Income Tax Officer, Ward-1, Nalgonda V. Bal Reddy Mekala, Nalgonda District

ITA 133/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61893 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 30-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHVAN, JUDICIAL MEMBER ITA NO. AY APPELLANT RESPONDENT 127/HYD/12 2008-09 INCOME TAX OFFICER, WARD-1, NALGONDA RAVINDRA REDDY KOPPULA, NALGONDA (PAN ARYPK5214B) 128/HYD/12 2008-09 INCOME TAX OFFICER, WARD-1, NALGONDA CHANDER RAO VEENAPALLU, NALGONDA (PAN ABVPV8135B) 129/HYD/12 2008-09 INCOME TAX OFFICER, WARD-1, NALGONDA SAIDULU NARSING, NALGONDA (PAN ACRPN5231D) 130/HYD/12 2008-09 INCOME TAX OFFICER, WARD-1, NALGONDA POLI REDDY ERIGELA, NALGONDA (PAN BFWPS0618J) 131/HYD/12 2008-09 INCOME TAX OFFICER, WARD-1, NALGONDA SRIDHAR REDDY E., NALGONDA (PAN BFWPS0618J) 132/HYD/12 2008 - 09 INCOME TAX OFFICER, WARD-1, NALGONDA RAJU GURRAM, NALGONDA (PAN AJNPG7832L) 133/HYD/12 2008 - 09 INCOME TAX OFFICER, WARD-1, NALGONDA BAL REDDY MEKALA, NALGONDA (PAN ALFPB8215N 134/HYD/12 2008 - 09 INCOME TAX OFFICER, WARD-1, NALGONDA RAJGOPAL CHINTAPATI, NALGONDA (PAN ABVPV3384L) 135/ HYD/12 2008 - 09 INCOME TAX OFFICER, WARD-1, NALGONDA YADAGIRI PULLEMLA, NALGONDA (PAN AGFPP2939Q) 136/HYD/12 2008 - 09 INCOME TAX OFFICER, WARD-1, NALGONDA PITCHAIAH YERRAMSETTY,NALGONDA (PAN AATPY4571F) 142/HYD/12 2008 - 09 INCOME TAX OFFICER, WARD- 7(1), HYDERABAD JAI MATHA WINES, HYDERABAD (PAN AAFJ 9115 Q) ITA NO. 127/HYD/12 & OTHERS RAVINDRA REDDY KOPPULA AND OTHERS 2 143/HYD/12 2007 - 08 INCOME TAX OFFICER, WARD- 7(1), HYDERABAD JAI MATHA WINES, HYDERABAD (PAN AAFJ 9115 Q) 144/HYD/12 2008 - 09 INCOME TAX OFFICER, WARD- 7(1), HYDERABAD B. RAJU YADAV, HYDERABAD (PAN AGRPB5701C) APPELLANT BY : MR. B.V. PRASAD REDDY RESPONDENT BY : NONE DATE OF HEARING : 03/05/2012 DATE OF PRONOUNCEMENT : 18/ 05/2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M; THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE ORDERS PASSED BY THE CIT(A) VI, HYDERABAD FOR ASSESSMENT YEARS 2007-08 & 2008-09. SINCE IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, THEY ARE CLUB BED, HEARD AND DISPOSED OFF TOGETHER FOR THE SAKE OF CONVENIENCE. 2. SINCE FACTS INVOLVED IN ALL THESE APPEALS ARE QUITE COMMON AND IDENTICAL, FOR THE SAKE OF BREVITY, WE D EAL WITH THE FACTS AS MENTIONED IN ITA NO.127/HYD/2012 IN THE CASE OF RAVINDRA REDDY KOPPULA. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS CARRYING ON THE BUSIN ESS OF RETAIL TRADE IN LIQUOR. THE ENTIRE PURCHASES OF TH E ASSESSEE ARE FROM THE ANDHRA PRADESH BEVERAGES CORPORATION LTD. THE AO OBSERVED THAT AS PER THE G OMS NO.184 DATED 7.2.2005 OF THE GOVT., OF AP THE RETAI LERS MARGIN WAS FIXED AT 27% FOR ORDINARY LIQUOR ITEMS, 20% FOR MEDIUM AND PREMIUM ITEMS AND 25% FOR BEER. SIN CE ITA NO. 127/HYD/12 & OTHERS RAVINDRA REDDY KOPPULA AND OTHERS 3 THE ASSESSEE WAS UNABLE TO PRODUCE THE EVIDENCE FOR ITS TURNOVER IN THE FORM OF SALE BILLS, THE AO COMPUTED THE TURNOVER BY ADOPTING THE PROFIT MARGIN AS 27% AND A DDED THE DIFFERENCE TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED BY THE ASSESSMENT ORDER, APPEAL WAS FILED BEFORE CIT (A). THE CIT (A) FOLLOWING THE DECISION OF ITAT, HYDERABAD BENCH IN ITA NO.591/HYD/2011 DATED 28-7-2011 IN CASE OF M/S KANAKA DURGA WINES DIRECTE D THE AO TO ESTIMATE THE NET PROFIT AT 3%. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFOR E US RAISING THE FOLLOWING GROUNDS OF APPEAL:- 3. THE GROUNDS OF APPEAL ARE COMMON IN ALL THE APPEALS UNDER CONSIDERATION, THEREFORE, THE GROUNDS OF APPEAL FROM ITA NO. 127/HYD/2012 ARE REPRODUCED BELOW:- 1. THE ORDER OF THE CIT(A) IS ERRONEOUS ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) OUGHT TO HAVE UPHELD THE ESTIMATION O F SALES @ 27% OF THE COST OF LIQUOR PUT TO SALE AS PE R GOVERNMENT OF A.P. PROHIBITION & EXCISE GOMS 184 DATED 07/02/2005 AND ASSESSMENT OF UNDERSTATEMENT OF SALES. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE IT AT IN ITS ORDER IN THE CASE OF M/S KANAKA DURGA WINES , HYDERABAD, IN ITA NO. 591/HYD/2011, DT. 28/07/2011 UPHELD THE ACTION OF THE AO REJECTING TH E BOOKS OF ACCOUNTS U/S 145 AND ADOPTING 30% OVER THE COST OF PURCHASE TO ARRIVE AT THE UNDERSTATED SALES, IN PRINCIPLE. 4. THE CIT(A) ERRED IN RELYING ON THE DECISION OF I TAT IN THE CASE OF M/S KANAKA DURGA WINES, HYDERAGBAD, IN AS MUCH AS IN THE CASE OF M/S KANAKA DURGA WINES, HYDERABAD, THE NET PROFIT HAS BEEN ESTIMATED @ 3% OF THE COST OF LIQUOR PUT TO SA LE TAKING THE PREVIOUS HISTORY OF PROFIT WHERE AS THE ASSESSEE HAS NO PAST HISTORY AND THE LIQUOR TRADERS IN NALGONDA DISTRICT ARE SELLING THE LIQUOR AS PER PRP OR EVEN MORE THAN MRP. ITA NO. 127/HYD/12 & OTHERS RAVINDRA REDDY KOPPULA AND OTHERS 4 5. THE CIT(A) ERRED IN RELYING UPON THE DECISION OF ITAT, B-BENCH, HYDERABAD, IN THE CASE OF M/S KANAKA DURGA WINES, HYDERABAD, IN ITA NO. 591/HYD/2011, DT. 28/07/2011, SINCE THE VOLUME OF BUSINESS, LOCATION OF BUSINESS AND PROFITS IN THE C ASE OF MANJIT SINGH BAGGA OR M/S KANAKA DURGA WINES, HYDERABAD, CANNOT BE COMPARED WITH THAT OF THE ASSESSEE AND ALSO THAT EACH ASSESSMENT PROCEEDINGS ARE INDEPENDENT. 6. THE CIT(A) OUGHT TO HAVE UPHELD THE UNDERSTATEMENT OF SALES DETERMINED IN THE ASSESSMENT ORDER INSTEAD OF DIRECTING TO ESTIMATE T HE NET PROFIT @3% OF COST OF LIQUOR PUT TO SALE. 4. NONE APPEARED ON BEHALF OF THE RESPONDENT- ASSESSEES AT THE TIME OF HEARING BEFORE US. HOWEVER , WE PROCEEDED TO DISPOSE OF THESE APPEALS AFTER HEARING THE LEARNED DR AND ON MERITS. 5. BEFORE US, THE LEARNED DR HAS FILED WRITTEN SUBMISSIONS, WHEREIN IT WAS STATED AS UNDER:- 1. IN THE CASE OF M/S KANAKADURGA WINES VS. ITO, WARD-9(3), HYDERABAD(591/HYD/2011, THE HONBLE ITAT HAD UPHELD THE REJECTION OF BOOKS OF ACCOUNT AND ALSO ESTIMATION OF GP@30% OF SALES. 2. THE HONBLE ITAT HAD DIRECTED THAT THE NET PROFI T BE ESTIMATED @ 3% OF PURCHASES. THIS WAS DONE AFTER VERIFYING THE PREVIOUS HISTORY OF BUSINESS DO NE BY THE ASSESSEE. THE HONBLE ITAT HAD FOLLOWED THE SAME DECISION IN SOME OTHER CASES. 3. HOWEVER, IN THESE CASES, THERE IS NO PREVIOUS BUSINESS DONE BY THE ASSESSEE TO VERIFY. THE ASSESSING OFFICER HAS RELIED ON THE BUSINESS PRACTICES IN THIS TRADE WHERE THE SALE PRICE IS MUC H ABOVE THAT FIXED BY THE EXCISE DEPT. I.E. MORE THAN MRP. THE MEDIA HAVE REPORTED NUMEROUS CASES WHERE LIQUOR IS SOLD ABOVE THE MRP. ITA NO. 127/HYD/12 & OTHERS RAVINDRA REDDY KOPPULA AND OTHERS 5 4. IT IS BROUGHT TO THE KIND NOTICE OF THE HONBLE TRIBUNAL THAT AS PER THE LATEST ACB INVESTIGATION I N THE LIQUOR TRADE, THE SALES ARE MADE MUCH ABOVE MRP BY FORMING CARTELS OF LIQUOR TRADERS. 5. IN THE INTEREST OF SOCIAL JUSTICE, IT IS IMPERAT IVE THAT APPROPRIATE TAXES ARE COLLECTED FROM LIQUOR TRADE. IT IS ESTIMATED THAT LIQUOR TRADE CONTRIBUTE S TO RS. 18,000 CRORES TO THE STATE EXCHEQUER BUT PROPORTIONATE DIRECT TAXES ARE NOT REALIZED BY THE INCOME TAX DEPARTMENT. 6. IT IS ALSO SUBMITTED THAT TDS AND TCS RATES HAVE BEEN PRESCRIBED BY THE CBDT AFTER EVALUATING THE PROFIT MARGIN IN EACH TRADE. FOR THE LIQUOR TRADE, A RATE OF 1% TCS (AND INCREASED BY SURCHARGE AND EDUCATION CESS) HAS BEEN PRESCRIBED. IF THIS RATE I S ADOPTED, THE NET PROFIT MARGIN IN THE LIQUOR TRADE EXCEEDS 5%. 7. A PROVISION FOR REFUND IS PROVIDED TO THE ASSESS EE UNDER UNFORESEEN CONDITIONS WHERE THE ASSESSEE INCURS LOSSES OR LESSER PROFITS. BUT AFTER A PERUSA L OF THE FACTS OF THESE CASES, THERE DOES NOT SEEM TO BE A CASE FOR LOSS OR LOW PROFITS. 8. AS A RESULT OF ESTIMATION OF 3% BEING UPHELD BY THE ITAT, REFUNDS ARE RESULTING IN MANY CASES WHICH IS NOT A SCENARIO ENVISAGED BY THE CBDT WHILE FIXING TCS OF 1% FOR LIQUOR TRADE. 9. UNDER THE CIRCUMSTANCES CITED ABOVE, IT IS REQUESTED THAT THE HONBLE TRIBUNAL BE PLEASED TO DIRECT THAT THE ESTIMATE OF NET PROFIT ABOVE 5% OF THE PURCHASES MADE BY THE ASSESSEE. ITA NO. 127/HYD/12 & OTHERS RAVINDRA REDDY KOPPULA AND OTHERS 6 6. WE HEARD BOTH THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE IMPUGNED ORDERS OF THE CIT(A) IN DIRECT ING THE ASSESSING OFFICER TO ESTIMATE THE PROFIT OF THE ASSESSEE AT 3% OF THE PURCHASES OR STOCK PUT FOR SALE DURING THE YEAR, AS NOTED ABOVE, ARE BASED ON THE DECISION OF THE TRIBUNAL IN ITA NO.591/HYD/2011 DATED 28.7.2011 WHEREIN THE TRIBUNAL HAS HELD AS UNDER:- WE FIND THAT THE AO HAS RIGHTLY ADOPTED THE SALE PRICE AT 30% OVER THE COST OF PURCHASE TO ARRIVE AT THE UNDERSTATEMENT OF SALES OF RS.93,65,993/- BY THE ASSESSEE. BUT THE SAME TIME, THE ENTIRE UNDERSTATEMENT OF SALES CANNOT BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IT IS WELL SETTLED LAW THAT T HE BEST GUIDE FOR ESTIMATION OF INCOME AFTER REJECTING THE BOOKS OF ACCOUNTS IS EITHER PAST HISTORY OF THE ASSESSEE OR ANY OTHER COMPARABLE CASES. THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY DEMONSTRATED BEFORE US THAT THE ASSESSEES NET PROF IT IN THE PAST IS BETWEEN 0.12% TO 0.28% OF SALES. TH E CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MANJIT SINGH BAGGA VS. ITO IN ITA NO.371 & OTHERS DATED 30 TH SEPTEMBER, 2010 HELD THAT THE ESTIMATION OF THE NET PROFIT AT 3% IS REASONABLE. IN VIEW OF THE MATTER, ENDS OF JUSTICE WOULD BE MET IF WE ESTIMATE THE NET PROFIT OF THE ASSESSEE AT 3% OF PURCHASES O R STOCK PUT FOR SALE DURING THE YEAR UNDER CONSIDERATION AS AGAINST THE ESTIMATION OF 5% MADE BY THE CIT(A). 7. WE FIND THAT THE COORDINATE BENCHES OF THIS TRIBUNAL HAVE BEEN CONSISTENTLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL RELIED UPON BY THE CIT(A), IN THEIR RECENT ORDERS IN SIMILAR KIND OF WINE GROUP CASES. HOWEVER, TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE DR, INTER-ALIA, THAT ESTIMATE OF NET ITA NO. 127/HYD/12 & OTHERS RAVINDRA REDDY KOPPULA AND OTHERS 7 PROFIT ABOVE 5% OF THE PURCHASES MADE BY THE ASSESS EE IS TO BE ADOPTED, WE DIRECT THE AO TO ESTIMATE NET PR OFIT AT 5% OF THE PURCHASES OR STOCK PUT FOR SALE DURING TH E YEAR SUBJECT TO THE ASSESSED INCOME NOT LESS THAN RETURN ED INCOME. THE ORDER OF THE CIT(A), TO THIS EXTENT, IS MODIFIED ACCORDINGLY. 8. IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/05/2012. SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED 18 TH MAY, 2012 KV