Dayyam Vasantha Rao, Visakhapatnam V. THE ITO, Srikakulam

ITA 21/VIZ/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2089 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 12-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R S NARAYAN
• Keywords: Rejection of books of accounts; Unexplained investment
• Section: 143(3)

Judgement Text

1 ITA NO S . 21 & 23 / VIZ /201 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER ITA NO. 2 1 & 23 / VIZ /201 5 (ASST. YEAR : 20 11 - 1 2 ) 1) DEYYAM VASANTHA RAO, J.R. PURAM, RANASTHALAM, SRIKAKULAM DISTRICT . PAN NO. AEYPV 6053 N VS. ITO , WARD - 1, SRIKAKULAM. 2) DEYYAM SRINIVASA RAO, J.R. PURAM, RANASTHALAM, SRIKAKULAM DISTRICT. PAN NO. BHVPS 8446 P (APPELLANT S ) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM FC A. DEPARTMENT BY : SHRI S.R.S. NARAYAN - DR DATE OF HEARING : 15 / 0 2 /201 7 . DATE OF PRONOUNCEMENT : 15 / 02 /201 7 . O R D E R THE S E ARE THE APPEAL S FILED BY THE DIFFERENT ASSESSEE S AGAINST THE SEPARATE ORDER S OF THE COMMISSIONER OF INCOME TAX (APPEALS), VISAKHAPATNAM , EACH DATED 13 / 11 /2014 FOR THE ASSESSMENT YEAR 2011 - 12 . SINCE THE ISSUE INVOLVED IN BOTH THE APPEALS IS SIMILAR , THEY ARE CLUBBED AND HEARD TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE S ARE INDIVIDUAL S CARRYING ON BUSINESS OF PURCHASE AND SALE OF IMFL (INDIAN MADE FOREIGN LIQUOR) IN SRIKAKULAM DISTRICT. THE ASSESSEE S HAD FILED RETURN S OF 2 ITA NO S . 21 & 23 / VIZ /201 5 INCOME BY DECLARING TOTAL INCOME OF 4,07,230/ - & 4,48,000/ - . THE RETURN S FILED BY THE ASSESSEE S WERE PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). LATER, AFTER FOLLOWING THE DUE PROCEDURE, ASSESSMENT S W ERE COMPLE TED U/S 143(3) OF THE ACT BY ESTIMATING INCOME OF 44,73,957/ - & 44,58,560/ - AT 20% OF THE STOCK PUT TO SALE. 3. ON APPEAL, THE LD. CIT(A) GRANTED A PARTIAL RELIEF TO THE ASSESSEE S BY SCALING DOWN THE PERCENTAGE FROM 20% TO 10% AND DIRECTED THE A.O. TO RE - COMPUTE THE INCOME AT 10% OF PURCHASE PRICE. 4 . ON BEING AGGRIEVED, ASSESSEE S CARRIED MATTER IN APPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE S HAS SUBMITTE D THAT THE ISSUE INVOLVED IN THE S E APPEAL S IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL WHERE THE TRIBUNAL HAS SCALED DOWN THE ESTIMATION OF PROFIT FROM 10% TO 5% IN THE CASE OF TANGUDU JOGISETTY IN I TA NO.96/VIZAG/2016 BY ORDER DATED 2.6.2016. 5 . ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORTED THE ORDER S PASSED BY THE AUTHORITIES BELOW. 6 . I HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY ISSUE INVOLVED IN TH E S E APPEAL IS ESTIMATION OF PROFIT IN RESPECT OF IMFL BUSINESS CARRIED BY THE ASSESSEE. IN THIS RESPECT, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF TANGUDU JOGISETTY (SUPRA) HAS CONSIDERED THE PROFI T LEVEL IN THE LINE OF BUSINESS AND DECIDED THAT 5% OF PURCHASE 3 ITA NO S . 21 & 23 / VIZ /201 5 PRICE IS REASONABLE PROFIT MARGIN IN THE LINE OF IMFL BUSINESS AND DIRECTED THE A.O. TO RE - COMPUTE THE PROFIT OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 8. WE H AVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES 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 PROFIT 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 THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THE CASE LAW RELIED UPON BY THE ASSESSEE 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 TRADING IN ARRACK, WHERE AS IT IS IN THE BUSINESS OF DEALING IN IMFL. THE ASSESSEE FURTHER CONTENDED THAT IMFL TRADE WAS CONTROLLED BY THE STATE GOVERNMENT THROUGH A.P. STATE BEVERAGES CORPORATION LTD. AND THE PRICES OF THE PRODUCTS ARE FIXED BY THE STATE GOVERNMENT. THE ASSESS EE BEING A LICENSE HOLDER OF STATE GOVERNMENT CANNOT SELL THE PRODUCTS OVER AND ABOVE THE MRP FIXED 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 RELYING UPON THE DECIS ION OF A.P. HIGH COURT IN THE CASE OF CIT VS. R. NARAYANA RAO IN ITA NO.3 OF 2003 WHICH IS RENDERED UNDER DIFFERENT FACTS. THE A.P. HIGH COURT HAS CONSIDERED THE CASE OF AN ARRACK DEALER, WHEREAS, THE ASSESSEE IS INTO THE BUSINESS OF DEALING IN IMFL. THE REFORE, WE ARE OF THE VIEW THAT THE A.O. WAS NOT JUSTIFIED IN RELYING UPON THE JUDGEMENT, WHICH WAS RENDERED UNDER DIFFERENT FACTS TO ESTIMATE THE NET PROFIT. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE, RELIED UPON THE DECISION OF ITAT, VISAKHAPATNA M BENCH 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 IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FINDS THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR C IRCUMSTANCES HELD THAT ESTIMATION OF 5% NET PROFIT ON PURCHASES IS REASONABLE. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. IT IS THE 4 ITA NO S . 21 & 23 / VIZ /201 5 CONTENTION OF THE LD. A.R. THAT THE ESTIMATION OF PROFIT AT 16% IS HIGH AND EXCESSIVE CONSIDERING THE NORMAL RATE OF PROFIT IN THIS LI NE 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 THAT THE ISSUE IS NO MORE RES INTEGRA IN VIEW OF A SERIES OF DECISIONS OF THE ITAT HYDERABAD BENCH IN SIMILAR C ASES. THE COORDINATE BENCH IN CASE OF ITA NO.127/HYD/12 AND OTHERS DATED 18.05.2012 AS WELL AS A NUMBER OF OTHER CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FOREIGN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASSESSEE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDERABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ESTIMATE THE PROFIT FROM THE WINE BUSINESS OF THE ASSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASES MADE NET OF ALL OTHER DEDUCTIONS. THE ASSESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INCOME DETERMINED SHOULD BE BELOW THE INCOME RETURNED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE RATIOS OF COORDINATE BENCH, WE ARE OF THE VIEW THAT THE NET PROFIT ESTIMATED BY THE A.O. BY RELYING UPON THE DECISION OF HONBLE A.P. HIGH COURT (SUPRA), WHICH WAS RENDERED UNDER DIFFERENT FACTS IS QUITE HIGH. ON THE OTHER HAND, THE ASSESSEE RELIED UPON THE DECISION OF COORDI NATE BENCH AND THE COORDINATE BENCH UNDER SIMILAR CIRCUMSTANCES ESTIMATED THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. NO CONTRARY DECISION IS PLACED ON RECORD BY THE REVENUE TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. THEREFORE, WE DIRECT THE A.O. TO ESTIMATE THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. ORDERED ACCORDINGLY. 7 . IN VIEW OF THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, I DIRECT THE A.O. TO RE - COMPUTE THE INCOME OF THE ASSESSEE S AT 5% OF PURCHASE PRICE. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE S IS ALLOWED. 8 . SO FAR AS UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE IS CONCERNED, AT THE TIME OF HEARING AUTHORIZED REPRESENTATIVE OF THE AS SESSEE SUBMITTED THAT HE DOES NOT WANT TO PRESS THIS GROUND. THE 5 ITA NO S . 21 & 23 / VIZ /201 5 DEPARTMENTAL REPRESENTATIVE HAS RAISED ANY OBJECTION. HENCE, THIS GROUND OF APPEAL RAISED BY THE ASSESSEES IS DISMISSED. 9 . IN THE RESULT, APPEAL S FILED BY THE ASSESSEE S ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF FEBRUARY , 201 7 . SD/ - ( V. DURGA RAO ) JUDICIAL MEMBER DATED : 15 TH FEBRUARY , 201 7 . VR/ - COPY TO: 1 . THE ASSESSEE. A) DEYYAM VASANTHA RAO, B) DEYYAM SRINIVASA RAO, BOTH ARE RESIDING AT J.R. PURAM, RANASTHALAM, SRIKAKULAM DIST. 2 . THE REVENUE - ITO, WARD - 1, SRIKAKULAM. 3 . THE CIT - 2, VISAKHAPATNAM. 4 . THE CIT(A) , VISAKHAPATNAM. 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR , I.T.A.T., VISAKHAPATNAM