES EXPLANATION TO THE EXTENT OF RS.32,50,000 AND THE BALANCE OF 2,16,000 WAS CONFIR MED. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO 1050 OF 2018 BALAJI WINES HYDERABAD. PAGE 3 OF 4 4. AS REGARDS GROUNDS 1 AND 2 WITH REGARD TO ESTIMA TION OF INCOME, WE FIND THAT THIS ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE BY VARIOUS DECISIONS OF THE TRIBUNAL WHERE IN WE HAVE UPHELD THE ESTIMATION OF INCOME AT 3% OF THE COST O F GOODS PUT TO SALE. THE RELEVANT PORTION OF THE TRIBUNAL IN THE C ASE OF SRI VENKATESWARA WINES, SCUNDERABAD IN ITA NO.1206/HYD/ 2015 IS REPRODUCED HEREUNDER: 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF A CCOUNT AND THEREFORE, THE ESTIMATION OF INCOME IS JUSTIFIED. IT IS ONLY THE R ATE AT WHICH THE INCOME IS TO BE ESTIMATED IS BEFORE US. A.O. HAS ESTIMATED THE INCO ME AT 5% OF THE COST OF GOODS SOLD, WHILE THE ASSESSEE IS SEEKING THE ESTIMATION AT 3% OF THE COST OF GOODS SOLD. WE FIND THAT IN THE CASE OF VENKATESWARA W INES, NI ZAMABAD (SUPRA), THE COORDINATE BENCH OF THIS TRIBUNAL HAS TAKEN NOTE OF THE DECISION OF HON'BLE HIGH COURT OF TELANGANA AND ANDHRA PRADESH IN THE CASE O F CIT VS. KAMLEKAR SHANKAR LAL (SUPRA) TO HOLD AS UNDER : '6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE AO HAS CALLED FOR BOOKS OF ACCOUNT OF THE ASSES SEE BUT THE ASSESSEE HAD FAILED TO PRODUCE THE SAME. THEREFORE, AO HAD ESTIMATED TH E INCOME OF THE' ASSESSEE AT 2.5% OF THE TURNOVER. THE CIT WANTS THE SAME TO BE ESTIMATED AT 5% OF THE TOTAL TURNOVER BECAUSE THE TRIBUNAL IN THE CASE OF AN ASS ESSEE CARRYING ON THE SAME BUSINESS OF SALE OF IMFL HAS ESTIMATED THE INCOME A T 5% OF THE TURNOVER. THIS, IN OUR VIEW, IS NOT JUSTIFIED AS HELD BY THE COORDINAT E BENCH OF THIS TRIBUNAL. THE ITA.NO.1206/HYD/2015 SAI VENKATESWARA WINES, SE CUNDERABAD UNIFORM NET PROFIT CANNOT BE ADOPTED IN EACH AND EVERY CASE OF SIMILAR BUSINESS. ESTIMATION OF NET PROFIT MUST BE ON THE BASIS OF FACTS INVOLVED I N EACH AND EVERY CASE. THEREFORE, IN OUR VIEW, THERE IS NO ERROR COMMITTED BY THE AU IN ESTIMATING THE PROFIT AT 2.5% OF THE TOTAL TURNOVER. THUS GROUNDS OF APPEAL NO.2 & 3 ARE ALLOWED.' 5.1. IN THE CASE BEFORE US, THE ASSESSEE IS AGREEAB LE TO THE ESTIMATION OF INCOME AT 3% OF THE COST OF GOODS SOLD. AS THE FACTS BEFORE U S ARE SIMILAR TO THE FACTS BEFORE THE TRIBUNAL IN THE CASE OF VENKATESWARA W INES, NI ZAMABAD (SUPRA) AND THE UNIFORM RATE OF PROFIT CANNOT BE ADOPTED IN THE CAS E OF EVERY ASSESSEE IN SIMILAR BUSINESS, WE ALLOW GROUND NO.2 OF THE ASSESSEE. 5. RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH (TO WHICH BOTH OF US ARE SIGNATORIES), THE AO IS DIRECTED TO ESTIMATE THE NET PROFIT AT 3% OF THE COST OF GOODS PUT TO SALE. THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. ITA NO 1050 OF 2018 BALAJI WINES HYDERABAD. PAGE 4 OF 4 6. AS REGARDS GROUNDS 3 & 4, WE FIND THAT IN THE RE MAND REPORT, THE AO HAS VERIFIED THE EVIDENCE FILED BY T HE ASSESSEE SUCH AS BANK STATEMENT OF THE PARTNER, LOAN A/C, ETC., A ND HAS ACCEPTED THAT THE SOURCES FOR RS.32,50,000 ARE EXPL AINED. EVEN WITH REGARD TO THE BALANCE OF RS.2,16,000, THE AO H AS HELD THAT CONSIDERING THE FACT THAT THE ASSESSEE IS INTO BUSI NESS SINCE LONG, THE STATEMENT OF THE ASSESSEE ALONGWITH THE EVIDENC ES MAY BE ACCEPTED. WE FIND THAT THE CIT (A) HAS HOWEVER, HAS NOT ACCEPTED ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED TH E EVIDENCE. SINCE ADMITTEDLY THE ASSESSEE IS IN THIS BUSINESS F OR LONG AND THE AO HAS ACCEPTED THE ASSESSEES CONTENTION OF THE AV AILABILITY OF FUNDS OF RS.2,16,000 FROM THE EARLIER YEARS AFTER V ERIFICATION, WE ARE OF THE OPINION THAT THE CIT (A) OUGHT TO HAVE D ELETED EVEN THE ADDITION OF RS.2,16,000. THEREFORE, GROUNDS 3 & 4 A RE ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH OCTOBER, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 24 TH OCTOBER, 2018. VINODAN/SPS COPY TO: 1 BALAJI WINES, C/O A.V.RAGHURAM, K.VASANTKUMAR, P VINOD, ADCOATES, 610 BABUKHAN ESTATE, BASHEERBAGH, HYDERAB AD-1 2 ITO WARD 15(3) IT TOWERS, AC GUARDS, HYDERABAD 3 CIT (A)-7 HYDERABAD 4 PR. CIT 7 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER