THE ITO, Bhimavaram V. Sri Nujella Rama Krishna, Bhimavaram

ITA 186/VIZ/2015

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9868 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts

Judgement Text

ITA NO.186/VIZAG/2015 SRI NUJELLA RAMAKRISHNA, BHIMAVARAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO186/VIZAG/2015 ( / ASSESSMENT YEAR: 2010-11) ITO, WARD - 2, BHIMAVARAM VS. SRI NUJELLA RAMA KRISHNA, BHIMAVARAM [PAN: AHIPN 1179Q ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI ARAVINDAKSHAN, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 14.09.2016 / DATE OF PRONOUNCEMENT : 19.09.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A), RAJAHMUNDRY DATED 3.3.2015 FOR THE ASSESSME NT YEAR 2010-11. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS IN THE B USINESS OF IMFL FILED RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS.5, 25,140/-. THE A.O. ITA NO.186/VIZAG/2015 SRI NUJELLA RAMAKRISHNA, BHIMAVARAM 2 AFTER DUE PROCESS ASSESSMENT WAS COMPLETED U/S 143( 3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) BY ESTIMATING TOTAL INCOME AT 20% OF THE TOTAL PURCHASES DETERMINED THE TOTAL INCOME OF RS.54,70,156/-. ON APPEAL, CIT(A) HAS SCALED DOWN FROM 20% TO 10% AND GRANTED PARTIAL RELIEF. 3. WHEN THIS APPEAL IS TAKEN UP FOR HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN T HIS APPEAL IS SQUARELY COVERED BY THE COORDINATE BENCH OF THE TRIBUNAL AND SUBMITTED THAT THE SAME MAY BE FOLLOWED. THE D.R. SUPPORTED THE ORDER PASSED BY THE A.O. 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS ESTIMATION OF PROFIT IN RESPECT OF IMFL BUSINESS CARRIED BY THE ASSESSEE. IN THIS RES PECT, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF TANGUDU JOGISE TTY IN ITA NO.96/VIZAG/2016 BY ORDER DATED 2.6.2016 HAS CONSI DERED THE PROFIT LEVEL IN THE LINE OF BUSINESS AND DECIDED THAT 5% O F PURCHASE PRICE IS REASONABLE PROFIT MARGIN IN THE LINE OF IMFL BUSINE SS AND DIRECTED THE A.O. TO RE-COMPUTE THE PROFIT OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: ITA NO.186/VIZAG/2015 SRI NUJELLA RAMAKRISHNA, BHIMAVARAM 3 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE A.O. ESTIMATED NET PROFIT OF 20% ON STOCK PUT FOR SALE. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNTS AND VOUCHERS IN SUPPORT OF PURCHASES AND SALES. THE A. O. FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO MAINTAIN STOCK REGISTERS AND BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NOT SUSCEPTIBLE FOR VERIFICATION, THEREFORE REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED NET PR OFIT OF 20% BY RELYING UPON THE DECISION OF HONBLE A.P. HIGH COURT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE NET PROFIT ESTIMATED BY THE A.O. IS QUITE HIGH WHEN COMPARED TO THE NATURE OF BUSINESS CARRIED ON BY TH E ASSESSEE. IT IS FURTHER SUBMITTED THAT THE CASE LAW RELIED UPON BY THE ASSE SSEE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE CASE BEFORE THE HONBLE A.P. HIGH COURT WAS THAT THE ASSESSEE IS INTO THE BUSINESS OF TRADI NG IN ARRACK, WHEREAS IT IS IN THE BUSINESS OF DEALING IN IMFL. THE ASSESSEE FURT HER CONTENDED THAT IMFL TRADE WAS CONTROLLED BY THE STATE GOVERNMENT THROUG H A.P. STATE BEVERAGES CORPORATION LTD. AND THE PRICES OF THE PRODUCTS ARE FIXED BY THE STATE GOVERNMENT. THE ASSESSEE BEING A LICENSE HOLDER OF STATE GOVERNMENT CANNOT SELL THE PRODUCTS OVER AND ABOVE THE MRP FIX ED BY THE STATE GOVERNMENT. WE FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE A.O. HAS ESTIMATED THE NET PROFIT BY RELYI NG UPON THE DECISION OF A.P. HIGH COURT IN THE CASE OF CIT VS. R. NARAYANA RAO I N ITA NO.3 OF 2003 WHICH IS RENDERED UNDER DIFFERENT FACTS. THE A.P. HIGH C OURT HAS CONSIDERED THE CASE OF AN ARRACK DEALER, WHEREAS, THE ASSESSEE IS INTO THE BUSINESS OF DEALING IN IMFL. THEREFORE, WE ARE OF THE VIEW THAT THE A.O. WAS NOT JUSTIFIED IN RELYING UPON THE JUDGEMENT, WHICH WAS RENDERED U NDER DIFFERENT FACTS TO ESTIMATE THE NET PROFIT. ON THE OTHER HAND, THE LD . A.R. FOR THE ASSESSEE, RELIED UPON THE DECISION OF ITAT, VISAKHAPATNAM BEN CH IN THE CASE OF T. APPALASWAMY VS. ACIT IN ITA NO.65 & 66/VIZAG/2012. WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSEE I N THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FINDS THAT THE COORDINATE BENC H OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HELD THAT ESTIMATION OF 5% NE T PROFIT ON PURCHASES IS REASONABLE. THE RELEVANT PORTION OF THE ORDER IS R EPRODUCED HEREUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS O F THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS THE CONTENTION OF THE LD. A.R. THAT THE ESTIMATION OF PROFIT AT 16% IS HI GH AND EXCESSIVE CONSIDERING THE NORMAL RATE OF PROFIT IN THIS LINE OF BUSINESS. WHEREAS, THE LD. D.R. SUPPORTED THE ORDER OF THE CIT(A). HAVING CONSIDERED THE SUBMISSIONS OF THE ASSESSEE, WE ARE OF THE VIEW THA T THE ISSUE IS NO MORE RES INTEGRA IN VIEW OF A SERIES OF DECISIONS OF THE ITAT HYDERABAD BENCH IN SIMILAR CASES. THE COORDINATE BENCH IN CASE OF ITA NO.127/HYD/12 AND OTHERS DATED 18.05.2012 AS WELL AS A NUMBER OF OTHE R CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FOREI GN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASSESS EE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDERABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICE R TO ESTIMATE THE PROFIT FROM THE WINE BUSINESS OF THE ASSESSEE BY APPLYING THE RATE OF 5% OF THE ITA NO.186/VIZAG/2015 SRI NUJELLA RAMAKRISHNA, BHIMAVARAM 4 PURCHASES MADE NET OF ALL OTHER DEDUCTIONS. THE AS SESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INCOME DETERM INED SHOULD BE BELOW THE INCOME RETURNED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE RATIOS OF COORDINATE BEN CH, WE ARE OF THE VIEW THAT THE NET PROFIT ESTIMATED BY THE A.O. BY RELYING UPO N THE DECISION OF HONBLE A.P. HIGH COURT (SUPRA), WHICH WAS RENDERED UNDER D IFFERENT FACTS IS QUITE HIGH. ON THE OTHER HAND, THE ASSESSEE RELIED UPON THE DECISION OF COORDINATE BENCH AND THE COORDINATE BENCH UNDER SIM ILAR CIRCUMSTANCES ESTIMATED THE NET PROFIT OF 5% ON TOTAL PURCHASES N ET OF ALL DEDUCTIONS. NO CONTRARY DECISION IS PLACED ON RECORD BY THE REVENU E TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDIN ATE BENCH. THEREFORE, WE DIRECT THE A.O. TO ESTIMATE THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. ORDERED ACCORDINGLY. 5. IN VIEW OF THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, I DIRECT THE A.O. TO RE-COMPUTE THE INCOM E OF THE ASSESSEE AT 5% OF PURCHASE PRICE. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19 TH SEPT16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 19.09.2016 VG/SPS ITA NO.186/VIZAG/2015 SRI NUJELLA RAMAKRISHNA, BHIMAVARAM 5 '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-2, BHIMAVARAM 2. / THE RESPONDENT SRI NUJELLA RAMA KRISHNA, PROP. M/S. AJAY WINES, 3-1- 20, BHIMAVARAM-534202. 3. ) / THE CIT, RAJAHMUNDRY 4. ) ( ) / THE CIT(A), RAJAHMUNDRY 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM SL. NO. DESCRIPTION DATE INITIALS 1. DATE OF DICTATION BY THE AUTHOR 16.09.2016 SR.P S 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 19.09.2 016 SR.PS 3. DRAFT PLACED BEFORE THE SECOND MEMBER SR. PS 4. DRAFT APPROVED BY THE SECOND MEMBER SR. PS 5. DATE OF APPROVED ORDER COMES TO THE SR. PS SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER SR. PS 7. DATE OF FILE SENT TO THE BENCH CLERK SR. PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK HD. C LK 9. DATE OF DISPATCH OF ORDER SR. PS