Narasimha Chary , Siddipet V. Income Tax Officer, Ward-1, Hyderabad

ITA 263/Hyd/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1640 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-02-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 13-03-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TOTA SUBRAMANYAM
• Section: 142(1); 143(1); 201; 143(2); 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES SMC : HYDERABAD (THROUGH VIRTUAL CONFERENCE) BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER IT A NO. 263 /H/20 20 ASSESSMENT YEAR: 20 1 5 - 16 NARASIMHA CHARY SUTHARI, SIDDIPET. PAN EDUPS 7823 A VS. INCOME - TAX OFFICER, WARD 1 , SIDDIPET (APPELLANT) (RESPONDENT) ASSESSEE BY: NONE REVENUE BY: SHRI TOTA SUBRAMANYAM DATE OF HEARING: 04 /0 2 /2021 DATE OF PRONOUNCEMENT: 16 /0 2 /2021 O R D E R T H IS ASSESSEE S APPEAL FOR AY 201 5 - 1 6 IS DIRECTED AGAINST THE C I T(A) - 7 , HYDERABAD S ORDER DATED 1 4 / 0 6 / 20 20 PASSED IN CASE NO. 0152/ CIT(A) - 7/ 2017 - 18 INVOLVING PROCEEDINGS U/S 1 4 3(3) OF THE INCOME TAX ACT , 1961 ; IN SHORT THE ACT. CASE CALLED NUMBER OF TIMES . NONE APPEARED AT ASSESSEES BEHEST. I PROCEED TO DISPOSE OF THIS APPEAL EX - PARTE AGAINST THIS TAXPAYER THEREFORE. I TA NO. 263 /HYD/ 2020 NARASIMHA CHARI SUTHARI, HYD. : - 2 - : 2. I NOTICE AT THE OUTSET THAT ASSESSEE S INSTANT APPEAL SUFFERS FROM 584 DAYS DELAY IN FILING. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT DUE TO COLLECTING OF DOCUMENTS FROM THE DEPARTMENT CAUSED THE IMPUGNED DELAY RESULTING IN FILING OF THE INSTANT APP EAL. CASE LAW COLLECTOR LAND ACQUISITION VS MST. KATIJI & ORS, 1987 AIR 1353 (SC) AND UNIVERSITY OF DELHI VS. UNION OF INDIA, CIVIL APPEAL NO. 9488 & 9489/2019 DATED 17 DECEMBER, 2019, HOLD THAT SUCH A DELAY; SUPPORTED BY COGENT REASONS, DESERVES TO BE CONDONED SO AS TO MAKE WAY FOR THE CAUSE OF SUBSTANTIAL JUSTICE. I ACCORDINGLY HOLD THAT ASSESSEES IMPUGNED DELAY OF 584 DAYS IS NEITHER INTENTIONAL NOR DELIBERATE BUT DUE TO THE CIRCUMSTANCES BEYOND HIS CONTROL. CASE IS NOW TAKEN UP FOR ADJUDICATION ON MERITS. 3. WITH THE ABLE ASSISTANCE OF LEARNED DR, I NOTICE THAT CIT(A) GAS AFFIRMED ASSESSING OFFICERS ACTION ESTIMATING 5% INCOME COMPONENT OF ASSESSEES LIQUOR BUSINESS AS UNDER: - 4. GROUND NOS. 1 & 6 ARE GENERAL IN NATURE. GROUND NOS.2, 3 & 4 ARE AGAINST ESTIMATION OF INCOME FROM LIQUOR BUSINESS @ 5% OF THE COST OF GOODS SOLD. THE ASSESSING OFFICER HELD THAT THE CLAIM OF THE ASSESSEE FOR I TA NO. 263 /HYD/ 2020 NARASIMHA CHARI SUTHARI, HYD. : - 3 - : ESTIMATION OF INCOME FROM WINE BUSINESS @ 3% COULD NOT BE AC CEPTED IN ABSENCE OF PROPER MAINTENANCE OF BOOKS OF ACCOUNT AND NON PRODUCTION OF SALES INVOICES AND HENCE ESTIMATED INCOME @ 5% OF COST OF GOODS SOLD. 5. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED AS UNDER: 'THE AP PELLANT HEREIN IS AN INDIVIDUAL DERIVING INCOME FROM RETAIL WINE BUSINESS, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 23 - 07 - 2016 ADMITTING AN INCOME OF RS.3,01,310/ - . THE APPELLANT PARTICIPATED IN THE AUCTION FOR ALLOTMENT OF LICENSE FOR SALE OF LIQUOR AND WAS A SUCCESSFUL BIDDER FOR THE DESIGNATED AREA. DURING THE PREVIOUS YEAR RELEVANT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, SAME WINES SHOP SOLD TOTAL COST OF GOODS WERE RS.2,09,49,032/ - . THE APPELLANT ADMITTED AN INCOME FROM THE SALE OF TOTAL COST OF GOODS AS MENTIONED ABOVE WAS RS. 3,01,310/ - . IT IS SUBMITTED THAT WHILE FILING THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 23 - 07 - 2016, IN THE PROFIT AND LOSS A /C SUBMITTED BY THE APPELLANT THAT THE CO ST OF PURCHASES WERE RS.2,09,49,032/ - AND CLOSING STOCK WAS RS, 1,22,018/ - . IT IS FURTHER SUBMITTED THAT APART FROM THE LIQUOR SALES IN SAID WINES SHOP, THE RETURN OF INCOME FILED BY THE APPELLANT FOR THE YEAR 2015 - 16 UNDER CONSIDERATION SAME WAS PROCESS ED U/S 143(1) OF I T ACT AND THE SAME WAS COMPLETED. SUBSEQUENTLY, THE CASE CONVERTED INTO SCRUTINY ASSESSING OFFICER ISSUED NOTICES U/S 143(2) AND 142(1) OF I T ACT. IN RESPONSE TO THE SAID NOTICES, THE APPELLANT FILED A LETTER EXPLAINING THE DETAILS OF THE BUSINESS AND FURTHER THE ASSESSING OFFICER REQUIRED THE APPELLANT TO FILE DETAILS OF PURCHASE BILLS AND EXPENSES VOUCHERS ETC., AND IN RESPONSE THERETO, THE APPELLANT SUBMITTED ALL THE PURCHASE BILLS ALONG WITH EXPLANATION BEFORE THE ASSESSING OFFICER AND ALSO PRODUCED OTHER RELEVANT I TA NO. 263 /HYD/ 2020 NARASIMHA CHARI SUTHARI, HYD. : - 4 - : MATERIAL AS REQUIRED BY THE ASSESSING OFFICER. WITHOUT CONSIDERING THE SUBMISSIONS OF THE APPELLANT, THE ASSESSING OFFICER REJECTED ALL SUCH EXPLANATION AND ARRIVED AT THE NET PROFIT AT THE RATE OF 5% ON COST OF GOODS SOLD I.E, RS.2,09,49,032/ - (20949032 X 5/100 = RS.10,47,450/ - IN WINE SHOP BUSINESS AND BOOKS OF ACCOUNTS WERE REJECTED AND ESTIMATION OF 5% ON WINE SHOP IS ON HIGH SIDE. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, THE HON'BLE INCOME - TAX APPELLATE TRIBUNAL HAS BEEN CONSISTENTLY FOLLOWING THE ESTIMATE OF NET PROFIT AT 3% IN THE CASE OF WINE SHOPS. FURTHER, THE APPELLANT SUBMITS THAT THE MARGIN OF PROFIT IS VERY LOW COMPARING WITH OTHERS BECAUSE THE APPELLANT HAS TO SELL THE LIQUOR ON MRP RATES AND IF THERE IS ANY VIOLATION IN SELLING THE LIQUOR AGAINST THE NORMS PRESCRIBED, THE EXCISE AUTHORITIES WILL SEIZE THE SHOP FOR ONE MONTH. THEREFORE, THE APPELLANT IS VERY CAREFUL IN SELLING THE LIQUOR IN ACCORDANCE WITH THE NORMS PRESCRIBED BY THE GOVERNMENT. IN THE CIRCUMSTANCES, THE APPELLANT WAS GETTING VERY LOW PROFIT AND THEREFORE IT IS NOT JUSTIFIED THAT NET PROFIT SHOULD NOT BE TAKEN AT 5% IN THIS CASE. IN THIS VIEW OF THE MATTER AND CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCES OF INSTANT CASE, THE APPEL/ANT IS PRAYING BEFORE THE HON'BLE COMMISSIONER OF INCOME - TAX (APPEALS) TO KINDLY DIRECT THE ASSESSING OFFICER FOR ESTIMATING THE GROSS PROFIT AT 3% OR ACCEPT THE RETURNS OF INCOME FILED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. ' 6. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE ASSESSEE CAREFULLY. THE ASSESSING OFFICER ESTIMATED THE PROFITS OF THE BUSINESS OF THE APPELLANT AT 5% OF THE COST OF GOODS SOLD DUE TO NON PRODUCTION OF SALES INVOI CES, BILLS/VOUCHERS. THE APPELLANT DID NOT PRODUCE THE COPIES OF THE SALE BILLS, INVOICES SHOWING THE DETAILS I TA NO. 263 /HYD/ 2020 NARASIMHA CHARI SUTHARI, HYD. : - 5 - : OF THE GOODS SOLD, QUANTITY OF THE GOODS SOLD AND ITS RATE. NO PROPER VOUCHERS WERE ALSO FURNISHED BEFORE ASSESSING OFFICER IN RESPECT OF THE EXPE NSES CLAIMED. EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR OF THE APPELLANT DID NOT PRODUCE THE COPIES OF SALE BILLS SHOWING DETAILS OF THE GOODS SOLD AND RATE APPLIED. THE APPELLANT RELIED UPON VARIOUS DECISIONS OF THE ITAT WHEREIN NET PROFIT W AS ESTIMATED AT 3% OF COST OF GOODS SOLD IN LIQUOR TRADE. THE JURISDICTIONAL ITAT HAS TAKEN STAND IN NUMBER OF CASES THAT UNIFORM PROFIT CANNOT BE ADOPTED IN EACH AND EVERY CASE OF SIMILAR BUSINESS. THE RATIO OF VARIOUS DECISIONS CITED BY THE APPELLANT IS ALSO NOT APPLICABLE, AS EACH YEAR IS DIFFERENT AND MARGIN OF PROFIT VARIES EACH YEAR DEPENDING UPON THE NATURE OF PRODUCTS SOLD. THE FOLLOWING CASES DECIDED BY HON'BLE ITAT, HYDERABAD SUPPORT THE STAND OF THE AO THAT THE NET PROFIT AT THE RATE OF 50/0 OF C OST OF GOODS SOLD IS THE REASONABLE PROFIT THAT CAN BE DETERMINED IN THE ABSENCE OF PROPER BOOKS OF ACCOUNT. (I) ITO, SURYAPET VS SRI BEERAVELLI VENKAT REDDY & OTHERS ITA NOS.148 TO 177/HYD/12, DATED 07.05.2012. (II) P.NARSING RAO VS ITO, ITA NO.110/H/ 2012, DT 18.05.2012. (III) KANAKA DURGA WINES VS ITO, WARD - 9(3), HYDERABAD IN MA NO.217/ HYD/ 2011 (IN ITA NO,462/HYD/2011) DATED 18.05.2012 (IV) ITO, WARD - 2, HYDERABAD VS AMARAVATHI WINE SHOP, HYD IN ITA NO.1196/HYD/2011, DT 08.06.2012 (V) ITO, WARD - 1, NALGONDA VS SRI PRASAD BANDARU IN ITA NO.329/HYD/2013, DATED 03.10.2013. (VI) M/S. MALLIKHARJUNA BAR & RESTAURANT, CHAITANYAPURI, HYDERABAD IN ITA NO.186/HYD/2012, DT.28 - 06 - 2012. I TA NO. 263 /HYD/ 2020 NARASIMHA CHARI SUTHARI, HYD. : - 6 - : 6.1 THE HONBLE HIGH COURT OF AP IN THE CASE OF CIT VS. MEKALA BAL RE DDY IN ITA NO.28 & 29 OF 2013 DT. 30.07.2013 CONFIRMED THE DETERMINATION OF NET PROFIT FROM LIQUOR BUSINES~ AT 5% OF THE GOODS SOLD. 6.2 UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LO CATION OF THE BUSINESS, VOLUME OF TRADE DONE BY THE APPELLANT, NATURE OF THE BUSINESS DONE BY THE ASSESSEE, EXPERIENCE OF THE ASSESSEE IN):'HIS LINE OF BUSINESS, I CONSIDER THE NET PROFIT OF THE APPELLANT AT 5% THE C OST OF GOODS SOLD IN LIQUOR BUSINESS AS REASONABLE AND CONFIRM THE AD DITION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THE GROUND NOS.2, 3 & 4 OF APPEAL RAISED BY THE APPELLANT ARE REJECTED. 3. AFTER GIVING MY THOUGHTFUL CONSIDERATION OF LEARNED DRS S UBMISSIONS AND MATERIAL AVAILABLE ON RECORD, I FIND NO REASON TO SUSTAIN THE IMPUGNED PROFIT ESTIMATION AT 5% IN ENTIRETY AS THE FACT REMAINS THAT ASSESSEE IS IN LIQUOR BUSINESS GETTING SPECIFIED COMMISSION (S) RATES UNDER THE STATE EXCISE LAW/POLICY. THIS LIQUOR SALE BUSINESS ALSO DOES NOT INVOLVE ANY VALUE ADDITION ELEMENT IN THE PRODUCT SOLD. COMING TO JUDICIAL PRECEDEN T CONSIDERED IN THE CIT(A)S ORDER ESTIMATING 3% INCOME IN LIQUOR BUSINESS (SUPRA) , I AM OF THE OPINION THAT SUCH AN ESTIMATION CARR IES ONLY PERSUASIVE VALUE SINCE BASED ON FACTS AND CIRCUMSTANCES INVOLVED IN A PARTICULAR YEAR . LEARNED DR ALSO FAILS TO REBUT I TA NO. 263 /HYD/ 2020 NARASIMHA CHARI SUTHARI, HYD. : - 7 - : THE CLINCHING FACT THAT ASSESSING OFFICER HAS NOT TAKEN INTO CONSIDERATION ANY COMPARABLE CASE IN TH IS LINE OF LIQUOR BUSINESS SO A S TO ESTIMATE THE IMPUGNED INCOME @ 5%. IN THESE FACTS AND CIRCUMSTANCES, I HOLD THAT LUMPSUM PROFIT ELEMENT OF 4% IN TH IS CASE SHALL MEET THE ENDS OF JUSTICE WITH A RIDER THAT THE SAME SHALL NOT BE TAKEN AS PRECEDENT IN ANY OTHER CASE; WHATSOEVER. 4 . THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN ABOVE TERMS. PRONOUNCED IN THE OPEN COURT ON 16 TH FEBRUARY , 2021 . SD/ - ( S.S. GODARA ) JUDICIAL MEMBER HYDE RABAD, DATED : 16 TH FEBRUARY , 20 2 1 K V C OPY TO : 1 NARASIMHA CHARY SUTHARI, T. CHAITANYA KUMAR, ADVOCATE, FLAT NO. 102, GOWRI APTS., URDU LANE, HIMAYATHNAGAR, HYDERABAD. 2 ITO, WARD 1 , SIDDIPET 3 C I T(A) - 7 , HYDERABAD 4 PR. CIT - 7 , TIRUPATI 5 ITAT, DR, HYDERABAD. 6 GUARD FILE.