Pandava Ramarao, Visakhapatnam V. THE ITO, Srikakulam

ITA 118/VIZ/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8957 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 10-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM BEFORE SHRI D. MANMOHAN, HONBLE VICE-PRESIDENT ITA NO. 118/VIZ/2015 (ASST. YEAR : 2011-12) PANDAVA RAMA RAO, PROP. JYOTI WINES, ICHAPURAM, SRIKAKULAM DISTRICT. VS. ITO, WARD-2, SRIKAKULAM. PAN NO. AKFPP 2263 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM - FCA. DEPARTMENT BY : SHRI M.K. SETHI SR. DR DATE OF HEARING : 03/05/2017. DATE OF PRONOUNCEMENT : 03/05/2017. O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A)-2, VISAKHAPATNAM AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. 2. FACTS NECESSARY FOR THE PURPOSE OF DISPOSAL OF THE APPEAL ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF IMFL AFTER OBTAINING IMFL LICENCE FOR A PERIOD OF 02 YEARS. LICENCE WAS PURCHASED IN AUCTION FOR AN AMOUNT OF 60,50,053/- FOR ONE YEAR. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE MADE PURCHASES WORTH 1.14 CRORES AND DECLARED TURNOVER OF 1.48 CRORES. ON THE AFOREMENTIONED TURNOVER ASSESSEE ADMITTED NET LOSS OF 7,42,183/-. 2 ITA NO. 118/VIZ/2015 (PANDAVA RAMA RAO) 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BILLS AND VOUCHERS AND DETAILS OF SALES WERE ALSO NOT AVAILABLE. HE, THEREFORE, REJECTED THE BOOK RESULTS AND PROCEEDED TO ESTIMATE THE INCOME WHEREIN, THE TURNOVER DECLARED BY THE ASSESSEE WAS TAKEN INTO CONSIDERATION. 4. THE ASSESSING OFFICER OBSERVED THAT ANDHRA PRADESH BEVERAGES CORPORATION LTD. ALLOWS PROFIT MARGIN OF 25% TO 30% AND MANY TIMES, THE ASSESSEE MAY REALIZE MORE ON THE SALE OF A PARTICULAR ITEM DUE TO DEMAND FROM THE PUBLIC, AS IMFL IS SELLERS MARKET, AND EVEN MORE SPECIFICALLY ON ELECTION TIME, FESTIVAL DAYS ETC. THE OBSERVATIONS OF THE ASSESSING OFFICER WERE BASED ON THE MEDIA REPORTS. THUS, ASSESSING OFFICER ESTIMATED NET PROFIT MARGIN AT 20% OF THE STOCK PUT FOR SALE. 5 . THE CASE OF THE ASSESSEE WAS THAT THE ASSESSEE OFFERED AN AMOUNT OF 12,00,000/- AS BUSINESS INCOME FOR WANT OF EVIDENCE AND, HENCE, FURTHER ADDITION CANNOT BE MADE. THIS CLAIM WAS REJECTED ON THE GROUND THAT THE SAID AMOUNT WAS CONSIDERED ONLY UNDER THE HEAD INCOME FROM OTHER SOURCES. 6 . ON AN APPEAL FILED BY THE ASSESSEE, THE LD. CIT(A) TAKEN INTO CONSIDERATION THE POINTS MADE OUT BY THE ASSESSEE AND ESTIMATED NET PROFIT AT 10% OF THE PURCHASE PRICE AND DIRECTED THE ASSESSING OFFICER ACCORDINGLY. 3 ITA NO. 118/VIZ/2015 (PANDAVA RAMA RAO) 7 . AS REGARDS ADDITION TOWARDS UNEXPLAINED LOANS, THE CASE OF THE ASSESSEE WAS THAT FRIENDS AND RELATIVES ADVANCED SUMS, BUT THE LD.CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER FOR WANT OF EVIDENCE. 8. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. VIDE GROUND NOS. 1.0 TO 1.2, THE ASSESSEE CHALLENGES THE ACTION OF THE LD. CIT(A) IN ESTIMATING INCOME AT 10% OF PURCHASE PRICE INASMUCH AS ON A SIMILAR MATTER THE ITAT, HYDERABAD BENCH ESTIMATED INCOME FOR THIS YEAR AT 5% OF THE PURCHASES IN THE CASE OF IMFL TRADERS. FACTS AND CIRCUMSTANCES BEING IDENTICAL, THE INCOME ESTIMATE BY THE LD. CIT(A) DESERVES TO BE TONED DOWN FURTHER. IN THIS REGARD, IT WAS CONTENDED THAT THE ASSESSEE HAD TO PAY HUGE LICENCE FEE FOR EACH YEAR IRRESPECTIVE OF THE TURNOVER. THE IMFL HAD TO BE PURCHASED ONLY FROM ANDHRA PRADESH BEVERAGES AND SALES CAN BE EFFECTED ONLY AT MRP FIXED BY THE GOVERNMENT. AS PER LICENCE ORDER, IT SHOULD NOT SELL MORE THAN MRP FIXED AND THUS THE ESTIMATE MADE BY THE ASSESSING OFFICER AS WELL AS LD.CIT(A), MERELY BASED ON SOME NEWSPAPER REPORTS, WOULD AMOUNT TO GENERALIZATION OF THE WHOLE MATTER AND, THEREFORE, IT DEPICTS A PICTURE FAR FROM REALITY. IN FACT, DURING THE ASSESSMENT YEAR 2011-12, THE RATIO OF LICENCE FEE WITH THE TURNOVER WAS MUCH HIGHER; THE TURNOVER OF THE ASSESSEE WAS AT 1.48 CRORES WHEREAS, THE LICENCE FEE WAS 45,37,540/- FOR A PERIOD OF 09 MONTHS. DUE TO LOW TURNOVER AND MORE LICENCE FEE, ASSESSEE COULD NOT MAKE PROFIT. RELIANCE WAS ALSO PLACED UPON THE 4 ITA NO. 118/VIZ/2015 (PANDAVA RAMA RAO) DECISION OF THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF GUDLA MOTHILAL VS. ITO IN ITA NO. 365/VIZAG/2015, ORDER DATED 22/07/2016 WHEREIN THE TRIBUNAL ESTIMATED NET PROFIT AT 5% OF THE PURCHASES, NET OF ALL EXPENDITURE. 9 . I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RECORD. HAVING REGARD TO OVERALL CIRCUMSTANCES OF THE CASE AND IN LINE WITH THE VIEW TAKEN BY THE ITAT IN THIS LINE OF BUSINESS, I HOLD THAT ESTIMATE OF NET INCOME AT 5% OF THE PURCHASES, CLEAR OF ALL EXPENDITURE, WILL MEET THE ENDS OF JUSTICE AND I DIRECT THE ASSESSING OFFICER ACCORDINGLY. 10 . GROUND NOS. 1.3 TO 1.7 ARE NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AND, THEREFORE, THE SAID GROUNDS ARE REJECTED. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT TODAY I.E. 03 RD DAY OF MAY, 2017. SD/- (D. MANMOHAN) VICE-PRESIDENT DATED : 03 RD MAY, 2017. VR/- COPY TO: 1. THE ASSESSEE PANDAVA RAMA RAO, PROP. JYOTI WINES, ICHAPURAM, SRIKAKULAM DISTRICT. 2. THE REVENUE ITO, WARD-2, SRIKAKULAM. 3. THE CIT-2, VISAKHAPATNAM. 4. THE CIT(A)-2, VISAKHAPATNAM. 5. THE D.R., VISAKHAPATNAM. 6. GUARD FILE. BY ORDER