V. Venkateswarulu, Visakhapatnam V. The ITO, Anakapalle

ITA 292/VIZ/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8893 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 25-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R S NARAYAN
• Keywords: Rejection of books of accounts; Unexplained investment; Gift; Additional evidence; Reasonable cause
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, HON'BLE JUDICIAL MEMBER ITA NO. 292/VIZ/2016 (ASST. YEAR : 2011-12) V. VENKATESWARULU, PROP. KAMESWARAMMATHALLI WINES, D.NO. 49-27-4/1, MADHURANAGAR, VISAKHAPATNAM. VS. ITO, WARD-1, ANAKAPALLI. PAN NO. AAUPV 2664 D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM FCA. DEPARTMENT BY : SHRI S.R.S. NARAYAN - SR. DR DATE OF HEARING : 29/05/2017. DATE OF PRONOUNCEMENT : 31/05/2017. O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, GUNTUR, DATED 10/03/2016 FOR THE ASSESSMENT YEAR 2011-12. 2. THE FIRST GROUND OF APPEAL RELATING TO ESTIMATION OF INCOME. ASSESSEE IS AN INDIVIDUAL CARRYING ON THE BUSINESS OF PURCHASE AND SALE OF IMFL, FILED HIS RETURN OF INCOME BY DECLARING INCOME OF 1,80,430/-. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). LATER, AFTER FOLLOWING THE DUE PROCEDURE, ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT BY ESTIMATING THE PROFIT AT 20% OF THE STOCK PUT TO SALE. 2 ITA NO. 292/VIZ/2016 [V. VENKATESWARULU] 3. ON APPEAL, THE LD. CIT(A) GRANTED A PARTIAL RELIEF TO THE ASSESSEE 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 CARRIED MATTER IN APPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, AUTHORIZED REPRESENTATIVE 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 DOWN 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 ORDERS 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 BUSINESS CARRIED BY THE ASSESSEE. IN THIS RESPECT, THE COORDINATE BENCH OF THE 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 THE 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 3 ITA NO. 292/VIZ/2016 [V. VENKATESWARULU] 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, 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 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 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 PRESENT CASE AND FINDS THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES 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 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 CASE OF ITA NO.127/HYD/12 AND OTHERS 4 ITA NO. 292/VIZ/2016 [V. VENKATESWARULU] 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 COORDINATE 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 AT 5% OF PURCHASE PRICE. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 8 . THE SECOND GROUND OF APPEAL RELATING TO UNEXPLAINED INVESTMENT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS ASKED THE SOURCE OF 4,01,079/-. THE ASSESSEE HAS NOT FILED ANY DETAILS, THEREFORE, THE ASSESSING OFFICER HAS TREATED THE INVESTMENTS MADE BY THE ASSESSEE AS UNEXPLAINED INVESTMENT AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5 ITA NO. 292/VIZ/2016 [V. VENKATESWARULU] 9 . ON APPEAL EVEN BEFORE THE LD. CIT(A) THE ASSESSEE HAS NOT FIELD ANY DETAILS, THEREFORE, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 10 . ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 11 . BEFORE THE TRIBUNAL, THE ASSESSEE HAS FILED A PETITION UNDER RULE 29 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 WHEREIN HE STATED THAT WHEREAS, IT IS SUBMITTED BEFORE THIS HON'BLE ITAT THAT THE RELEVANT EVIDENCE COULD NOT BE PRODUCED BEFORE THE LOWER AUTHORITIES SINCE THE ASSESSEE, AS HE WAS PERUSING TO GATHER THE INFORMATION, COULD NOT DO SO WHEN THE MATTER HAS COME UP BEFORE THE LOWER AUTHORITIES. BESIDES, ASSESSEE BEING ILLITERATE IS NOT AWARE OF THE INCOME TAX PROCEDURES, THEREFORE, COULD NOT DO THE NEEDFUL. THIS WAY THE ASSESSEE WAS PREVENTED BY A REASONABLE CAUSE, BEING UNABLE TO PRODUCE EVIDENCES BEFORE THE AUTHORITIES. 12. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEES WIFE IS A TEACHER AND SHE GAVE A GIFT OF 4,01,079/- TO THE ASSESSEE. HE PRAYED THAT ADDITIONAL EVIDENCE MAY BE ADMITTED AND THE ADDITIONS MAY BE DELETED. 13. ON THE OTHER HAND, DEPARTMENTAL REPRESENTATIVE HAS POINTED OUT THAT THE ASSESSEE HAS NOT FILED ANY DETAILS BEFORE THE ASSESSING OFFICER EVEN BEFORE THE LD. CIT(A). THE ADDITIONAL EVIDENCE FILED AT THIS STAGE 6 ITA NO. 292/VIZ/2016 [V. VENKATESWARULU] CANNOT BE ADMITTED AND SUBMITTED THAT ADDITIONS CONFIRMED BY THE LD.CIT(A) MAY BE UPHELD. 14. I HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 15. SO FAR AS INVESTMENT OF 4,01,079/- IS CONCERNED, THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION AND ALSO NOT FILED ANY DETAILS BEFORE THE ASSESSING OFFICER, THEREFORE, THE ASSESSING OFFICER HAS TREATED THE IMPUGNED AMOUNT AS UNEXPLAINED INCOME AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. NOW, THE ASSESSEE FILED A PETITION FOR ADMISSION OF ADDITIONAL EVIDENCE, WHEREIN HE STATED THAT HE IS PURSUING TO GATHER THE INFORMATION. HE HAS NOT SPECIFICALLY MENTIONED THAT WHAT IS PURSUING TO GATHER THE INFORMATION. I FIND THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS A VAGUE AND I AM OF THE OPINION THAT THE REQUEST MADE BY THE ASSESSEE CANNOT BE ACCEPTED. THUS, THIS PETITION FILED BY THE ASSESSEE FOR ADMISSION OF ADDITIONAL EVIDENCE IS REJECTED. 16. SO FAR AS MERITS OF THE CASE IS CONCERNED, THE ASSESSEE EXCEPT STATING THAT HIS WIFE HAS GIVEN A GIFT TO THE TUNE OF 4,01,079/-, NO OTHER MATERIAL HAS PLACED BEFORE ME. THEREFORE, I FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 7 ITA NO. 292/VIZ/2016 [V. VENKATESWARULU] 17. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF MAY, 2017. SD/- (V. DURGA RAO) JUDICIAL MEMBER DATED : 31 ST MAY, 2017. VR/- COPY TO: 1. THE ASSESSEE V. VENKATESWARULU, PROP. KAMESWARAMMATHALLI WINES, D.NO. 49-27-4/1, MADHURANAGAR, VISAKHAPATNAM. 2. THE REVENUE ITO, WARD-1, ANAKAPALLI. 3. THE PCIT-2, VISAKHAPATNAM. 4. THE CIT(A)-2, GUNTUR. 5. THE D.R., VISAKHAPATNAM. 6. GUARD FILE. BY ORDER