Bakkashetty Laxman, Nirmal V. Income Tax Officer, Ward-1, Nirmal

ITA 1516/Hyd/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2571 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 29-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H PHANI RAJU
• Assessee Lawyers: P VINOD
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A SMC BENCH: HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA. NO. 1515 /HYD/ 2017 ( ASSESSMENT YEAR: 2013 - 2014 ) BADRI SRINIVAS, NIRMA 1 . PAN: ANNPB 6756 A VS. ITO, WARD - 1, NIRMAL. (APPELLANT) (RESPONDENT) ITA. NO. 1516 /HYD/ 2017 ( ASSESSMENT YEAR: 2013 - 2014 ) BAKKASHETTY LAXMAN, NIRMAL PAN: AVEPB 1939 N VS. ITO, WARD - 1, NIRMAL. (APPELLANT) (RESPONDENT) ITA. NO. 1517 /HYD/ 2017 ( ASSESSMENT YEAR: 2013 - 2014 ) NARALA SATYANARAYANA, NIRMAL. PAN: ACBPN 7075 R VS. ITO, WARD - 1, NIRMAL. (APPELLANT) (RESPONDENT) ITA. NO. 1518 /HYD/ 2017 ( ASSESSMENT YEAR: 2013 - 2014 ) RAJENDRA PRASAD SALLA, NIRMAL. PAN: DQQPS 1779 R VS. ITO, WARD - 1, NIRMAL. (APPELLANT) (RESPONDENT) FOR ASSESSEE S : SHRI P. VINOD FOR REVENUE : SHRI H. PHANI RAJU, DR DATE OF HEARING : 08 .0 2 .2018 DATE OF PRONOUNCEMENT : 08 .0 2 .2018 ORDER PER D. MANMOHAN , VP. THESE APPEALS PERTAIN TO DIFFEREN T ASSESSEES BUT ARISE OUT OF IDENTICAL ORDERS PASSED BY LD. CIT(A) - 5, HYDERABAD. ALL THE APPEALS PERTAIN TO A.Y. 2013 - 14 AND THE ISSUE INVOLVED THEREIN IS ALSO SAME. I THEREFORE PROCEED TO DISPOSE OF THESE APPEALS TOGETHER FOR THE SAKE OF CONVENIENCE. 2 2. THE COMMON GROUNDS URGED BY THE ASSESSEES READ AS UNDER: - 1. THE ORDER OF THE LD. CIT(A) CONFIRMING THE ORDER OF THE A.O. IS ERRONEOUS BOTH ON FACTS AND IN LAW IN SO FAR AS IT IS PREJUDICIAL TO THE ASSESSEE. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ESTIM ATION OF INCOME AT 5% ON STOCK PUT TO SALE BY MERELY FOLLOWING THE DECISIONS OF THE ITAT THAT ARE RENDERED ON THE BASIS OF EARLIER EXCISE ACT WITHOUT APPRECIATING THE SUBMISSIONS ON THE NEW EXCISE ACT AND LATER DECISION OF THE ITAT IN THE CASE OF LATE SHRI MUSHKAM, ADILABAD IN ITA NO.94/HYD/2017, DATED 28.04.2017. 3. THE LD. CIT(A) ERRED IN GIVING A FINING THAT SALE PRICE IS NOT FIXED IN SPITE OF SPECIFICALLY SUBMITTING THAT THE SALE PRICE IS FIXED BY THE GOVERNMENT AND IF FOUND VIOLATING IT, THE ASSESSEE W OULD NOT ONLY LOOSE THE LICENSE BUT ALSO WOULD FORFEIT THE AMOUNT. 3. FOR THE SAKE OF CONVENIENCE, THE FACTS MENTIONED IN THE CASE OF SHRI BADRI SRINIVAS ARE REFERRED TO. THE ASSESSEES ARE ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF LIQUOR. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEES FILED THEIR RETURN OF INCOME WHICH WERE PROCESSED U/S 143(1) OF THE ACT BUT, LATER ON TAKEN UP FOR SCRUTINY WHEREIN IT WAS NOTICED THAT THE ASSESSEE (SHRI BADRI SRINIVAS) ADMITTED PURCHASES OF RS. 3.96 CRS AND SALES OF RS. 4.31 CRS WHEREAS THE NET PROFIT DECLARED IS ONLY RS. 3,90,725/ - WHICH , ACCORDING TO THE A O , IS VERY LOW. SINCE THE ASSESSEE DID NOT PRODUCE BILLS AND VOUCHERS CONCERNING SALES AND EXPENSES, THE A.O. CALLED UPON THE ASSESSEE TO EXPL AIN AS TO WHY THE INCOME SHOULD NOT BE ESTIMATED AT 5% ON GOODS PUT TO SALE. THE CASE OF THE ASSESSEES ON THE OTHER HAND WAS THAT DURING THE YEAR UNDER CONSIDERATION THEY HAD TO PAY H U G E EXCISE LICENSE FEES AND ORDINARILY IN THIS LINE OF BUSINESS THE NET PROFI T WOULD NOT BE MORE THAN 3%. THE A.O. OBSERVED THAT THE ASSESSEE HAS SHOWN THE GROSS PROFIT OF RS. 44,37,994/ - WHICH WORKS OUT TO GP RATE AT 10.27% WHEREAS THE N ET P ROFIT DECLARED WAS ONLY 0.90%, WHICH IS VERY LOW. HE THEREFORE ESTIMATED THE PROFIT @ 5% ON GOODS PUT TO SALE BY RELYING ON A DECISION OF THE ITAT HYDERABAD BENCHES IN THE CASE M/S. KANAKA DURGA WINES (ITA NO.462/HYD/2011). IN THE CASE OF SHRI BAKKASHETTY LAXMAN, THE ASSESSEE DECLARED GP MARGIN OF 14.90% WHEREAS NET PROFIT WORKS OUT TO RS. 1 .64% WHICH WAS ALSO CONSIDERED AS LOW AND THEREFORE , THE A.O. 3 ESTIMATED THE NET PROFIT @ 5%. IN THE CASE OF N. SATYANARAYANA, WHO IS ALSO A RESIDENT OF NIRMAL AND RUNNING WINE SHOP IN THE NAME AND STYLE OF M/S. PRAJA WINES AT NIRMAL , T HE NET PROFIT DECLA RED WORK S OUT TO 0.98% . B Y REJECTING THE BOOK RESULTS , THE A.O. ESTIMATED THE NET PROFIT @ 5% ON GOODS PUT TO SALE. IN THE CASE OF SHRI S. RAJENDRA PRASAD, ANOTHER RESIDENT OF NIRMAL, NET PROFIT WORKED OUT TO 0.98% ON SALE OF WINES FROM THE SHOP RUN IN THE NAME AND STYLE OF M/S. DURGA WINES WHEREAS THE A.O. ESTIMATED THE NET PROFIT @ 5% ON GOODS PUT TO SALE. 4. AGGRIEVED, ASSESSEES CONTENDED BEFORE THE FIRST APPELLATE AUTHORITY THAT IN VIEW OF THE CHANGE IN EXCISE POLI C Y THERE IS NO CHANCE OF SELLING THE GOODS AT HIGHER THAN MRP AS IT WIL L RESULT IN CANCELLATION OF LICENCE AND FOREGOING OF LICENCE FEE AND THEREFORE, THE GP HAS TO BE TAKEN INTO CONSIDERATION AS PER THE MRP FIXED BY THE STATE. IT WAS ALSO SUBMITTED THAT ITAT HYDERABAD BENCHES HAD CONSI STENTLY TAKEN A VIEW THAT NET PROFIT RATE OF 2.5% TO 3% IS REASONABLE. IT WAS ALSO SUBMITTED THAT IN THE CASES WHERE THE TRIBUNAL HAS ADOPTED 5% NET PROFIT, THE LIQUOR POLICY WAS DIFFERENT WHEREAS NOW A STRINGENT LIQUOR POLICY IS BEING FOLLOWED BY THE STA TE GOVERNMENT. IN THIS REGARD, ASSESSEES FILED COPY OF THE LIQUOR POLICY. HOWEVER, LD. CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE AND AFFIRMED THE ORDERS OF THE AOS WHEREIN INCOME WAS ESTIMATED @ 5% OF THE COST OF GOODS SOLD. 5 . FURTHER AGGRIEVED, A SSESSEES PREFERRED APPEALS BEFORE THE TRIBUNAL. 6 . IN ALL THESE APPEALS PAPER BOOKS WERE FILED, APART FROM THE WRITTEN SUBMISSIONS AND ORDER COPIES OF THE ITAT HYDERABAD BENCHES . A SSESSMENT ORDERS IN THE CASE OF OTHER ASSESSEES , WHO ARE SIMILARLY SITUATED AND CARRYING ON THE BUSINESS IN AND AROUND NIRMAL , WERE FILED TO HIGHLIGHT THAT THE ASSESSING OFFICERS HAVE CONSISTENTLY ESTIMATED THE INCOME @ 3 % ON THE STOCK PUT FOR SALE BY PA SSING REASONED ORDERS U/S 4 143(3) OF THE ACT . I N THE ABSENCE OF ANY MATERIAL TO CONTRADICT THE FACTS, THE DECISIONS RENDERED BY THE TRIBUNAL IN 2016 AND 2017 DESERVE TO BE PREFERRED RATHER THAN T H E O R D E R S WHICH ARE RENDERED ON DIFFERENT SET OF FACTS. IT MAY BE NOTICE D THAT THE ASSESSING OFFICER IN THE CASE OF SHRI SANGA RAO AMBER (PAGE 18 OF THE PAPER BOOK) TOOK INTO ACCOUNT THE CONTENTION THAT THE REASON FOR LOW PROFIT WAS THE CHANGE IN THE POLICY / STATE EXCISE LAWS; PREVIOUSLY THE LIQUOR WAS SOLD FOR A PRICE WHIC H WAS MUCH MORE THAN THE MAXIMUM RETAIL PRICE (MRP) DUE TO WHICH PROFIT WAS MORE BUT PRESENTLY D U E TO HIGH COURT DIRECTIONS AND STATE EXCISE LAWS STRINGENCY , THERE IS NO CHANCE TO SELL THE LIQUOR AT MORE THAN MRP BESIDES THE FACT THAT THE ASSESSEES HAD TO PAY PRIVILEGE FEE @13.6% FOR LIFTING OF STOCK IF IT EXCEEDS 6 TIMES OF THE LICENSE FEE PAID. ACCORDINGLY THE A.O. ACCEPTED BY OBSERVING AS UNDER : - THE SUBMISSIONS MADE BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ON 10.03.2016 IS EXAMINED AND CONSID ERING THE SALE OF LIQUOR ONLY ON MRP & PAYMENT OF PRIVILEGE FEES, THE INCOME OF THE ASSESSEE IS ESTIMATED @ 3% ON PURCHASES MADE DURING THE YEAR, AFTER GIVING DUE CREDIT TO THE OPENING AND CLOSING STOCK. 7 . HE PLACED BEFORE US, THE FOLLOWING ORDE RS OF THE ASSESSING OFFICER WHEREIN THE ISSUE WAS ANALYSED BY THE ASSESSING OFFICER IN 143(3) PROCEEDINGS FOR THE PURPOSE OF ESTIMATING THE INCOME @ 3%, UPON REJECTION OF THE BOOK RESULTS: - SL. NAME OF THE ASSESSEE ASST. YEAR SECTION (UNDER WHICH THE ASSESSMENT WAS MADE) 1 SRI NADPOLLA RAJESHWAR MITTAPALLI 2013 - 14 143(3) 2. SHRI KISHAN RAO MIRYALA 2013 - 14 143(3) 3. SHRI SANGA RAO AMBER 2013 - 14 143(3) 8 . HE ALSO RELIED UPON THE FOLLOWING DECISIONS OF THE ITAT WHEREIN THE ESTIMATE OF NET PROFIT @ 3% OF THE COST OF THE GOODS SOLD WAS ACCEPTED BY THE TRIBUNAL: - (1) ITA NO. 1206/HYD/2015 IN THE CASE OF SRI VENKATESWARA WINES, DATED 27.11.2015; 5 (2) ITA NO.181/HYD/2016 IN THE CASE OF SECUNDERABAD WINES, DATED 20.07.2016 AND (3) ITA NO.94/HYD/2017 IN THE CASE OF LATE SHRI MUSHKAM SUDERSHAN GOUD (REP. BY L/R ELDER SON MUSHKAM AMAR KIRAN GOUD 9 . HE THUS SUBMITTED THAT IN THE GIVEN FACTUAL MATRIX, THE A.O. AS WELL AS THE LD. CIT(A) OUGHT TO HAVE ACCEPTED THE PLEA OF THE ASSESSEE THAT THE NET PROFIT SHOULD NOT E X C E E D 3%. 1 0 . ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIES. 1 1 . I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. A.O. AS WELL AS LD. CIT(A) HAVE RELIED UPON THE DECISIONS OF THE ITAT RENDERED IN 2011 / 2012 WHEREAS THE ASSESSING OFFICER, UNDER SIMILAR CIRCUMSTANCES, MADE SCRUTINY ASSESSMENTS WHEREIN THE STRINGENT CHANGE IN P OLICY AS WELL AS IMPACT OF THE HIGH COURT DIRECTIONS WERE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF ESTIMATING THE NET INCOME @ 3% AND IN FACT IN THE LATER DECISIONS OF THE TRIBUNAL, THE NET INCOME WAS ESTIMATED @ 3 % OF THE COST OF GOODS SOLD. UNDER THE SE CIRCUMSTANCES, CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL, CITED (SUPRA), I DIRECT THE A.O. TO ADOPT 3% OF THE COST OF THE GOODS SOLD AS THE INCOME OF THE ASSESSEES. 1 2 . IN THE RESULT, APPEALS FILED BY THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH FEBRUARY, 2018. S D / - (D. MANMOHAN) VICE PRESIDENT HYDERABAD, DATED: 08 TH FEBRUARY, 2018. OKK, SR.PS 6 COPY TO 1. K.VASANTKUMAR, A.V. RAGHU RAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEER BAGH, HYDERABAD - 1. 2. INCOME TAX OFFICER, WARD ( 1), HYDERABAD. 3. CIT (A) - 5 , HYDERABAD. 4. PR. COMMISSIONER OF INCOME TAX - 5 , HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE