Sai Venkateswara Wines, Secunderabad, Secunderabad V. ITO, Ward-10(2), Hyderabad, Hyderabad

ITA 1198/HYD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98682 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 09-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: P PRASAD
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.1198/HYD/2015 ASSESSMENT YEAR 2011-12 SAI VENKATESWARA WINES, SECUNDERABAD 500 017. PAN ABMFS2466H VS. THE INCOME TAX OFFICER, WARD 10(2), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. P. PRASAD FOR REVENUE : MR. K. E. SUNIL BABU DATE OF HEARING : 16.11.2015 DATE OF PRONOUNCEMENT : 20 .11.2015 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y. 2011-12. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE OR DER OF THE LD. CIT(A) IN CONFIRMING THE ESTIMATION OF INCO ME OF THE ASSESSEE @ 5% ON THE COST OF GOODS SOLD. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE A.Y. 2011-12 ON 27.09.2011 ADMITTING INCOME OF RS.3,73,010. DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE I.T. ACT, THE A.O. ASKED THE ASSESSEE TO PRODUCE THE INV OICES/ BILLS PARTICULARLY SALE INVOICES. THE ASSESSEE COUL D NOT PRODUCE THE SAME AND THEREFORE, THE ASSESSEE WAS AS KED 2 ITA.NO.1198/HYD/2015 SAI VENKATESWARA WINES, SECUNDERABAD THE BASIS FOR RECORDING OF SALES IN THE BOOKS OF AC COUNT AND WAS ASKED TO SUBSTANTIATE THE SAME WITH THE SAL E INVOICES/BILLS ISSUED. IN RESPONSE TO THE SAME, THE ASSESSEE REPLIED THAT IN THE LINE OF WINE SHOP BUSI NESS, IT IS DIFFICULT TO MAINTAIN SALE BILLS AND HENCE, THE ASSESSEE HAS NOT MAINTAINED ANY SALE BILLS. SINCE THE ASSESS EE HAS NOT GIVEN ANY CONVINCING REPLY REGARDING BASIS FOR RECORDING OF SALES, THE A.O. HELD THAT IT IS DIFFIC ULT TO ARRIVE AT THE REAL PROFITS OF THE BUSINESS. THEREFORE, HE HELD THAT THE ONLY METHOD TO WORK OUT THE PROFITS IS TO ESTIM ATE THE PROFITS BASED ON THE COST OF SALES MADE DURING THE YEAR. THEREAFTER, HE CONSIDERED THE DECISION OF THE ITAT IN THE CASE OF ITO, SURYAPET VS. SRI BEERAVELLI VENKAT RED DY & OTHERS ITA.NOS. 148 TO 177/HYD/2012 DATED 07.05.201 2 WHEREIN THE TRIBUNAL HAS CONFIRMED THE ESTIMATION O F NET PROFIT AT 5% OF THE PURCHASE OR STOCK PUT FOR SALE DURING THE YEAR SUBJECT TO THE ASSESSED INCOME BEING NOT L ESS THAN THE RETURNED INCOME. TAKING NOTE OF THE SAID DECISION AS WELL AS THE DECISION OF HONBLE HIGH CO URT OF A.P. IN THE CASE OF CIT VS. KAMLEKAR SHANKAR LAL ITTA.NO.21 OF 2013 DATED 23.07.2013, A.O. PROCEEDED TO ESTIMATE THE NET PROFIT FROM THE SALE OF BEVERAGES AT 5% OF THE GOODS PUT TO SALE I.E., OPENING STOCK PLUS PURC HASES MADE AND REDUCED BY THE CLOSING STOCK, INCLUDING DISCOUNT RECEIVED. THE SAME WORKED OUT TO RS.15,07, 663 WHICH WAS BROUGHT TO TAX. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO CONFI RMED THE ORDER OF THE A.O. AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 3 ITA.NO.1198/HYD/2015 SAI VENKATESWARA WINES, SECUNDERABAD 3. THE LD. COUNSEL FOR THE ASSESSEE, MR. P. PRASAD, REITERATED THE SUBMISSIONS MADE BY THE ASSE SSEE BEFORE THE AUTHORITIES BELOW AND HAS PRAYED THAT TH E ESTIMATION OF THE NET PROFIT BE RESTRICTED TO 3% OF THE COST OF GOODS SOLD. IN RESPECT OF THIS CONTENTION, HE HA S ALSO FILED BEFORE US A COPY OF ORDER OF THIS TRIBUNAL IN THE CASE OF VENKATESWARA WINES, NIZAMABAD VS. ITO, WARD-1, NIZAMABAD IN ITA.NO.725/HYD/2015 DATED 04.09.2015 T O WHICH ONE OF US I.E., JUDICIAL MEMBER IS THE SIGNAT ORY WHEREIN THE ESTIMATION OF INCOME AT 2.5% OF THE TUR NOVER HAS BEEN APPROVED BY THE TRIBUNAL. 4. THE LD. D.R., ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND ALSO DREW OUR ATTENTION TO THE DECISION OF HONBLE HIGH COURT OF A.P. IN THE CASE OF CIT VS. KAMLEKAR SHANKAR LAL (SUPRA). 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS N OT MAINTAINED ANY BOOKS OF ACCOUNT 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 INCOME AT 5% OF THE COST OF GOODS SOL D, WHILE THE ASSESSEE IS SEEKING THE ESTIMATION AT 3% OF THE COST OF GOODS SOLD. WE FIND THAT IN THE CASE OF VENKATESWARA WINES, NIZAMABAD (SUPRA), THE COORDINA TE BENCH OF THIS TRIBUNAL HAS TAKEN NOTE OF THE DECISI ON OF HONBLE HIGH COURT OF TELANGANA AND ANDHRA PRADESH IN 4 ITA.NO.1198/HYD/2015 SAI VENKATESWARA WINES, SECUNDERABAD THE CASE OF CIT VS. KAMLEKAR SHANKAR LAL (SUPRA) TO HOLD AS UNDER : 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND TH E MATERIAL ON RECORD, WE FIND THAT THE AO HAS CALLED FOR BOOKS OF ACCOUNT OF THE ASSESSEE BUT THE ASSESSEE HAD FAILED TO PRODUCE THE SAME. THEREFORE, AO HAD ESTIMATED THE 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 ASSESSEE CARRYING ON THE SAME BUSINESS OF SALE OF IMFL HAS ESTIMATED THE INCOME AT 5% OF THE TURNOVER. THIS, IN OUR VIEW, IS NOT JUSTIFIE D AS HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL. THE 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 IN 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 AGREEA BLE TO THE ESTIMATION OF INCOME AT 3% OF THE COST OF GO ODS SOLD. AS THE FACTS BEFORE US ARE SIMILAR TO THE FAC TS BEFORE THE TRIBUNAL IN THE CASE OF VENKATESWARA WINES, NIZAMABAD (SUPRA) AND THE UNIFORM RATE OF PROFIT CA NNOT BE ADOPTED IN THE CASE OF EVERY ASSESSEE IN SIMILAR BUSINESS, WE ALLOW GROUND NO.2 OF THE ASSESSEE. 6. AS REGARDS GROUND NO.3 RELATING TO REMUNERATION PAID TO THE PARTNERS OF RS. 8 LAKHS TO BE ALLOWED TO BE DEDUCTED FROM THE ESTIMATED INCOME, W E FIND THAT THE SAME IS NOT ALLOWABLE AS THE INCOME O F THE 5 ITA.NO.1198/HYD/2015 SAI VENKATESWARA WINES, SECUNDERABAD ASSESSEE ITSELF HAS BEEN ESTIMATED ON THE COST OF T HE GOODS SOLD AND NOT ON THE TURNOVER OR RECEIPTS OF THE ASS ESSEE. THEREFORE, GROUND NO.3 OF THE ASSESSEE IS REJECTED. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.11.2015. SD/- SD/- (S. RIFAUR RAHMAN) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 20 TH NOVEMBER, 2015 VBP/- COPY TO : 1. SAI VENKATESWARA WINES, PICKET, SECUNDERABAD. C/O. MR. SHARMA & SASTRY, CHARTERED ACCOUNTANTS, NO.5-3- 318/1, JEERA, M.G. ROAD, SECUNDERABAD 500 003. 2. THE INCOME TAX OFFICER, WARD 10 - (2), I.T. TOWERS, HYDERABAD. 3. CIT(A) - VI, HYDERABAD 4 . PR. CIT - VI, HYDERABAD. 5 . D.R. ITAT A BENCH, HYDERABAD. 6 . GUARD FILE