E.Veera Kumar, Kakinada V. THE ITO, Kakinada

ITA 114/VIZ/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94092 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 08-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Keywords: Unexplained investment
• Section: 145

Judgement Text

ITA NOS.31, 70, 78, 95, 104, 114 & 190/VIZAG/2015 CH. RAMANJANEYULU, SRIKAKULAM AND OTHERS IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B.R. BASKARAN , ACCOUNTANT MEMBER ITA NO.31/VIZAG/2015 ASSESSMENT YEAR : 2011-12 CH. RAMANJANEYULU SRIKAKULAM VS. ITO WARD-1 SRIKAKULAM (APPELLANT) (RESPONDENT) PAN NO.ANNPC 5660J ITA NO.70/VIZAG/2015 ASSESSMENT YEAR : 2011-12 M. LAKSHMAYYA DORA SRIKAKULAM VS. ITO WARD-1 SRIKAKULAM (APPELLANT) (RESPONDENT) PAN NO.BEUPM 7086R ITA NO.78/VIZAG/2015 ASSESSMENT YEAR : 2011-12 M. NAGARAJU SRIKAKULAM VS. ITO WARD-1 SRIKAKULAM (APPELLANT) (RESPONDENT) PAN NO.BEUPM 6861E ITA NO.95/VIZAG/2015 ASSESSMENT YEAR : 2011-12 PALIPALLI RAVI KUMAR ANAKAPALLI VS. ITO WARD-1 ANAKAPALLI (APPELLANT) (RESPONDENT) PAN NO.AKFPP 8347Q ITA NO.104/VIZAG/2015 ASSESSMENT YEAR : 2011-12 M. RAM BABU RANASTHALAM VS. ITO WARD-2 SRIKAKULAM (APPELLANT) (RESPONDENT) PAN NO.AOHPM 4754J ITA NOS.31, 70, 78, 95, 104, 114 & 190/VIZAG/2015 CH. RAMANJANEYULU, SRIKAKULAM AND OTHERS 2 ITA NO.114/VIZAG/2015 ASSESSMENT YEAR : 2011-12 E. VEERA KUMAR KAKINADA VS. ITO WARD-2 KAKINADA (APPELLANT) (RESPONDENT) PAN NO.AAHPE 9050H ITA NO.190/VIZAG/2015 ASSESSMENT YEAR : 2010-11 NUJELLA RAMAKRISHNA UNDI VS. ITO WARD-2 BHIMAVARAM (APPELLANT) (RESPONDENT) PAN NO.AHIPN 1179Q ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SMT. KOMALI KRISHNA, CIT(DR) DATE OF HEARING : 22.07.2015 DATE OF PRONOUNCEMENT : 22.07.2015 ORDER PER BENCH:- THESE APPEALS PERTAIN TO THE ASSESSMENT YEAR 2011- 12 (EXCEPT IN THE CASE OF N. RAMAKRISHNA) AND THEY ARE DIRECTED AGAIN ST THE ORDERS PASSED BY CIT(A)-II, VISAKHAPATNAM. SINCE THE MAIN ISSUE INVO LVED IN ALL THESE APPEALS IS COMMON, WE PROCEED TO DISPOSE OF THESE APPEALS B Y A COMBINED ORDER, FOR THE SAKE OF CONVENIENCE. A CHART WAS FURNISHED BY THE ASSESSEE INDICATING THE ADDITIONS MADE IN THE CASE OF EACH ASSESSEE AND ISSUES RAISED BEFORE THE TRIBUNAL, WHICH IS ANNEXED TO THIS ORDER AS A-I. 2. THE FACTS AS MENTIONED IN THE CASE OF CH. RAMANJ ANEYULU ARE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF DISPOSING OF ALL THE APPEALS SINCE BOTH THE PARTIES AGREED THAT THE FACTS AND CIRCUMSTANCES ARE IDENTICAL IN THE OTHER CASES AS WELL. 3. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF PURCHASE AND SALE OF INDIAN MADE FOREIGN LIQUOR. FOR THE YEAR UN DER CONSIDERATION HE DECLARED INCOME OF RS.5,79,357/-. THE CASE HAVING BEEN TAKEN UP FOR ITA NOS.31, 70, 78, 95, 104, 114 & 190/VIZAG/2015 CH. RAMANJANEYULU, SRIKAKULAM AND OTHERS 3 SCRUTINY, THE ASSESSING OFFICER CALLED UPON THE ASS ESSEE TO FURNISH THE SOURCES FOR THE CAPITAL INTRODUCED, SOURCES FOR THE PAYMENT OF LICENSE FEES, BANK ACCOUNTS HELD BY THE ASSESSEE AND ALSO TO PROVE ALL THE PURCHASES AND SALES AS WELL AS UNSECURED LOANS IF ANY, TAKEN DURING THE YEAR. A.P. BEVERAGES CORPORATION SUPPLIED IMFL WORTH RS.1.42 CRORES WHIC H WAS IN TURN SOLD AT RS.1.95 CRORES AND THUS THE NET PROFIT ADMITTED AGA INST THE ABOVE SALES, EXCLUDING OTHER INCOME, WORKED OUT TO 2.58%. THE A SSESSEE HAS NOT FURNISHED STOCK REGISTER AND COULD NOT PRODUCE SALE BILLS ETC. THEREFORE, THE BOOK RESULTS WERE REJECTED BY THE ASSESSING OFFICER AND INVOKED THE PROVISIONS OF SECTION 145 OF THE INCOME-TAX ACT, 1961. ACCORDI NG TO THE ASSESSING OFFICER, AS PER THE RATE STRUCTURE FIXED BY A.P. BE VERAGES CORPORATION THE NORMAL MARGIN OF PROFIT VARIES BETWEEN 23 TO 27%, W HEREAS THE ASSESSEE DECLARED LESSER PROFIT. THE A.O., THEREFORE, ESTIM ATED THE NET PROFIT FROM SALE OF LIQUOR AT 20% OF THE STOCK PUT FOR SALE. THE AS SESSMENT WAS ACCORDINGLY COMPLETED BY DETERMINING THE TOTAL INCOME AT RS.37, 48,106/-. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED THAT THE ITAT HYDERA BAD AND VISAKHAPATNAM BENCHES HAVE CONSISTENTLY ESTIMATED THE INCOME FROM THE IMFL TRADE BETWEEN 3 TO 5% OF THE PURCHASE PRICE OF STOCK PUT UP FOR SALE, WHEREAS THE ASSESSING OFFICER ADOPTED 20% PROFIT, WHICH IS EXCE SSIVE AND ARBITRARY. 4. LD. CIT(A) HAD TAKEN NOTE OF THE NOTORIOUS FACT, WITH REGARD TO THE RAMPANT PRACTICE OF SELLING LIQUOR AT ABOVE MRP, AN D ASSUMED THAT THE RETAIL TRADERS SELL LIQUOR AT A PROFIT MARGIN VARYING BETW EEN 30 TO 40%. HE THEREFORE ESTIMATED THE INCOME OF ASSESSEE AT 10% O F THE PURCHASE PRICE. THERE WERE ALSO OTHER ADDITIONS MADE BY THE ASSESSI NG OFFICER WHICH WERE ALSO AFFIRMED BY THE CIT(A) IN THIS CASE I.E. THE A DDITION TOWARDS UNEXPLAINED INVESTMENT AND INTEREST ON FDR. 5. AGGRIEVED, ASSESSEES PREFERRED APPEALS BEFORE TH E APPELLATE TRIBUNAL CONTENDING, INTER ALIA, THAT THE ESTIMATE OF PROFIT BY THE CIT(A) IS EXCESSIVE AND ALSO THE OTHER ADDITIONS SUCH AS UNEXPLAINED IN VESTMENT, ETC. ARE NOT IN ACCORDANCE WITH LAW. THOUGH ASSESSEE CHALLENGED RE JECTION OF BOOKS, AT THE TIME OF HEARING NO ARGUMENTS WERE ADVANCED ON THAT ASPECT. AT THE TIME OF ITA NOS.31, 70, 78, 95, 104, 114 & 190/VIZAG/2015 CH. RAMANJANEYULU, SRIKAKULAM AND OTHERS 4 HEARING, LD. COUNSEL SUBMITTED THAT IN IDENTICAL C IRCUMSTANCES, THE ITAT VISAKHAPATNAM BENCH IN THE CASE OF SHRI M. SRINIVAS A RAO (ITA NO.32/VIZAG/2015 DT.22.5.2015), WHICH IN TURN RELIE D UPON AN EARLIER DECISION OF THIS TRIBUNAL, FOLLOWED A CONSISTENT APPROACH OF ESTIMATING THE PROFIT FROM IMFL BUSINESS @ 5% ON THE COST OF SALES. OTHER ADDI TIONS WERE CONFIRMED BY THE ITAT ON THE GROUND THAT INTRODUCTION OF CAPITAL INTO THE CAPITAL ACCOUNT OF THE ASSESSEE WAS NOT PROVED BY THE ASSESSEE AND ENT RIES WERE NOT ROUTED THROUGH THE BOOKS. 6. IT IS NOT THE CASE OF THE LD. D.R. THAT THE FACTS IN THESE CASES ARE IN ANY WAY DIFFERENT/DISTINGUISHABLE FROM THE CASE LAW RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE. HAVING REGARD TO THE CON SISTENT STAND TAKEN BY THE ITAT, WE DIRECT THE A.O. TO ESTIMATE THE PROFIT FRO M IMFL BUSINESS BY ADOPTING THE RATE OF 5% ON THE COST OF SALES. 7. HOWEVER, AS REGARDS THE OTHER ADDITIONS SUCH AS ADDITION TOWARDS UNEXPLAINED INVESTMENT, ETC. THE ASSESSEE HAS NOT B ROUGHT ON RECORD ANY MATERIAL TO CONTROVERT THE FINDINGS OF THE A.O./CIT (A). WE THEREFORE, AFFIRM THE ORDER OF THE CIT(A) ON THE OTHER ASPECTS. 8. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEES ARE TREATED AS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 22 ND JULY, 2015 SD/- SD/- (B.R. BASKARAN) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT VG/SPS VISAKHAPATNAM, DATED 22 ND JULY, 2015 ITA NOS.31, 70, 78, 95, 104, 114 & 190/VIZAG/2015 CH. RAMANJANEYULU, SRIKAKULAM AND OTHERS 5 ANNEXURE-I ITA N 0 .95/VIZ/2015 P.RAVI KISHORE ITA NO.L90/VIZ/2015 N.RAMA KRISHNA ITA NO.LL4/VIZ/2015 E.VEERA KUMAR ITANO.31/VIZ/ 2015 CH.RAMANJANEVULU ITA NO.70/VIZ/2015 M.LAKSHMAYVA DORA ITA NO.L04/VIZ/2015 M.RAMBABU ITA NO.78/VIZ/2015 M.NAGARAJU ASSESSMENT YEAR 2011-2012 2010-2011 2011-2012 2011-2012 2011-2012 2011-2012 2011-2012 DATE OF FILING ROI 30-09-2011 04-05-2010 30-09-2011 17-09-2011 17-09-2011 17-09-2011 17-09-2011 INCOME ADMITTED 6,17,270 5,25,140 12,10,050 5,79,357 4,12,813 4,58,173 4,28,665 INCOME ASSESSED 32,00,480 54,70,156 51,68,160 37,48,106 35,07,792 32,25,322 35,70,341 NET PROFIT ESTIMATED @ 20% ON COST OF SALES / PURCHASE 31,40,150 54,46,274 50,71,585 27,28,133 20,30,3S1 24,19,644 24,01,852 UNEXPLAINED INVESTMENT IN 1ST INSTALLMENT OF LICENSE FEE NA NA NA 9,97,801 14,55,292 7,34,038 11,53,321 INTEREST NA NA 96,575 22,172 22,116 71,640 15,168 CIT(A): NET PROFIT ESTIMATED @ 10% OF PURCHASE 16,48,995 27,23,137 28,86,005 14,24,565 10,75,001 12,75,787 12,50,162 UNEXPLAINED INVESTMENT - - 9,97,801(U/S69) 8,10,000(U/S 68} 6,38,830(U/S68J 8;20,000(U/S 68) GROUNDS OF APPEAL BEFORE ITAT G.NO.L &4 (GENERAL) G.N0.1&4 (GENERAL) G.NO.L & 6 (GENERAL) G.NO.L & 7 (GENERAL) G.NO.L & 7 (GENERAL) G.N0.1&7 (GENERAL) G.N0.1&7 (GENERAL) G.NO.2 (ON REJECTION OF BOOKS) G-NO.2 (ON REJECTION OF BOOKS) G.NO.2 (ON REJECTION OF BOOKS) G.NO.2 (ON REJECTION OF BOOKS) G.NO.2 (ON REJECTION OF BOOKS) G.NO.2 (ON REJECTION OF BOOKS) G.NO.2 (ON REJECTION OF BOOKS) G.NO.3 (ON ESTIMATION) G.NO.3 (ON ESTIMATION) G.NO.3 (ON ESTIMATION} G.NO.3 & 4 (ON ESTIMATION) G.NO.3 (ON ESTIMATION) G.NO.3 (ON ESTIMATION) G.NO.3 (ON ESTIMATION) _. G.NO.4 (TELESCOPING) G.N0.5&6 (ON ADDITION OF RS.9,97,801) G.NO.4&5 (ON ADDITION OF RS. 8,10,000) G.NO.4 & 5 (ON ADDITION OF RS. 6,38,830) G.NO.4 55 (ON ADDITION OF RS.8,20,000) G.NO.5 (ON ADDITION OF RS. 96,575) _ G.NO.6 (TELESCOPING) G.NO.6 (TELESCOPING) G.NO.6 (TELESCOPING) ITA NOS.31, 70, 78, 95, 104, 114 & 190/VIZAG/2015 CH. RAMANJANEYULU, SRIKAKULAM AND OTHERS 6 COPY TO 1 SHRI CH. RAMANJANEYULU, PROP: SRI SAI BABU WINES, J.R. PURAM, RANASTHALAM, SRIKAKULAM. 2 SHRI M. LAKSHMAYYA DORA, PROP: ROHITH WINES, VAND RANGI VILLAGE, S. SIGADAM MANDAL, SRIKAKULAM. 3. SHRI M. NAGA RAJU, PROP: KOTHMATHALLI WINES, RAJ AM MANDALAM, SRIKAKULAM. 4. SHRI P. RAVI KISHORE, PROP: VASU WINES, D.NO.12- 33-15, CHINTAVARI STREET, ANAKAPALLE. 5. SHRI M. RAM BABU, KAMMA SIGADAM, RANASHALAM, SRI KAKULAM DIST. 6. SHRI E. VEERA KUMAR, D.NO.7-9-34/1, SAMBAMURTHY STREET, RAMA RAO PET, KAKINADA 7. SHRI N. RAMAKRISHNA, PROP: AJAY WINES, D.NO.2-17 , VANDRUM, UNDI, W.G. DIST. 8 THE ITO WARD-1, SRIKAKULAM 9 THE ITO WARD-2, SRIKAKULAM 10 THE ITO WARD-1, ANAKAPALLE 11 THE ITO WARD-2, KAKINADA 12 THE ITO WARD-2, BHIMAWARAM 13 THE CIT(A), VISAKHAPATNAM 14 THE DR, ITAT, VISAKHAPATNAM. 15 GUARD FILE. BY ORDER ASST . REGISTRAR INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM