Karla Srinivasa Rao, Vijayawada V. The Income Tax Officer, Ward No. 2(4), Vijayawada

ITA 15/VIZ/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4945 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 12-01-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income
• Section: 142(1); 143(1); 143(2)

Judgement Text

आयकर अपीऱीयअधिकरण, विशाखापटणम पीठ, विशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्ि ू रु आर एऱ रेड्डी, न्याययक सदस्य एिं श्री एस बाऱाक ृ ष्णन, ऱेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अऩीऱ सं./ I.T.A. Nos.14 & 15/Viz/2020 (ननधधारण वषा / Assessment Year : 2013-14) Sri Karla Srinivasa Rao, Vijayawada. PAN: ALWPK 9656 K Vs. Income Tax Officer, Ward-2(4), Vijayawada. (अपीऱार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अऩीऱधथी की ओर से/ Appellant by : Sri G.V.N. Hari, AR प्रत्यधथी की ओर से / Respondent by : Sri SPG Mudaliar, Sr. AR स ु नवधई की तधरीख / Date of Hearing : 16/03/2022 घोषणध की तधरीख/Date of Pronouncement : 08/04/2022 O R D E R PER BENCH: Both the captioned appeals are filed by the assesseee. Since these appeals pertain to the same assessee and one AY 2013-14, they are clubbed, heard together and disposed off in this consolidated order. 2 ITA No.14/Viz/2020 2. This appeal is filed against the order of the Ld. CIT (A), Vijayawada in appeal No.414/CIT(A)/VJA/2015-16, dated 14/10/2019 passed U/s. 143(3) r.w.s 250(6) of the Act for the AY 2013-14. 3. The assessee has filed grounds of appeal at the time of filing of the appeal. Subsequently, on 07/02/2022 the assessee has filed Revised Grounds of Appeal and they are extracted herein below for reference: “1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case. 2. The Ld. CIT(A) is not justified in upholding the action of the Assessing Officer in rejecting the books of account of the appellant and in estimating the business income. 3. Without prejudice to the above, the Ld. CIT(A) ought to have directed the Assessing officer to estimate the income @ 3% of stock put to sale. 4. Any other ground that may be urged at the time of appeal hearing.” 4. Brief facts of the case are that the assessee is an individual engaged in the business of trading in liquor under the name and style of Lucky Wines filed his return of income for the AY 2013-14 on 30/09/2013 admitting total income at loss of Rs. 25,57,831/-. The return of income was processed U/s. 143(1) of the Act and subsequently, 3 the case was taken up for scrutiny under CASS. Accordingly, the statutory notices U/s. 143(2) and 142(1) were issued to the assessee. In response to the notices, the AR of the assessee appeared from time to time and furnished the relevant details. During the scrutiny assessment the Ld. AO observed that though the assessee had been given sufficient opportunities, the assessee failed to furnish the details for expenses claimed in the P & L Account as well as the stock register which is subjected to periodical checks by the Excise Officials. Considering the assessee’s failure to furnish the requisite details and in the absence of bills and vouchers in support of the expenses debited to the P & L Account for verification, the Ld. AO rejected the books of account of the assessee and estimated the profit of the assessee @ 5% on stock put to sale by the assessee which worked out to Rs. 15,27,292/- and added the same to the total income of the assessee. In the assessment made U/s. 143(3) of the Act, the Ld. AO also made addition of Rs. 6,52,000/- as unexplained cash deposits and determined the assessed income at Rs. 21,79,292/-. Aggrieved by the order of the Ld. AO, assessee filed an appeal before the Ld. CIT(A). 5. On appeal, the Ld. CIT (A), after considering the submissions of the assessee, granted to relief to the assessee in respect of unexplained cash 4 deposits in the assessee’s bank accounts and sustained the decision of the Ld. AO with regard to estimation of net income from business of liquor @ 5% and partly allowed the appeal. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal. 6. Before us, the Ld. AR briefly narrated the facts of the case and submitted that under identical circumstances, the Hyderabad Bench of the Tribunal in the case of M/s. Balaji Wines vs. ITO in ITA No.1050/Hyd/2018, order dated 24/10/2018 directed the AO to estimate the net profit at 3% of the cost of goods put to sale. He pleaded for the same directions in the case of the assessee. Per contra, the Ld. DR relied on the orders of the Revenue Authorities. 7. We have heard the rival submissions and carefully perused the material on record. As regards the Revised Grounds No.2 with regard to rejection of books of accounts by the AO, since the assessee has been provided various opportunities but has not provided the required documents by AO, as noted by the AO in the assessment order, we are inclined to uphold the order of AO on this ground. 8. With respect to Ground No 3 with regard to the estimation of income, we find that the issue is covered in favour of the assessee, as submitted by the Ld. AR, wherein the Hyderabad Bench of the Tribunal 5 in the case of M/s. Balaji Wines vs. ITO in ITA No.1050/Hyd/2018, dated 24/10/2018 the Tribunal directed the AO to estimate the net profit @ 3% of the cost of goods put to sale. For the sake of reference, the relevant portion of the Hyderabad Tribunal’s order is reproduced herein below for reference: “4. As regards grounds 1 and 2 with regard to estimation of income, we find that this issue is covered in favour of the assessee by various decisions of the Tribunal wherein we have upheld the estimation of income at 3% of the cost of goods put to sale. The relevant portion of the Tribunal in the case of Sri Venkateswara Wines, Scunderabad in ITA No.1206/Hyd/2015 is reproduced hereunder: “5. Having regard to the rival contentions and the material on record, we find that the assessee has not maintained any books of account and therefore, the estimation of income is justified. It is only the rate at which the income is to be estimated is before us. A.O. has estimated the income at 5% of the cost of goods sold, while the assessee is seeking the estimation at 3% of the cost of goods sold. We find that in the case of Venkateswara W ines, Nizamabad (supra), the Coordinate Bench of this Tribunal has taken note of the decision of Hon'ble High Court of Telangana and Andhra Pradesh in the case of CIT vs. Kamlekar Shankar Lal (supra) to hold as under : "6. Having regard to the rival contentions and the 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 held by the Coordinate Bench of this Tribunal. The ITA.No.1206/Hyd/2015 Sai Venkateswara Wines, 6 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 agreeable to the estimation of income at 3% of the cost of goods sold. As the facts before us are similar to the facts before the Tribunal in the case of Venkateswara W ines, Nizamabad (supra) and the uniform rate of profit cannot be adopted in the case of every assessee in similar business, we allow ground No.2 of the assessee”. 5. Respectfully following the decision of the Coordinate Bench (to which both of us are signatories), the AO is directed to estimate the net profit at 3% of the cost of goods put to sale. The assessee’s appeal is accordingly allowed. 9. Respectfully following the Coordinate Bench decision of the Tribunal (supra) as well as following the principle of consistency, we hereby direct the Ld. AO to estimate the net profit @ 3% of the cost of goods put to sale. Accordingly, Revised Grounds No.3 raised by the assessee is allowed. 10. Grounds No.1 and 4 are general in nature and therefore they are dismissed as such. 11. In the result, appeal of the assessee partly allowed for statistical purposes as indicated herein above. 7 ITA No. 15/Viz/2020 10. This is a twin appeal filed by the assessee against the order of the Ld. CIT (A), Vijayawada in Appeal No.414/CIT(A)/VJA/2015-16, dated 14/10/2010 for the AY 2013-14. 11. At the time of hearing the Ld. AR admitted that this appeal is inadvertently filed by the assessee against the same orders of the Ld. Revenue Authorities as in the appeal ITA No.14/Viz/2020. Therefore, the Ld. AR pleaded that this appeal may be treated as withdrawn. 12. Thus, this appeal filed by the assessee is dismissed as withdrawn. 13. Conclusively, ITA No.14/Viz/2020 is partly allowed for statistical purposes and ITA No.15/Viz/2020 is dismissed as withdrawn. Pronounced in the open Court on the 08 th April , 2022. Sd/- Sd/- (द ु व्ि ू रु आर.एऱ रेड्डी) (एस बाऱाक ृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याययकसदस्य/JUDICIAL MEMBER ऱेखा सदस्य/ACCOUNTANT MEMBER Dated : 08.04.2022 OKK - SPS 8 आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाररती/ The Assessee– Karla Srinivasa Rao, D.No.40-12-72A, Flat No.406, HRT Elegance, Ramaswamy St., Patamata, Vijayawada. 2. रधजस्व/The Revenue – Income Tax Officer, Ward-2(4), Central Revenue Building, MG Road, Opp. PWD Grounds, Vijayawada. 3. The Principal Commissioner of Income Tax, Vijayawada. 4.आयकर आय ु क्त (अऩीऱ)/ The Commissioner of Income Tax (Appeals), Vijayawada. 5. ववभधगीय प्रनतननधध, आयकर अऩीऱीय अधधकरण, ववशधखधऩटणम/ DR,ITAT, Visakhapatnam 6.गधर्ा फ़धईऱ / Guard file आदेशधन ु सधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam