Sri Venkateswara Wines, Sec'bad, Secunderabad V. ITO, Ward-10(4), Hyderabad, Hyderabad

ITA 1206/HYD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98707 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-11-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 14-10-2015
• 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.1206/HYD/2015 ASSESSMENT YEAR 2011-12 SRI VENKATESWARA WINES, SECUNDERABAD 500 017. PAN AAWFS4351G VS. THE INCOME TAX OFFICER, WARD 10(4), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. P. PRASAD FOR REVENUE : MR. K. E. SUNIL BABU DATE OF HEARING : 16.11.2015 DATE OF PRONOUNCEMENT : 27.11.2015 ORDER PER S. RIFAUR RAHMAN, A.M.: THIS IS ASSESSEES APPEAL FOR THE A.Y. 2011-12. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF T HE LD. CIT(A) IN CONFIRMING THE ESTIMATION OF INCOME OF TH E ASSESSEE @ 5% ON THE COST OF GOODS SOLD. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME FOR THE A.Y. 2011-12 ON 28.09.2011 ADMITTING INCOME OF RS. 8,75,710/-. DURING THE ASSE SSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE I.T. ACT, T HE A.O. ASKED THE ASSESSEE TO PRODUCE THE INVOICES/ BILLS P ARTICULARLY SALE INVOICES. THE ASSESSEE COULD NOT PRODUCE THE S AME AND THEREFORE, THE ASSESSEE WAS ASKED THE BASIS FOR REC ORDING OF SALES IN THE BOOKS OF ACCOUNT AND WAS ASKED TO SUBS TANTIATE THE SAME WITH THE SALE INVOICES/BILLS ISSUED. IN RE SPONSE TO THE SAME, THE ASSESSEE REPLIED THAT IN THE LINE OF WINE SHOP 2 ITA.NO.1206/HYD/2015 SAI VENKATESWARA WINES, SECUNDERABAD BUSINESS, IT IS DIFFICULT TO MAINTAIN SALE BILLS AN D HENCE, THE ASSESSEE HAS NOT MAINTAINED ANY SALE BILLS. SINCE T HE ASSESSEE HAS NOT GIVEN ANY CONVINCING REPLY REGARDI NG BASIS FOR RECORDING OF SALES, THE A.O. HELD THAT IT IS DI FFICULT TO ARRIVE AT THE REAL PROFITS OF THE BUSINESS. THEREFORE, HE HELD THAT THE ONLY METHOD TO WORK OUT THE PROFITS IS TO ESTIMATE THE PROFITS BASED ON THE COST OF SALES MADE DURING THE YEAR. TH EREAFTER, HE CONSIDERED THE DECISION OF THE ITAT IN THE CASE OF ITO, SURYAPET VS. SRI BEERAVELLI VENKAT REDDY & OTHERS I TA.NOS. 148 TO 177/HYD/2012 DATED 07.05.2012 WHEREIN THE TR IBUNAL HAS CONFIRMED THE ESTIMATION OF NET PROFIT AT 5% OF THE PURCHASE OR STOCK PUT FOR SALE DURING THE YEAR SUBJ ECT TO THE ASSESSED INCOME BEING NOT LESS THAN THE RETURNED IN COME. TAKING NOTE OF THE SAID DECISION AS WELL AS THE DEC ISION OF HONBLE HIGH COURT OF A.P. IN THE CASE OF CIT VS. K AMLEKAR 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., OPEN ING STOCK PLUS PURCHASES MADE AND REDUCED BY THE CLOSING STOC K, INCLUDING DISCOUNT RECEIVED. THE SAME WORKED OUT TO RS.15,07,663 WHICH WAS BROUGHT TO TAX. AGGRIEVED, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ORDER OF THE A.O. AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE, MR. P. PRASAD, REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEF ORE THE AUTHORITIES BELOW AND HAS PRAYED THAT THE ESTIMATIO N OF THE NET PROFIT BE RESTRICTED TO 3% OF THE COST OF GOODS SOLD. IN RESPECT OF THIS CONTENTION, HE HAS ALSO FILED BEFOR E US A COPY OF ORDER OF THIS TRIBUNAL IN THE CASE OF VENKATESWA RA WINES, 3 ITA.NO.1206/HYD/2015 SAI VENKATESWARA WINES, SECUNDERABAD NIZAMABAD VS. ITO, WARD-1, NIZAMABAD IN ITA.NO.725/HYD/2015 DATED 04.09.2015 TO WHICH ONE O F US I.E., JUDICIAL MEMBER IS THE SIGNATORY WHEREIN THE ESTIMATION OF INCOME AT 2.5% OF THE TURNOVER HAS BEEN APPROVED BY THE TRIBUNAL. 4. THE LD. D.R., ON THE OTHER HAND, SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW AND ALSO DREW OUR ATTENTIO N 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 M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS NOT MAINTA INED ANY BOOKS OF ACCOUNT AND THEREFORE, THE ESTIMATION OF I NCOME IS JUSTIFIED. IT IS ONLY THE RATE AT WHICH THE INCOME IS TO BE ESTIMATED IS BEFORE US. A.O. HAS ESTIMATED THE INCO ME AT 5% OF THE COST OF GOODS SOLD, WHILE THE ASSESSEE IS SE EKING THE ESTIMATION AT 3% OF THE COST OF GOODS SOLD. WE FIND THAT IN THE CASE OF VENKATESWARA WINES, NIZAMABAD (SUPRA), THE COORDINATE BENCH OF THIS TRIBUNAL HAS TAKEN NOTE OF THE DECISION OF HONBLE HIGH COURT OF TELANGANA AND AND HRA PRADESH IN 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 JUSTIFIED AS HE LD BY THE COORDINATE BENCH OF THIS TRIBUNAL. THE 4 ITA.NO.1206/HYD/2015 SAI VENKATESWARA WINES, SECUNDERABAD 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 AGREEAB LE TO THE ESTIMATION OF INCOME AT 3% OF THE COST OF GOODS SOL D. AS THE FACTS BEFORE US ARE SIMILAR TO THE FACTS BEFORE THE TRIBUNAL IN THE CASE OF VENKATESWARA WINES, NIZAMABAD (SUPRA) A ND THE UNIFORM RATE OF PROFIT CANNOT BE ADOPTED IN THE CAS E 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. 3,67,944/- TO BE ALLOWED TO BE DEDUCTED FROM THE ESTIMATED INCOME, WE FIND THAT TH E SAME IS NOT ALLOWABLE AS THE INCOME OF THE ASSESSEE ITSELF HAS BEEN ESTIMATED ON THE COST OF THE GOODS SOLD AND NOT ON THE TURNOVER OR RECEIPTS OF THE ASSESSEE. THEREFORE, GR OUND NO.3 OF THE ASSESSEE IS REJECTED. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2015. SD/- SD/- ( P. MADHAVI DEVI) (S. RIFAUR RAHMAN ) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 27 TH NOVEMBER, 2015 KV 5 ITA.NO.1206/HYD/2015 SAI VENKATESWARA WINES, SECUNDERABAD 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