ITO, Ward-7(4), Hyderabad V. Sri Manjit Singh Bagga, Hyderabad

ITA 1861/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66141 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 01-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PB L
• Keywords: Cost of acquisition
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1861/HYD/2011 ASSESSMENT YEAR : 2005-06 ITO, WARD-7(4), HYDERABAD. .... APPELLANT VS. SRI MANJIT SINGH BAGGA, GOWLIGUDA, HYDERABAD. RESPONDENT PAN:ABYPB 1636 L APPELLANT BY : SHRI NIVEDITA BISWAS RESPONDENT BY : SHRI K.A. SAI PRASAD DATE OF HEARING : 14-06-2012 DATE OF PRONOUNCEMENT : 10-08-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST ORDER DATED 25-8-2011 OF CIT (A)-VI, HYDERABAD PASS ED IN APPEAL NO. 0042/07-08/CIT (A)-VI AND IT PERTAINS TO THE AS SESSMENT YEAR 2005-06. 2. IN GROUND NO.2, THE REVENUE HAS CHALLENGED THE ORDER PASSED BY THE CIT (A) IN REJECTING THE ESTIMATION O F PROFIT MADE AT 5% OF THE PURCHASES BY THE AO. BRIEFLY THE FAC TS OF THE CASE ARE, THE ASSESSEE IS A PROPRIETOR OF GURMEET WINES WHICH CARRIES ON BUSINESS IN PURCHASES AND SALE OF LIQUOR IN RETA IL TRADE. THE ENTIRE PURCHASES ARE MADE FROM AP BEVERAGES CORPORA TION 2 ITA NO. 1861 OF 2011 SRI MANJIT SINGH BAGGA, HYDERABAD. LIMITED. THE GOVERNMENT ALLOWED MRP AT 30% ON THE I SSUE PRICE FOR THE RETAILER. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING INCOME OF RS.3,55,050/- WHICH COMES TO ABOUT 3.24% OVER THE PURCHASE COST. THE AO WHILE COMPLETING THE ASSESSM ENT U/S 143(3) FOUND DISCREPANCY IN THE INVOICE RAISED AND THEREFORE PROCEEDED TO ESTIMATE THE PROFIT OF THE BUSINESS OF THE ASSESSEE. THE AO ESTIMATED THE SALES BY ADDING A MARGIN OF 6% OVER THE PURCHASE COST OF GOODS SOLD (ISSUE PRICE) OF RS.5,2 0,58,994/- AGAINST THE SALES OF RS.5,37,46,490/- DECLARED BY T HE ASSESSEE. THE DIFFERENCE OF RS.14,36,044/- WAS ADDED TO THE T OTAL INCOME AS PROFIT OF THE ASSESSEE. THE ASSESSEE BEING AGGRI EVED OF THE ESTIMATION OF THE PROFIT MADE BY THE AO, FILED AN A PPEAL BEFORE THE CIT (A). THE CIT (A) FOLLOWING THE ORDER PASSE D BY THE ITAT IN ITA NO.371/HYD/2009 AND 391/HYD/2009 IN ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 2004-05 ALLOWED THE APPEAL OF THE ASSESSEE BY ACCEPTING THE PROFIT DECLARED. 3. THE LEARNED DR SUBMITTED BEFORE US THAT THE PROF IT DECLARED AT 3.24% OF THE PURCHASES IS LOW CONSIDERING THE FA CT THAT THE CBDT AFTER EVALUATING PROFIT MARGIN IN EACH CASE HA S PURCHASED TCS AT 1% FOR THE LIQUOR TRADE. IF THIS RATE IS ADOPTED, TH E NET PROFIT MARGIN ON THE LIQUOR TRADE EXCEEDS 5%. THE LEARNED DR FURTHER SUBMITTED THAT MANY ASSESSES IN THIS LINE O F BUSINESS HAVE COME TO AN UNDERSTANDING WITH THE IT DEPARTMENT FOR ESTIMATION OF PROFIT AT 5% OF THE PURCHASES AND THE ITAT, HYDE RABAD BENCH ALSO DIRECTING FOR ESTIMATION OF PROFIT AT 5% ON PU RCHASES AND STOCKS PUT FOR SALE. 4. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED TH AT IN ASSESSEES OWN CASE THE ITAT HAS ACCEPTED THE GP RA TE OF THE ASSESSEE AT 3.68% FOR THE ASSESSMENT YEAR 2001-02 A ND 3% FOR 3 ITA NO. 1861 OF 2011 SRI MANJIT SINGH BAGGA, HYDERABAD. THE ASSESSMENT YEAR 2004-05. HE THEREFORE SUBMITTE D THAT THE PROFIT SHOWN BY THE ASSESSEE SHOULD BE ACCEPTED. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT IS A FACT THAT FOR THE ASSESSMENT YEA R 2004-05, THE ITAT HAS ACCEPTED THE GROSS PROFIT RATE AT 3% BY TH E ASSESSEE IN ITA 371/HYD/2009 DATED 30 TH SEPT. 2010. SUBSEQUENTLY, ITAT, HYDERABAD BENCH IN ITA NO.591/HYD/2011 DATED 28-7-2 011 IN CASE OF KANAKA DURGA WINES HAS ALSO HELD THAT ESTIM ATION OF NET PROFIT AT 3% ON PURCHASES OR STOCK PUT FOR SALE TO BE REASONABLE. HOWEVER, ITAT, HYDERABAD BENCH SUBSEQUENTLY, IN CAS E OF RAVINDRA REDDY IN ITA NO.127/HYD/2012 AFTER CONSIDE RING THE DEPARTMENTS ADDITIONAL CONTENTIONS HAS BEEN CONSI STENTLY HOLDING THAT ESTIMATION OF PROFIT FOR RETAIL TRADE OF LIQUOR SHOULD BE MADE AT 5% OF THE PURCHASES OR OF STOCK PUT FOR SALE. IN THE CHANGED SCENARIO FOLLOWING THE AFORESAID CONSISTENT VIEW OF THE TRIBUNAL AS DISCUSSED IN THE COURT, WE DIRECT THE A O TO ESTIMATE THE NET PROFIT RATE AT 5% OF THE PURCHASES OR STOCK PUT FOR SALE DURING THE ASSESSMENT YEAR SUBJECT TO THE ASSESSED INCOME NOT LESS THAN THE RETURNED INCOME. HENCE THIS GROUND N O.2 IS PARTLY ALLOWED. 6. SO FAR AS GROUND NO.3 IS CONCERNED, THE REVENUE HAS CHALLENGED THE ADDITION OF RS.19,42,106/-. IT IS E VIDENT FROM THE ORDER OF CIT (A) THAT APART FROM THE ADDITION OF RS .14,36,044/- THE CIT (A) HAS UPHELD THE OTHER ADDITIONS. THEREFO RE, THERE IS APPARENT MISTAKE IN THE GROUND RAISED BY THE REVEN UE. IN VIEW OF OUR DIRECTION IN GROUND NO.2, THIS GROUND HAS BE COME INFRUCTUOUS AND ACCORDINGLY DISMISSED AS SUCH. 4 ITA NO. 1861 OF 2011 SRI MANJIT SINGH BAGGA, HYDERABAD. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE COURT ON 10 - 8-2012. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 10 TH AUGUST, 2012. COPY TO:- 1) ITO, WARD-7(4), HYDERABAD. 2) SRI MANJIT SINGH BAGGA, 15-9-116, GOWLIGUDA, HYD ERABAD. 3) THE CIT (A)-VI, HYDERABAD 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 5 ITA NO. 1861 OF 2011 SRI MANJIT SINGH BAGGA, HYDERABAD.