Sri Singitha Sai Rama Murthy, Pinapalla V. The ITO, Rajahmundry

ITA 260/VIZ/2016

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9612 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 02-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92

Judgement Text

ITA NO. 260 /V IZ /2016 SRI SANGITA SAI RAMA MURTHY 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER . / I . T .A.NO. 2 60/VIZ / 2016 ( / ASSESSMENT YEAR: 2011 - 12 ) SRI SANGITA SAI RAMA MURTHY, D.NO. 1 - 150, C/O SANGITA SAI GUNARANJAN HOUSE, PINAPALLA, ALAMURU MANDAL, E. G. DIST. VS. ITO, WARD - 3 , RAJAHMUNDRY. [PAN: CUPPS 3668 M ] ( / APPELLAN T) ( / RESPONDENT) / APPELLANT BY : SHRI C. SUBRAHMANYAM CA / RESPONDENT BY : SHRI T. SATYAN DHAM - DR / DATE OF HEARING : 26 . 12 .2016 / DATE OF PRONOUNCEMENT : 28 .12 .2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), RAJAHMUNDRY , DATED 09/02/2016 FOR THE ASSESSMENT YEAR 2011 - 12. ITA NO. 260 /V IZ /2016 SRI SANGITA SAI RAMA MURTHY 2 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS OF IMFL (INDIAN M ADE FOREIGN LIQUOR) , FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,92,788/ - . THE CASE WAS SELE C TED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SECTI ON 143(3) OF THE ACT BY ESTIMATING THE INCOME FROM THE BUSINESS AT 20%. 3. ON APPEAL, THE LD. CIT(A) SCA LED DOWN THE INCOME FROM 20% TO 10% AND DIRECTED THE A.O. TO RE - COMPUT E THE INCOME AT 10% OF PURCHASE PRICE. 4 . ON BEING AGGRIEVED, ASSESSEE CARRIED MA TTER IN APPEAL BEFORE THE TRIBUNAL. A T THE TIME OF HEARING, THE LD. C OUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL WHERE THE TRIBUNAL HAS SCALED DO WN THE ESTIMATION OF PROFIT FROM 10% TO 5% IN THE CASE OF TANGUDU JOGISETTY IN ITA 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 THIS APPEAL IS ESTIMATION OF PROFIT IN RESPECT OF IMFL ITA NO. 260 /V IZ /2016 SRI SANGITA SAI RAMA MURTHY 3 BUSINESS CARRIED BY THE ASSESSEE. IN THIS RESPECT, THE COORDINATE BENCH OF T H IS TRIBUNAL IN THE CASE OF TANGUDU JOGISETTY (SUPRA) HAS CONSIDERED THE PROFIT LEVEL IN THE LINE OF BUSINESS AND DECIDED THAT 5% OF PURCHASE PRICE IS REASONABLE PROFIT MARGIN IN THE LINE OF IMFL BUSINESS AND DIRECTED THE A.O. TO RE - COMPUTE THE PROFIT OF T HE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 8. WE HAVE 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 MAIN TAINED 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 ESTIMAT ED 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. HI GH COURT WAS THAT THE ASSESSEE IS INTO THE BUSINESS OF TRADING IN ARRACK, WHEREAS 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 ASSESSEE 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 DECISION 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 ARR ACK 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 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, VISAKHAPATNAM 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 PRE SENT CASE AND FINDS THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HELD ITA NO. 260 /V IZ /2016 SRI SANGITA SAI RAMA MURTHY 4 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, PERUSE D THE ORDERS OF 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 HIGH 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 THAT 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 CA SE 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 DECISI ON 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 T HE 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 COORDINATE BENCH AND THE COORDINATE BE NCH 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. THEREFOR E, 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 ESTIMATE THE NET PROFIT AT 5% OF PURCHASE PRICE. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. ITA NO. 260 /V IZ /2016 SRI SANGITA SAI RAMA MURTHY 5 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE . O RDER PRONOUNCED IN THE OPEN C OURT ON 28 TH THIS DAY OF DEC 20 16 . S D/ - ( . ) (V. DURGA RAO) /JUDICIAL MEMBER /VISAKHAPATNAM: /DATED : 28 /12/2016 V R / - / COPY OF THE ORDER FORWARDED TO : - 1. / THE APPELLANT SRI SANGITA SAI RAMA MURTHY, D.NO. 1 - 150, C/O SANGITA SAI GUNARANJAN HOUSE, PINAPALLA, ALAMURU MA NDAL, E. G. DIST. 2. / THE RESPONDENT ITO, WARD - 3, RAJAHMUNDRY. 3. / THE CIT, RAJAHMUNDRY. 4 . ( ) / THE CIT(A) , RAJAHMUNDRY . 5 . , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // (SR.PRIVATE SECRETARY) , / ITAT, VISAKHAPATNAM