M/s Vijaya Sai Wines, V. THE ITO, Rajahmundry

ITA 281/VIZ/2015

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9681 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M.K. SETHI
• 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; 142(1); 143(2)

Judgement Text

ITA NO.281/VIZAG/2015 M/S. VIJAYA SAI WINES, RAJAHMUNDRY 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.281/VIZAG/2015 ( / ASSESSMENT YEAR: 2010-11) M/S. VIJAYA SAI WINES, RAJAHMUNDRY VS. ITO, WARD - 3, RAJAHMUNDRY [PAN: AAHFV5315J ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : N O N E / RESPONDENT BY : SHRI M.K. SETHI, DR / DATE OF HEARING : 30.11.2016 / DATE OF PRONOUNCEMENT : 09.12.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE CIT(A), RAJAHMUNDRY DATED 19.3.2015 AND IT PERTAINS TO THE ASSESSMENT YEAR 2010-11. ITA NO.281/VIZAG/2015 M/S. VIJAYA SAI WINES, RAJAHMUNDRY 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF RETAIL TRADING IN I MFL, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 15.9.2010 DECLARING TOTAL INCOME OF ` 1,99,880/-. THE CASE HAS BEEN SELECTED FOR SCRUTI NY AND ACCORDINGLY NOTICES U/S 143(2) & 142(1) OF THE INCO ME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT') WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED THE INFORMATION CALLED FOR. THE ASSE SSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 26.3.2013 DETERM INING TOTAL INCOME OF ` 30,85,200/-, BY ESTIMATING NET PROFIT OF 20% ON NE T PURCHASES/STOCK PUT TO SALE. AGGRIEVED BY THE ASSESSMENT ORDER, TH E ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) FOR THE RE ASONS RECORDED IN HIS ORDER, SCALED DOWN ESTIMATION OF NET PROFIT FROM 20 % TO 10% OF NET PURCHASES/STOCK PUT TO SALE. AGGRIEVED BY THE CIT( A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 3. WHEN THIS APPEAL IS TAKEN UP FOR HEARING, THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF ITAT, VISAKHAPATNAM IN T HE CASE OF SHRI TANGUDU JOGISETTY IN ITA NO.96/VIZAG/2016, WHEREIN THE ITAT UNDER ITA NO.281/VIZAG/2015 M/S. VIJAYA SAI WINES, RAJAHMUNDRY 3 SIMILAR SET OF FACTS HAS DIRECTED THE A.O. TO ESTIM ATE NET PROFIT OF 5% ON NET PURCHASES/STOCK PUT TO SALE NET OF ALL DEDUCTIO NS. 4. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORD ER OF LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. ESTIMATED NET PROFIT OF 20% ON NET PURCHASES/S TOCK PUT TO SALE BY REJECTING BOOKS OF ACCOUNTS U/S 145 OF THE ACT. TH E A.O. WAS OF THE OPINION THAT THE ASSESSEES BOOKS OF ACCOUNTS ARE N OT SUSCEPTIBLE FOR VERIFICATION AND ALSO THE ASSESSEE FAILED TO SUBSTA NTIATE EXPENDITURE DEBITED TO P&L ACCOUNT WITH NECESSARY EVIDENCES, TH EREFORE, REJECTED BOOKS OF ACCOUNTS AND ESTIMATED NET PROFIT OF 20% N ET PURCHASES. IT IS THE CONTENTION OF THE ASSESSEE THAT NET PROFIT ESTI MATED BY THE A.O. IS HIGHER SIDE. THE ASSESSEE FURTHER SUBMITTED THAT T HE JURISDICTIONAL ITAT IN SIMILAR TYPE OF CASES HAS DIRECTED THE A.O. TO E STIMATE NET PROFIT OF 5% ON STOCK PUT TO SALE NET OF ALL DEDUCTIONS. IN THIS CONNECTION, RELIED UPON THE DECISION OF ITAT, VISAKHAPATNAM IN THE CAS E TANGUDU JOGISETTY IN ITA NO.96/VIZAG/2016. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES DIREC TED THE A.O. TO ESTIMATE NET PROFIT OF 5% ON STOCK PUT TO SALE NET OF ALL DEDUCTIONS. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUND ER: ITA NO.281/VIZAG/2015 M/S. VIJAYA SAI WINES, RAJAHMUNDRY 4 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES 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 PR OFIT 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 TH E ASSESSEE. IT IS FURTHER SUBMITTED THAT THE CASE LAW RELIED UPON BY THE ASSE SSEE 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 TRADI NG IN ARRACK, WHEREAS IT IS IN THE BUSINESS OF DEALING IN IMFL. THE ASSESSEE FURT HER CONTENDED THAT IMFL TRADE WAS CONTROLLED BY THE STATE GOVERNMENT THROUG H 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 FIX ED 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 RELYI NG UPON THE DECISION OF A.P. HIGH COURT IN THE CASE OF CIT VS. R. NARAYANA RAO I N ITA NO.3 OF 2003 WHICH IS RENDERED UNDER DIFFERENT FACTS. THE A.P. HIGH C OURT HAS CONSIDERED THE CASE OF AN ARRACK 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 U NDER 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 BEN CH 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 I N THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FINDS THAT THE COORDINATE BENC H OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HELD THAT ESTIMATION OF 5% NE T PROFIT ON PURCHASES IS REASONABLE. THE RELEVANT PORTION OF THE ORDER IS R EPRODUCED HEREUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS O F 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 HI GH 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 THA T 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 CASE OF ITA NO.127/HYD/12 AND OTHERS DATED 18.05.2012 AS WELL AS A NUMBER OF OTHE R CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FOREI GN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASSESS EE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDERABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICE R TO ESTIMATE THE PROFIT FROM THE WINE BUSINESS OF THE ASSESSEE BY APPLYING THE RATE OF 5% OF THE ITA NO.281/VIZAG/2015 M/S. VIJAYA SAI WINES, RAJAHMUNDRY 5 PURCHASES MADE NET OF ALL OTHER DEDUCTIONS. THE AS SESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INCOME DETERM INED 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 I S QUITE HIGH. ON THE OTHER HAND, THE ASSESSEE RELIED UPON THE DECISION OF COOR DINATE BENCH AND THE COORDINATE BENCH UNDER SIMILAR CIRCUMSTANCES ESTIMA TED THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. NO CONTR ARY 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 DIREC T THE A.O. TO ESTIMATE THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDU CTIONS. ORDERED ACCORDINGLY. 6. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE AND ALSO RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE B ENCH OF ITAT, VISAKHAPATNAM IN THE CASE OF TANGUDU JOGISETTY VS. ITO (SUPRA), WE DIRECT THE A.O. TO ESTIMATE NET PROFIT OF 5% ON NET PURCHASES/STOCK PUT TO SALE NET OF ALL DEDUCTIONS. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 9 TH DEC16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 09.12.2016 VG/SPS ITA NO.281/VIZAG/2015 M/S. VIJAYA SAI WINES, RAJAHMUNDRY 6 )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT M/S. VIJAYA SAI WINES, D.NO.7-3- 43/1, NEAR VIJAYA TALKIES, MAIN ROAD, RAJAHMUNDRY 2. / THE RESPONDENT THE ITO, WARD-3, RAJAHMUNDRY 3. + / THE CIT, RAJAHMUNDRY 4. + ( ) / THE CIT (A), RAJAHMUNDRY 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM SL. NO. DESCRIPTION DATE INITIALS 1. DATE OF DICTATION BY THE AUTHOR 30.11.2016 SR.P S 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 30.11.2 016 SR.PS 3. DRAFT PLACED BEFORE THE SECOND MEMBER SR. PS 4. DRAFT APPROVED BY THE SECOND MEMBER SR. PS 5. DATE OF APPROVED ORDER COMES TO THE SR. PS SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER SR. PS 7. DATE OF FILE SENT TO THE BENCH CLERK SR. PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK HD. C LK 9. DATE OF DISPATCH OF ORDER SR. PS