Vishnu Molakala Lakshmi Prasad, Hyderabad V. Income Tax Officer, Ward-2, Khammam

ITA 2043/Hyd/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0603 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-08-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 07-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K J DIVYA
• Assessee Lawyers: Y V BHANU NARAYAN RAO
• Section: 143(3); 142(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 2 04 3 /HYD/201 7 ASSESSMENT YEAR: 20 1 1 - 12 VISHNU MOLAKALA LAKSHMI PRASAD, KHAMMAM PAN AASPV 7688K VS. INCOME - TAX OFFICER, WARD 2, KHAMMAM ( APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI Y.V. BHANU NARAYAN RAO REVENUE BY : SMT. K.J. DIVYA DATE OF HEARING 06 / 0 8 /2018 DATE OF PRONOUNCEMENT 19 / 0 9 / 201 8 O R D E R PER S . RIFAUR RAHMAN , A .M. : T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 01 / 08 / 201 7 OF CIT(A) 7 , HYDERABAD FOR AY 20 1 1 - 1 2 . 2. BRIEFLY THE FACTS OF THE CASE ARE, THE ASSESSEE, AN INDIVIDUAL, D E RIVING INCOME FROM BUSINESS IN PURCHASE AND SALE OF LIQUOR IN THE NAME AND STYLE OF KOTHAGUDEM WINES AND KAVERI RESTAURANT & BAR, FILED HIS RETURN OF INCOME FOR AY 2011 - 12 ON 29/03/2012 ADMITTING TOTAL INCOME OF RS. 8,34,670/ - , WHICH WAS PROCESSED U/S 143(1) OF THE INCOME - TAX ACT, 1961 ( IN SHORT THE ACT). NOTICE U/S 148 DATED 04/12/201 2 WAS ISSUED TO THE ASSESSEE AND IN RESPONSE TO THE SAME, THE ASSESSEE FILED A LETTER ON 08/10/2013 AND SUBMITTED THAT THE RETURN OF INCOME FILED EARLIER MAY BE TREATED AS IN RESPONSE TO THE NOTICE U/S 148. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) WERE ISSUED. IN RESPONSE TO THE SAID NOTICES, THE ASSESSE E FILED INFORMATION CALLED FOR. 2 ITA NO. 2043 /HYD/1 7 VISHNU MOLAKALA LAKSHMI PRASAD . 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO REJECTED THE AUDITED BOOKS OF ACCOUNT OF THE ASSESSEE AND COMPLETED THE ASSESSMENT BY ESTIMATING THE INCOME FROM BUSINESS @ 8% OF COST OF GOODS PUT TO SALE IN CASE OF BAR AND RESTAURANT AND @ 5% IN CASE OF WINE BUSINESS. THUS, THE INCOME FROM BUSINESS WAS ASSESSED AT RS. 12,25,390/ - AS AGAINST THE ADMITTED INCOME OF RS. 7,39,180/ - BY ESTIMATING THE SAME AS UNDER: I) NET PROFIT FROM KAVERI RESTAURANT AND BAR RS. 2,70,730/ - II) NET PROFIT FROM KOTHAGUDEN WINES RS. 9,54,660/ - . 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), IT WAS CONTENDED THAT THE AO ESTIMATED THE INCOME IS ON HIGHER SIDE CONSIDERING THE FACT THAT BUSINESS IS PREDO MINANTLY CARRIED OUT IN MOFUSIL AREA. REFERRING TO THE DECISIONS OF THE ITAT, HYDERABAD, THE ASSESSEE SUBMITTED THAT ESTIMATION OF NET PROFIT @ 3% OF GOODS PUT TO SALE IN CASE OF WINE BUSINESS IS REASONABLE AND ESTIMATION OF NET PROFIT @ 8% OF COST OF GOOD S PUT TO SALE IN CASE OF BAR AND RESTAURANT IS ON HIGHER SIDE. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) CONFIRMED THE ORDER OF AO. 6. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 7, HYDERABAD IS ERR ONEOUS AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 7, HYDERABAD OUGHT NOT TO HAVE DISMISSED THE APPEAL FILED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 7, HYDERABAD ERRED BY NOT CONSIDERING THE ISSUE OF VALIDITY OF ISSUE OF NOTICE 3 ITA NO. 2043 /HYD/1 7 VISHNU MOLAKALA LAKSHMI PRASAD . U/S. 148 AND THE SUBSEQUENT COMPLETION OF ASSESSMENT UNDER SECTION 143(3) R.W.S 147. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 7, HYDERABAD ERRED IN UPHOLDING THE ORDERS PASSED BY THE LEARNED ASSESSING OFFICER BY MAKING AN ADDITION OF RS. 9,05,010/ - BY ESTIMATING THE INCOME @ 8% OF COST OF SALES IN THE CASE OF BAR & RESTAURANT AN D @ 5% OF COST OF SALES IN THE CASE OF WINES BUSINESS, WHICH ESTIMATION IS ON THE HIGHER SIDE. 5 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 7, HYDERABAD ERRED BY CONFIRMING THE ACT OF THE LEARNED ASSESSING OFFICER IN REJECTING THE AUDITED BOOKS OF ACCOUNTS. 7. GROUND NOS. 1, 2 & 5 ARE GENERAL IN NATURE, HENCE, NEED NO ADJUDICATION. 8. AS REGARDS GROUND NO. 3 REGARDING VALIDITY OF ISSUE OF NOTICE U/S 148 AND THE SUBSEQUENT COMPLETION OF ASSESS MENT UNDER SECTION 143(3) RWS 147 OF THE ACT, WE FIND THAT THERE IS NO DISCUSSION ABOUT THIS ISSUE BY THE CIT(A), THOUGH THE ASSESSEE HAS RAISED THIS GROUND BEF ORE HIM. WE NOTICE THAT THE ASSESSMENT COMPLETED U/S 143(1) AND NOT U/S 143(3) AND THERE WAS NO OPPORTUNITY FOR THE AO TO FORM AN OPINION. SUBSEQUENTLY, IT WAS NOTICED BY THE AO THAT THE INCOME WAS ESCAPED ASSESSMENT. ACCORDINGLY, NOTICE WAS ISSUED AND ASSESSMENT WAS COMPLETED U/S 1 43(3) R.W.S. 147. WE DO NOT SEE ANY ISSUE WITH THE COMPLETION OF ASS ESSMENT OR ISSUE OF NOTICE U/S 148. THEREFORE, GROUND RAISED BY THE ASSESSEE IS DISMISSED. 9 . CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. AS REGARDS GROUND NO. 4, T HE COORDINATE BENCHES OF THIS TRIBUNAL CONSISTENTLY TAKING VIEW THAT ESTIMATION OF INCOME AT 3% OF THE COST OF THE GOODS SOLD IS REASONABLE IN TH E LINE OF WINE BUSINESS. IN THIS CONNECTION, WE REFER TO THE LATEST DECISION OF THE SMC BENCH IN THE CASE OF SRI KARATAM LAXMAIAH IN ITA NO. 22/HYD/2018, ORDER DATED 09/05/2018 WHEREIN IT WAS HELD AS UNDER: 4 ITA NO. 2043 /HYD/1 7 VISHNU MOLAKALA LAKSHMI PRASAD . 4. AFTER HEARING RIVAL CONTENTIONS I FIND THAT THERE IS A CLEAVAGE OF OPINION BETWEEN DIFFERENT BENCHES OF THE ITAT ON THIS ISSUE AS TO WHETHER THE PERCENTAGE SHOULD BE 3% OR 5 %. AS THE DECISION IN THE CASE OF SHRI LATE MUSHKAM, ADILABAD (SUPRA), AND IN TH E CASE OF SHRI BADRI SRINIVAS AND OTHERS VS. ITO IN ITA NOS. 1515, 1516, 1517 & 1518/HYD/2017, DATED 08.02.2018 WHICH IS THE LATEST ORDER'S ON THIS ISSUE, I PREFER TO FOLLOW THE SAME AND DIRECT THE A.O TO ESTIMATE THE INCOME OF THE ASSESSEE @ 3% OF COST OF SALES OF STOCK FOR THE IMPUGNED ASSESSMENT YEAR. 9 .1 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. HA VING 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 TAKE N NOTE OF THE DECISION OF HON'BLE HIGH COURT OF TELANGANA AND ANDHRA PRADESH INITA.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 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 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 PR OFIT 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 GOODS SOLD AS THE INCOME OF THE ASSESSEE RELATING TO WINE BUSINESS. 5 ITA NO. 2043 /HYD/1 7 VISHNU MOLAKALA LAKSHMI PRASAD . 9.2 AS REGARDS ESTIMATION OF INCOME @ 8% OF COST OF SALES IN THE CASE OF BAR & RESTAURANT, WE CONFIRM THE FINDINGS OF AO AS THE SAME WAS IN LINE WITH THE PROVISIONS OF SECTION 44AD. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 19 TH SEPTEMBER , 2018 . SD/ - SD/ - ( P. MADHAVI DEVI ) (S . RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 19 TH SEPTEMBER, 2018 KV C OPY TO: - 1) VISHNU MOLAKALA LAKSHMI PRASAD, C/O YV BHANU NARAYAN RAO, C A., 10 - 2 - 195, OPP. DECCAN CLUB, EAST MARREDPALLY, SECUNDERABAD 5000026 2) ITO, WARD 2 , KHAMMAM 3) CIT(A) 7 HYDERABAD. 4) PR. CIT - 7 , HYD. 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE