Sri raghumandala Venkatinaidu, Srikakulam V. The ITO, Srikakulam

ITA 106/VIZ/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8701 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 03-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P S MURTHY
• Assessee Lawyers: N V RAMANA MURTHY
• Keywords: Rejection of books of accounts; Unexplained investment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 106 / VIZ /201 7 (ASST. YEAR : 20 11 - 1 2 ) RAGHUMANDALA VENKATINAIDU, PROP. M/S. NUKALAMMA WINES, D.NO. 2 - 52, P.V.R. PURAM, VEERAGHATTAM, SRIKAKULAM. V S . ITO, WARD - 1 , SRIKAKULAM. PAN NO. AWGPR 8832 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N.V. RAMANA MURTHY - CA DEPARTMENT BY : SHRI P.S. MURTHY - DR DATE OF HEARING : 22 / 0 2 /201 8 . DATE OF PRONOUNCEMENT : 07 / 0 3 /201 8 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 , VISAKHAPATNAM , DATED 21 / 12 /201 6 FOR THE ASSESSMENT YEAR 2011 - 12 . 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS AN INDIVIDUAL CARRYING ON BUSINESS OF PURCHASE AND SALE OF IMFL (INDIAN MADE FOREIGN LIQUOR) IN SRIKAKULAM DISTRICT. THE ASSESSEE HAD FILED RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS. 3,99,477 / - , WHICH WAS PRO CESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER 2 ITA NO. 106 / VIZ /201 7 ( RAGHUMANDALA VENKATINAIDU ) CALLED AS 'THE ACT'). LATER ON , CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT BY ESTIMATING NET PROFIT AT 20% OF THE STOCK PUT TO SALE. 3. ON APPEAL, THE LD. CIT(A) SCAL ED DOWN THE PERCENTAGE FROM 20% TO 10% AND DIRECTED THE A.O. TO RE - COMPUTE THE INCOME AT 10% OF PURCHASE PRICE. 4. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, THE LD. AUTHOR IZED REPRESENTATIVE FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL WHERE THE TRIBUNAL HAS SCALED DOWN THE ESTIMATION OF PROFIT FROM 10% TO 5% IN THE CASE OF TANGUDU JOGISETTY IN ITA NO.96/VIZAG/2016 BY ORDER DATED 2.6.2016. 5. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORTED THE ORDER S PASSED BY THE AUTHORITIES BELOW. 6 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THRO UGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE INVOLVED IN THIS APPEAL IS ESTIMATION OF PROFIT IN RESPECT OF IMFL BUSINESS CARRIED BY THE ASSESSEE. IN THIS RESPECT, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF TANGUDU 3 ITA NO. 106 / VIZ /201 7 ( RAGHUMANDALA VENKATINAIDU ) JOGISETTY (SUPRA) HAS CON SIDERED THE PROFIT LEVEL IN THE LINE OF BUSINESS AND DECIDED THAT 5% OF PURCHASE PRICE IS REASONABLE PROFIT MARGIN IN THE LINE OF IMFL BUSINESS AND DIRECTED THE A.O. TO RE - COMPUTE THE PROFIT OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE A.O. ESTIMATED NET PROFIT OF 20% ON STOCK PUT FOR SALE. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNTS AND VOUCHERS IN SUPPORT OF PURCHASES AND SALES. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO MAINTAIN STOCK REGISTERS AND BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NOT SUSCEPTIBLE FOR VERIFICATION, THEREFORE REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED NET PROFIT OF 20% BY RELYING UPON THE DECISION OF HONBLE A.P. HIGH COURT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE NET PROFIT ESTIMATED BY THE A.O. IS QUITE HIGH WHEN COMPARED TO THE NATURE OF B USINESS CARRIED ON BY THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THE CASE LAW RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE CASE BEFORE THE HONBLE A.P. HIGH COURT WAS THAT THE ASSESSEE IS INTO THE BUSINESS OF TRADIN G IN ARRACK, WHEREAS IT IS IN THE BUSINESS OF DEALING IN IMFL. THE ASSESSEE FURTHER CONTENDED THAT IMFL TRADE WAS CONTROLLED BY THE STATE GOVERNMENT THROUGH A.P. STATE BEVERAGES CORPORATION LTD. AND THE PRICES OF THE PRODUCTS ARE FIXED BY THE STATE GOVER NMENT. THE ASSESSEE BEING A LICENSE HOLDER OF STATE GOVERNMENT CANNOT SELL THE PRODUCTS OVER AND ABOVE THE MRP FIXED BY THE STATE GOVERNMENT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE A.O. HAS ESTIMATED THE NET PROFIT BY RELY ING UPON THE DECISION OF A.P. HIGH COURT IN THE CASE OF CIT VS. R. NARAYANA RAO IN ITA NO.3 OF 2003 WHICH IS RENDERED UNDER DIFFERENT FACTS. THE A.P. HIGH COURT HAS CONSIDERED THE CASE OF AN ARRACK DEALER, WHEREAS, THE ASSESSEE IS INTO THE BUSINESS OF DEA LING IN IMFL. THEREFORE, WE ARE OF THE VIEW THAT THE A.O. WAS NOT JUSTIFIED IN RELYING UPON THE JUDGEMENT, WHICH WAS RENDERED UNDER DIFFERENT FACTS TO ESTIMATE THE NET PROFIT. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE, RELIED UPON THE DECISION OF ITAT, VISAKHAPATNAM BENCH IN THE CASE OF T. APPALASWAMY VS. ACIT IN ITA NO.65 & 66/VIZAG/2012. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FINDS THAT 4 ITA NO. 106 / VIZ /201 7 ( RAGHUMANDALA VENKATINAIDU ) THE COORDINATE BENCH OF THIS TRIBUNA L, UNDER SIMILAR CIRCUMSTANCES HELD THAT ESTIMATION OF 5% NET PROFIT ON PURCHASES IS REASONABLE. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS THE CONTENTION OF THE LD. A.R. THAT THE ESTIMATION OF PROFIT AT 16% IS HIGH AND EXCESSIVE CONSIDERING THE NORMAL RATE OF PROFIT IN THIS LINE OF BUSINESS. WHEREAS, THE LD. D.R. SUPPORTED THE ORDER OF THE CIT(A). HAVING CONSIDER ED THE SUBMISSIONS OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE ISSUE IS NO MORE RES INTEGRA IN VIEW OF A SERIES OF DECISIONS OF THE ITAT HYDERABAD BENCH IN SIMILAR CASES. THE COORDINATE BENCH IN CASE OF ITA NO.127/HYD/12 AND OTHERS DATED 18.05.2012 AS WE LL AS A NUMBER OF OTHER CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FOREIGN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASSESSEE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDERABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT FROM THE WINE BUSINESS OF THE ASSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASES MADE NET OF ALL OTHER DEDUCTIONS. THE ASSESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INC OME DETERMINED SHOULD BE BELOW THE INCOME RETURNED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE RATIOS OF COORDINATE BENCH, WE ARE OF THE VIEW THAT THE NET PROFIT ESTIMATED BY THE A.O. BY RELYING UPON THE DE CISION OF HONBLE A.P. HIGH COURT (SUPRA), WHICH WAS RENDERED UNDER DIFFERENT FACTS IS QUITE HIGH. ON THE OTHER HAND, THE ASSESSEE RELIED UPON THE DECISION OF COORDINATE BENCH AND THE COORDINATE BENCH UNDER SIMILAR CIRCUMSTANCES ESTIMATED THE NET PROFIT O F 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. NO CONTRARY DECISION IS PLACED ON RECORD BY THE REVENUE TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. THEREFORE, WE DIRECT THE A.O. TO ESTIMATE THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. ORDERED ACCORDINGLY. 7 . RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH OF TH IS TRIBUNAL, WE DIRECT THE A.O. TO RE - COMPUTE THE INCOME OF THE 5 ITA NO. 106 / VIZ /201 7 ( RAGHUMANDALA VENKATINAIDU ) ASSESSEE AT 5% OF PURCHASE PRICE. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 8 . THE NEXT GROUND OF APPEAL RELATING TO UNEXPLAINED INVESTMENT OF RS. 24,34,149/ - , UNSECURED LOANS OF RS. 4,66,000/ - AND INTEREST INCOME OF RS. 1,85, 670/ - . 9 . IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS MADE AN INVESTMENT TO THE TUNE OF RS. 43,70,249/ - TOWARDS FIRST INS T A L MENT OF LICENCE FEE PAID OF RS.30,19,833/ - , FDR OF RS. 9,06,000/ - AND FIRST PURCHASE OF RS.4,44,416/ - PRIOR TO JUNE, 2010. THE ASSESSEE WAS A S KED TO EXPLAIN THE SOURCE FOR THE SAME, BUT THE ASSESSEE FAILED TO FURNISH NEITHER SOURCE NOR BOOKS OF ACCOUNT. ACCORDINGLY, THE ASSESSING OFFICER AFTER GIVING CREDIT FOR OPENING CAPITAL BALANCE OF RS.19,36,100/ - AS EVIDENCED IN THE BALANCE SHEET FOR THE EARLIER YEAR , MADE THE IMPUGNED ADDITION OF RS. 24,34,149/ - . THE ASSESSING OFFICER ALSO MADE AN ADDITION OF RS. 4,66,000/ - SHOWN AS UNSECURED LOANS AND SUNDRY CREDITS IN THE BALANCE SHEET , AS THE ASSESSEE FAILED TO PROVE THE SAID LIABILITY. EVEN BEFORE THE LD.CIT(A), THE ASSESSEE IS NOT ABLE TO PRODUCE ANY EVIDENCE TO SUBSTANTIATE THE ADDITION OF RS. 24,34,149/ - . THEREFORE, LD. CIT(A) HAS CONFIRMED THE ORDER OF THE ASSESSING OFFICER. EVEN BEFORE US, 6 ITA NO. 106 / VIZ /201 7 ( RAGHUMANDALA VENKATINAIDU ) ASSESSEE IS NOT ABLE TO SUBMIT ANY EVIDENCE IN RESPECT OF THE ABOVE ADDITION , T HEREFORE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 10 . INSOFAR AS ADDITION OF RS. 4,66,000/ - IS CONCERNED, THE ASSESSEE HAS NOT FILED ANY EVIDENCE BEFORE THE ASSESSING OFFICER NOR BEFORE THE LD. CIT(A). EVEN BEFORE US ALSO, NO EVIDENCE IS FILED TO SUBSTANTIATE HIS CASE. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 11 . SO FAR AS INTEREST INCOME OF RS. 1,85,670/ - IS CONCERNED, THE ASSESSING OFFICER FOUND THAT THE INTEREST INCOME SHOWN BY THE ASSESSEE IS FROM BANK FDRS. WHEN THE ASSESSING OFFICER ASKED , ASSESSEE IS NOT ABLE TO SUBSTANTIATE THAT THE INCOME RE CEI VED BY HIM IS RELATING TO THE BUSINESS ACTIVITY, THEREFORE, THE ASSESSING OFFICER HAS TREATED THE SAME AS INCOME FROM OTHER SOURCE S . THE SAME IS CONFIRMED, IN AP PEAL, BY THE LD. CIT(A) . EVEN BEFORE US, THE ASSESSEE IS NOT ABLE TO FILE ANY EVIDENCE TO SHOW THAT THE INTEREST INCOME RE CEI VED BY THE ASSESSEE IS IN RELATION TO THE BUSINESS OF THE ASSESSEE. THEREFORE, WE FIND NO INFIRMITY IN THE 7 ITA NO. 106 / VIZ /201 7 ( RAGHUMANDALA VENKATINAIDU ) ORDER PASSED BY THE LD . CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 12 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 0 7 T H DAY OF MARCH , 201 8 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : MARCH , 201 8 . VR/ - COPY TO: 1. THE ASSESSEE - RAGHUMANDALA VENKATINAIDU, PROP. M/S. NUKALAMMA WINES, D.NO. 2 - 52, P.V.R. PURAM, VEERAGHATTAM, SRIKAKULAM. 2. THE REVENUE - ITO, WARD - 1 , SRIKAKULAM. 3. THE CIT - 2, VISAKHAPATNAM. 4. THE CIT(A) - 2 , VISAKHAPATNAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SENIOR PRIVATE SECRETARY I.T.A.T., VISAKHAPATNAM