Ungati Ramana, Srikakulam V. THE ITO, Srikakulam

ITA 108/VIZ/2015

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9782 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 31-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M.K. SETHI
• Keywords: Rejection of books of accounts; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

ITA NO.108/VIZAG/2015 UNGATI RAMANA, SRIKAKULAM ` 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER ./I.T.A.NO.108/VIZAG/2015 ( / ASSESSMENT YEAR: 2011-12) UNGATI RAMANA SRIKAKULAM VS. ITO, WARD - 1, SRIKAKULAM [PAN: AASPU3673K ] ( / APPELLANT) ( ! / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI , AR / RESPONDENT BY : SHRI M.K. SETHI , DR / DATE OF HEARING : 20 .09.2016 / DATE OF PRONOUNCEMENT : 26.10.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL IS FILED BY ASSESSEE AGAINST THE ORDER OF THE CIT(A)-2, VISAKHAPATNAM DATED 30.01.2015 FOR THE ASSESSMENT Y EAR 2011-12. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS CARRYING THE BUSINESS OF IMFL AND FILED ITS RETURN OF INCOME BY DECLARING TO TAL INCOME OF ITA NO.108/VIZAG/2015 UNGATI RAMANA, SRIKAKULAM ` 2 ` 3,73,640/-. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED BY THE A.O. BY DETERMINING TOTAL INCOME OF THE ASSESSEE AT ` 40,77,280/- BY ESTIMATING THE INCOME AT 20% OF STO CK PUT TO SALE. ASSESSEE CARRIED MATTER IN APPEAL BEF ORE THE CIT(A). THE LD. CIT(A) HAS SCALED DOWN THE SAME TO 10%. 3. ON BEING AGGRIEVED, THE ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE TRIBUNAL. THE FIRST GROUND RAISED BY THE ASSES SEE IS RELATING TO ESTIMATION OF PROFITS. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IN THE SIMILAR LINE OF BUSINESS, THE COORDINATE BENCH OF VISAKHAPATNAM BENCH HAS PASSED AN ORDER IN THE CASE OF TANGUDU JOGISETTY IN ITA NO.96/VIZAG/2016 B Y ORDER DATED 2.6.2016 AND ESTIMATED THE INCOME OF THE ASSESSEE A T 5% OF THE STOCK PUT TO SALE. ASSESSEE SUBMITTED THAT THE SAME MAY BE FOLLOWED. 4. ON THE OTHER HAND LD. D.R. HAS RELIED ON THE ORD ERS OF THE AUTHORITIES BELOW. 5. I HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. IN THIS REGARD, I FIND THAT AS SUBMITTED BY THE ASSESSEE, T HE VERY SAME ISSUE OF ESTIMATION OF PROFIT IN THE TRADE OF IMFL WAS CONSI DERED BY THE ITA NO.108/VIZAG/2015 UNGATI RAMANA, SRIKAKULAM ` 3 COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF TAN GUDU JOGISETTY (SUPRA) AND HELD THAT ESTIMATION OF 5% NET PROFIT O N PURCHASE IS REASONABLE AND DIRECTED THE A.O. TO ESTIMATE THE NE T PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. THE RELEVAN T PORTION OF THE ORDER IS EXTRACTED AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE A.O. ESTIMATED NET PROFIT OF 20% ON STOC K PUT FOR SALE. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS N OT MAINTAINED PROPER BOOKS OF ACCOUNTS AND VOUCHERS IN SUPPORT OF PURCHASES AND SALES. THE A.O. FURTHER OBSERVED THAT THE ASSE SSEE HAS FAILED TO MAINTAIN STOCK REGISTERS AND BOOKS OF ACCOUNTS M AINTAINED BY THE ASSESSEE ARE NOT SUSCEPTIBLE FOR VERIFICATION, THEREFORE REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED NET PROFIT OF 2 0% BY RELYING UPON THE DECISION OF HONBLE A.P. HIGH COURT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE NET PROFIT ESTIMATED BY TH E A.O. IS QUITE HIGH WHEN COMPARED TO THE NATURE OF BUSINESS CARRIE D ON BY THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THE CASE LA W 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 TH E ASSESSEE IS INTO THE BUSINESS OF TRADING 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 THROUG H A.P. STATE BEVERAGES CORPORATION LTD. AND THE PRICES OF THE PR ODUCTS ARE FIXED BY THE STATE GOVERNMENT. THE ASSESSEE BEING A LICE NSE HOLDER OF STATE GOVERNMENT CANNOT SELL THE PRODUCTS OVER AND ABOVE THE MRP FIXED BY THE STATE GOVERNMENT. WE FIND FORCE I N THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE A .O. HAS ESTIMATED THE NET PROFIT BY RELYING UPON THE DECISI ON 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, T HE ASSESSEE IS INTO THE BUSINESS OF DEALING 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 ESTIMAT E THE NET PROFIT. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE, R ELIED UPON THE DECISION OF ITAT, VISAKHAPATNAM BENCH IN THE CASE O F T. APPALASWAMY VS. ACIT IN ITA NO.65 & 66/VIZAG/2012. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSES SEE IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FINDS THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HELD THAT ESTIMATION OF ITA NO.108/VIZAG/2015 UNGATI RAMANA, SRIKAKULAM ` 4 5% NET PROFIT ON PURCHASES IS REASONABLE. THE RELE VANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS O F THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON R ECORD. IT IS THE CONTENTION OF THE LD. A.R. THAT THE ESTIMATION OF P ROFIT AT 16% IS HIGH AND EXCESSIVE CONSIDERING THE NORMAL RATE OF P ROFIT IN THIS LINE OF BUSINESS. WHEREAS, THE LD. D.R. SUPPORTED THE O RDER OF THE CIT(A). HAVING CONSIDERED THE SUBMISSIONS OF THE A SSESSEE, WE ARE OF THE VIEW THAT THE ISSUE IS NO MORE RES INTEG RA 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 A ND OTHERS DATED 18.05.2012 AS WELL AS A NUMBER OF OTHER CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FOREI GN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASS ESSEE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDER ABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AS SESSING OFFICER TO ESTIMATE THE PROFIT FROM THE WINE BUSINESS OF THE A SSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASES MADE NET O F ALL OTHER DEDUCTIONS. THE ASSESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INCOME DETERMINED SHOULD BE BELOW THE I NCOME RETURNED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE RATIOS OF COORDINATE BEN CH, WE ARE OF THE VIEW THAT THE NET PROFIT ESTIMATED BY THE A.O. BY RELYIN G UPON THE DECISION OF HONBLE A.P. HIGH COURT (SUPRA), WHICH WAS RENDERED UNDER DIFFERENT FACTS IS QUITE HIGH. ON THE OTHER HAND, THE ASSESS EE RELIED UPON THE DECISION OF COORDINATE BENCH AND THE COORDINATE BEN CH UNDER SIMILAR CIRCUMSTANCES ESTIMATED THE NET PROFIT OF 5% ON TOT AL 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 DEDUCTIO NS. ORDERED ACCORDINGLY. 6. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE CO ORDINATE BENCH OF THE TRIBUNAL, I SET ASIDE THE ORDER PASSED BY THE L D. CIT(A) AND REMIT MATTER BACK TO THE A.O. TO ESTIMATE THE PROFIT FROM THE BUSINESS OF THE ASSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASE S MADE NET OF ALL ITA NO.108/VIZAG/2015 UNGATI RAMANA, SRIKAKULAM ` 5 OTHER DEDUCTIONS. THUS, THIS GROUND OF APPEAL RAIS ED BY THE ASSESSEE IS ALLOWED. 7. THE SECOND GROUND OF APPEAL RAISED BY THE ASSESS EE IS RELATING TO UNSECURED LOANS. IN THE ASSESSMENT ORDER, THE A.O. HAS NOTED THAT THE ASSESSEE HAS CREDITED AN AMOUNT OF ` 4,66,850/- TO HIS CAPITAL ACCOUNT AND HAS CLAIMED THE SAME AS DERIVED FROM AGRICULTUR AL OPERATIONS. SUBSEQUENTLY, IT WAS ALSO CLAIMED THAT HE HAD TAKEN D.D. WORTH ` 3,60,000/- FROM VARIOUS PERSONS WHICH WERE UTILIZED IN PAYMENT OF LICENSE FEE. THE A.O. HAS NOT BELIEVED THE EXPLANA TION GIVEN BY THE ASSESSEE AND ADDITION WAS CONFIRMED. ON APPEAL, IT WAS SUBMITTED THAT HE HAS TAKEN FINANCIAL SUPPORT FROM YETCHERLA LAKSH MI NARAYANA FOR ` 3,60,000/- AND FURNISHED AN AFFIDAVIT ALONG WITH AP PEAL PAPERS. IN THAT SAID AFFIDAVIT, IT WAS STATED THAT WHY SHRI LAKSHMI NARAYANA HAS TAKEN A DD FOR ` 3,60,000/- TO PARTICIPATE IN THE AUCTION BUT AS HE WAS NOT SUCCESSFUL, IT WAS HANDED OVER TO THE ASSESSEE AS A FINANCIAL ASSISTANCE. THE LD. CIT(A) HAS REJECTED THIS AFFIDAVIT ON THE G ROUND THAT THIS EXPLANATION WAS NOT GIVEN BEFORE THE A.O. WE FIND T HAT WHEN ASSESSEE HAS SUBMITTED THE DETAILS AND EXPLANATION IS ALSO G IVEN BEFORE THE CIT(A), THE CIT(A) OUGHT TO HAVE ADJUDICATED THE SA ME BUT SIMPLY REJECTING EXPLANATION GIVEN BY THE ASSESSEE WITH SU PPORT OF AFFIDAVIT, IS NOT JUSTIFIED. THEREFORE, I SET ASIDE THE ORDER PA SSED BY THE CIT(A) AND ITA NO.108/VIZAG/2015 UNGATI RAMANA, SRIKAKULAM ` 6 REMIT THE MATTER BACK TO THE FILE OF THE A.O. TO EX AMINE THE AFFIDAVIT AND OTHER DETAILS FILED BY THE ASSESSEE AND DECIDE IN A CCORDANCE WITH LAW. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH OCT16. SD/- ( . ) (V. DURGA RAO) /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 26.10.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SRI UNGATI RAMANA, 297, SANIVADA VILLAGE, SRIKAKULAM 2. / THE RESPONDENT THE ITO, WARD-1, SRIKAKULAM 3. ) / THE CIT-2, VISAKHAPATNAM 4. ) ( ) / THE CIT(A)-2, VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM