Gajula Venkateswara Rao, Kham V. Income Tax Officer, Ward-2, Kothagudem

ITA 1687/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1255 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 04-02-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 03-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHR NILANJAN DEY
• Assessee Lawyers: A C GANGAIAH
• Keywords: Tangible material; Set aside
• Section: 143(3); 147; 148

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B ', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 1636 / HYD/201 8 ASSESSMENT YEAR: 20 11 - 12 GAJULA BR AHMANKA RAO , KHAMMAM. PAN A IPPG5951M VS. INCOME - TAX OFFICER , WARD 2 , KHAMMANM. APPELLANT RESPONDENT ITA NO. 1687/ HYD/201 8 ASSESSMENT YEAR: 20 11 - 12 GAJULA VENKATESWARA RAO, KHAMMAM. PAN A IPPG5950G VS. INCOME - TAX OFFICER , WARD 2 , KHAMMANM. ASSESSEE BY: S HRI A.C. GANGAIAH REVENUE BY: SHR NILANJAN DEY DATE OF HEARING: 04 / 0 1 / 201 9 DATE OF PRONOUNCEMENT: 20 / 0 3 /201 9 O R D E R PER S. RIFAUR RAHMAN , AM: BOTH T H E S E APPEAL S FILED BY THE ASSESSEE S ARE DIRECTED AGAINST THE ORDER S OF CIT(A) 7 , HYDERABAD, BOTH DATED, 2 4 / 1 2 /201 6 FOR AY 2011 - 12. SINCE IDENTICAL ISSUES ARE INVOLVED IN THESE APPEALS, THE SAME WERE CLUBBED AND HEARD TOGETHER AND, THEREFORE, A COMMON ORDER IS PASSED FOR THE SAKE OF CONVENIENCE. 2. BRIEF FACTS OF THE CASE AS TAKEN FROM 1636/HYD/2018 ARE , T HE ASSESSEE AN INDIVIDUAL DERIVING INCOME FROM BUSINESS IN PURC HASE AND SALE OF LIQUOR, E - FILED HIS RETURN OF INCOME FOR I.T.A. NO. 1 636 & 1687 /HYD/1 6 8 GAJULA BRAHMANKA RAO GAJULA VENKATESWARA RAO 2 A.Y.2011 - 12 ON 25.11.2011 ADMITTING A TOTAL INCOME OF RS.2,37,965/ - . SUBSEQUENTLY, PROCEEDINGS U/S 147 WERE INITIATED SINCE THE ASSESSEE HAS NOT PROPERLY ACCOUNTED FOR THE EXPENSES AND INVESTMENTS I N THE BOOKS OF ACCOUNT AND THEREBY SUPPRESSED THE SALES AND UNDERSTATED THE INCOME CHARGEABLE TO TAX. THE ASSESSMENT WAS COMPLETED BY ESTIMATING INCOME AT 5% ON COST OF GOODS PUT FOR SALE OF R S .4,65,473/ - AND ADDITION TOWARDS INITIAL INVESTMENT IN BUSINESS OF RS.20,04,500 / - AND DETERMINING TOTAL INCOME AT RS.24,69,9701 2.1 AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) CONFIRMED THE ESTIMATION OF INCOME @ 5% OF COST OF GOODS SOLD BY THE AO AND AS REGARDS THE ADDITION MADE BY THE AO OF RS. 20,04,500/ - ON ACCOUNT OF INITIAL LICE NSE FEE, PAYMENT OF INITIAL PURCHASE, MARGIN MONEY FOR BANK GUARANTEE AND APPLICATION MONEY, THE CIT(A) DELETED RS. 3,00,000/ - OUT OF THE SAID AMOUNT OF RS. 20,04,500/ - AND THE REMAINING BALANCE WAS CONFIRMED. 3. AGGRIEVED BY THE ORDER OF CIT(A), THE ASS ESSEE IS APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL , WHICH ARE COMMON IN BOTH THE APPEALS. : 1. ASSESSMENT ORDERS PASSED U/S 143(3) RWS 147 ARE TO BE QUASHED FOR WANT OF TANGIBLE MATERIAL FOR REOPENING ASSESSMENT. 2. COST OF SALES OF WINES A RE TO BE TAXED AT 3% 3. TO DELETE THE ADDITION OF FIRST PURCHASE OF WINES IN THE PREVIOUS YEAR AND OTHER ADDITIONS IN RESPECT OF INITIAL INVESTMENT. 3.1 THE ASSESSEE HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS OF APPEAL , WHICH ARE COMMON IN BOTH THE APP EALS : I.T.A. NO. 1 636 & 1687 /HYD/1 6 8 GAJULA BRAHMANKA RAO GAJULA VENKATESWARA RAO 3 (1) THE REASSESSMENT ORDERS DO NOT SPECIFY THE APPROVAL TAKEN UNDER SECTION 151 FOR ISSUING NOTICE U/ S 148. TRIBUNAL IS PRAYED TO SET ASIDE THE NOTICE ISSUED FOR REASSESSMENT. (2) THE NOTICE FOR REASSESSMENT UNDER SECTION 148 IS SERVED ON 19.12.2 012. ORDERS MIGHT HAVE BEEN PASSED ON OR BEFORE 31.12.2013 AS PER SECTION 153(2). THE ORDERS ARE PASSED ON 24.2.2014 BEYOND TIME LIMIT SPECIFIED IN SECTION 153(2). THE ORDERS PASSED ARE BARRED BY LIMITATION SPECIFIED IN SECTION 153(2) AND LIABLE TO BE QUAS HED. 3.2 THE ASSESSEE HAS NOT PRESSED/ARGUED ON THE SAID ADDITIONAL GROUNDS AND GROUND NO. 1 OF THE MAIN APPEAL AT THE TIME OF HEARING BEFORE US, THEREFORE, THE SAME ARE DISMISSED AS NOT PRESSED. 4. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL ON RECORD. AS REGARDS THE ESTIMATION OF INCOME, THE COORDINATE BENCHES OF THIS TRIBUNAL CONSISTENTLY TAKING A VIEW THAT ESTIMATION OF INCOME AT 3% OF THE COST OF THE GOODS SOLD IS REASONABLE IN THIS LINE OF BUSINESS. IN THE CASE OF SRI VENKATESWARA WINES IN ITA NO. 1206/HYD/2015, DATED 27/11/2015 FOR AY 2011 - 12, THE COORDINATE BENCH HAS HELD AS UNDER: 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 WINES, 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 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 THE MATERIAL ON RECORD, WE FIND THAT THE AO HAS CALLED FOR BOOKS OF ACCOUNT OF THE ASSESSE E BUT THE ASSESSEE HAD FAILED TO I.T.A. NO. 1 636 & 1687 /HYD/1 6 8 GAJULA BRAHMANKA RAO GAJULA VENKATESWARA RAO 4 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 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.' THEREFORE, WE DIRECT THE AO TO ADOPT 3% OF THE COST OF LIQUOR SOLD AS THE INCOME OF THE ASSESSEE. 5. AS REGARDS THE ADDITION OF RS. 20,04,500/ - , TOWARDS SOURCES OF INVESTMENT IN BUSINESS, THE AO MADE THE SAID ADDITION BY OBSERVING THAT IN THE ABSENCE OF CORROBORATIVE EVIDENCE FOR THE CAPITAL INVESTMENT AND CONFIRMATION FOR THE UNSECURED LOANS, THE TOTAL AMOUNT OF RS. 20,04,500/ - IS TREATED AS THE ASSESSEES INITIAL INVESTMENT IN THE BUSINESS. 5.1 THE CIT(A), DELETED THE RS. 3,00,000/ - OUT OF THE SAID AD DITION. 6. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI SRINIVASA REDDY IN ITA NO. 1303/HYD/2016 VIDE ORDER D ATED 28 TH NOVEMBER, 2018 WHEREIN THE BENCH OBSERVED AS UNDER: 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT ADMITTEDLY, THIS IS THE FIRST YEAR OF OPERATION OF THE ASSESSEE AND THE ASSESSEE COULD START THE BUSINESS ON LY AFTER OBTAINING LICENSE FROM THE GOVT. AND BY MAKING PAYMENT OF THE LICENSE FEE. THE I.T.A. NO. 1 636 & 1687 /HYD/1 6 8 GAJULA BRAHMANKA RAO GAJULA VENKATESWARA RAO 5 ASSESSEE HAS MADE THE PAYMENT OF RS.18.00 LAKHS TOWARDS THE FIRST INSTALMENT OF THE LICENSE FEE AND THEREFORE, SUCH AN AMOUNT CANNOT BE TREATED AS UNEXPLAINED INCOME FR OM THE BUSINESS OF THE ASSESSEE. THIS IS THE CAPITAL INTRODUCED BY HIM AND IF AT ALL, IT CAN ONLY BE THE INCOME FROM THE EARLIER YEARS AND NOT FROM THE RELEVANT PREVIOUS YEAR. THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE SUPREME COURT, WE DELETE THE ADDITION OF RS.18.00 LAKHS. SINCE THE ISSUE UNDER CONSIDERATION IS MATERIALLY IDENTICAL TO THAT OF THE ABOVE DECISION, FOLLOWING THE SAME, WE DIRECT THE AO TO DELETE THE ADDITION MADE ON THIS COUNT. ACCORDINGLY, GROUND RAISED BY THE ASSESSEE IS ALLOWED. 7. AS THE FACTS AND GROUNDS ARE MATERIALLY IDENTICAL IN ITA NO. 1687/HYD/2018 TO THAT OF ITA NO. 1636/HYD/2018, WE DIRECT THE AO TO ESTIMATE THE INCOME @ 3% OF THE COST OF LIQUOR SOLD AS THE INCOME OF THE ASSESSEE. 8. AS REGARDS THE ADDITION OF RS. 18,04,629/ - TOWARDS INITIAL INVESTMENT IN BUSINES S, FOLLOWING THE DECISION IN ITA NO. 1636/HYD/2018 (SUPRA), WE DIRECT THE AO TO DELETE THE ADDITION. 9. IN THE RESULT, BOTH THE APPEALS UNDER CONSIDERATION ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH , 201 9. SD/ - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 20 TH MARCH , 201 9. KV I.T.A. NO. 1 636 & 1687 /HYD/1 6 8 GAJULA BRAHMANKA RAO GAJULA VENKATESWARA RAO 6 COPY FORWARDED TO: 1. GAJULA BRAHMANKARAO & 2 . GAJULA VENKATESWARA RAO, S/O PURNACHANDRA RAO, MALLAVOLU 521162, GUDURU MANDAL, KRISHNA DT. A C IT, CIRCLE 1 7 ( 1 ), HYDERABAD . 3 . ITO, WARD 2, KOTHAGUDEM 4. CIT(A) - 7 , HYDERABAD 5. PR. CIT 7 , HYDERABAD 6. 7. THE DR, ITAT, HYDERABAD GUARD FILE