Duppalapudi Srinivasa Rao, Rajam V. THE ITO, Srikakulam

ITA 344/VIZ/2015

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9896 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 27-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M K SETHI

Judgement Text

ITA NO.344/VIZAG/2015 SRI DUPPALAPUDI SRINIVASA RAO, RAJAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER ./I.T.A.NO.344/VIZAG/2015 ( / ASSESSMENT YEAR: 2011-12) SRI DUPPALAPUDI SRINIVASA RAO SRIKAKULAM VS. ITO, WARD - 1, SRIKAKULAM [PAN: AHAPD0707A ] ( / APPELLANT) ( ! / RESPONDENT) / APPELLANT BY : SHRI K.V.R.K. SARMA, AR / RESPONDENT BY : SHRI M.K. SETHI, DR / DATE OF HEARING : 17.08.2016 / DATE OF PRONOUNCEMENT : 30.08.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-2, VISAKHAPATNAM DATED 17.6.2015 FOR THE ASS ESSMENT YEAR 2011-12. 2. THE FIRST GROUND OF APPEAL RAISED BY THE ASSESSE E IS IN RESPECT OF ESTIMATION OF INCOME FROM IMFL BUSINESS. WHEN THIS APPEAL IS TAKEN UP FOR HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS S UBMITTED THAT THE ITA NO.344/VIZAG/2015 SRI DUPPALAPUDI SRINIVASA RAO, RAJAM 2 ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED B Y THE COORDINATE BENCH ORDER OF THIS TRIBUNAL IN THE CASE OF OTHER ASSESSE ES WHO ARE CARRYING ON SIMILAR LINE OF BUSINESS AND SUBMITTED THAT THE SAM E MAY BE FOLLOWED AND INCOME OF THE ASSESSEE MAY BE ESTIMATED AT 5% O F THE PURCHASE PRICE. 3. ON THE OTHER HAND, THE LD. D.R. HAS SUPPORTED TH E ORDER PASSED BY THE AUTHORITIES BELOW. 4. I HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. I FIND THAT IN THIS CASE THE A.O. HAS ESTIMATED THE INCOME OF T HE ASSESSEE AT 20% OF THE PURCHASE PRICE. THE LD. CIT(A) HAS SCALED D OWN THE SAME TO 10%. THE COORDINATE BENCH OF THIS TRIBUNAL IN SIMI LAR LINE OF BUSINESS HAS CONSIDERED THE ESTIMATION OF PROFIT AT 5% OF PU RCHASE PRICE IN THE CASE OF SRI VYSYARAJU SATYANARAYANA RAJU, SRIKAKULA M DIST. IN ITA NO.2/VIZAG/2016, WHICH IS REPRODUCED AS UNDER: 3. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, THE LD. COUNSEL 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 W HERE 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. 4. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORT ED THE ORDER PASSED BY THE AUTHORITIES BELOW. 5. I HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERI ALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE ONLY ITA NO.344/VIZAG/2015 SRI DUPPALAPUDI SRINIVASA RAO, RAJAM 3 ISSUE INVOLVED IN THIS APPEAL IS ESTIMATION OF PROF IT IN RESPECT OF IMFL BUSINESS CARRIED BY THE ASSESSEE. IN THIS RESPECT, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF TANGUDU JOGISETTY (SUPR A) HAS CONSIDERED THE PROFIT LEVEL IN THE LINE OF BUSINESS AND DECIDED TH AT 5% OF PURCHASE PRICE IS REASONABLE PROFIT MARGIN IN THE LINE OF IMFL BUSI NESS 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 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. TH E A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO MAINTAIN S TOCK REGISTERS AND BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NO T SUSCEPTIBLE FOR VERIFICATION, THEREFORE REJECTED THE BOOKS OF ACCOU NTS AND ESTIMATED NET PROFIT OF 20% BY RELYING UPON THE DECISION OF HONB LE A.P. HIGH COURT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE NET PROF IT ESTIMATED BY THE A.O. IS QUITE HIGH WHEN COMPARED TO THE NATURE OF B USINESS 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 ASS ESSEE IS INTO THE BUSINESS OF TRADING IN ARRACK, WHEREAS IT IS IN THE BUSINESS OF DEALING IN IMFL. THE ASSESSEE FURTHER CONTENDED THAT IMFL TRA DE WAS CONTROLLED BY THE STATE GOVERNMENT THROUGH A.P. STATE BEVERAGE S CORPORATION LTD. AND THE PRICES OF THE PRODUCTS ARE FIXED BY THE STA TE 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 DE CISION 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 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 T HAT 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 C ASE AND FINDS THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CI RCUMSTANCES HELD THAT ESTIMATION OF 5% NET PROFIT ON PURCHASES IS REASONA BLE. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS O F THE REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON R ECORD. IT IS THE CONTENTION OF THE LD. A.R. THAT THE ESTIMATION OF P ROFIT AT 16% IS HIGH AND EXCESSIVE CONSIDERING THE NORMAL RATE OF P ROFIT IN THIS LINE ITA NO.344/VIZAG/2015 SRI DUPPALAPUDI SRINIVASA RAO, RAJAM 4 OF BUSINESS. WHEREAS, THE LD. D.R. SUPPORTED THE O RDER OF THE CIT(A). HAVING CONSIDERED THE SUBMISSIONS OF THE A SSESSEE, WE ARE OF THE VIEW THAT THE ISSUE IS NO MORE RES INTEG RA 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 A ND OTHERS DATED 18.05.2012 AS WELL AS A NUMBER OF OTHER 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 ASS ESSEE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDER ABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AS SESSING OFFICER TO ESTIMATE THE PROFIT FROM THE WINE BUSINESS OF THE A SSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASES MADE NET O F ALL OTHER DEDUCTIONS. THE ASSESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INCOME DETERMINED SHOULD BE BELOW THE I NCOME RETURNED. 9. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE RATIOS OF COORDINATE BEN CH, WE ARE OF THE VIEW THAT THE NET PROFIT ESTIMATED BY THE A.O. BY RELYIN G UPON THE DECISION OF HONBLE A.P. HIGH COURT (SUPRA), WHICH WAS RENDERED UNDER DIFFERENT FACTS IS QUITE HIGH. ON THE OTHER HAND, THE ASSESS EE RELIED UPON THE DECISION OF COORDINATE BENCH AND THE COORDINATE BEN CH UNDER SIMILAR CIRCUMSTANCES ESTIMATED THE NET PROFIT OF 5% ON TOT AL 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 DEDUCTIO NS. ORDERED ACCORDINGLY. 5. IN VIEW OF THE ABOVE ORDER OF THE COORDINATE BEN CH OF THE TRIBUNAL, I DIRECT THE A.O. TO RE-COMPUTE THE INCOM E OF THE ASSESSEE AT 5% OF PURCHASE PRICE. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 6. THE SECOND GROUND OF APPEAL RAISED BY THE ASSESS EE IS RELATING TO UNSECURED LOANS OF ` 10,35,000/-, ADDITION OF ` 7,40,000/- IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED THAT ASSESS EE HAS MADE A TOTAL INVESTMENT OF ` 26,36,330/- TOWARDS THE FIRST INSTALMENT OF LICENS E FEE OF ITA NO.344/VIZAG/2015 SRI DUPPALAPUDI SRINIVASA RAO, RAJAM 5 ` 19,29,120/-, FDR OF ` 4,11,600/-, BG COMMISSION OF ` 1,47,912/- AND FIRST PURCHASE OF LIQUOR OF ` 1,47,698/-. THE A.O. HAS ASKED THE ASSESSEE TO EXPLAIN SOURCE OF SAID INVESTMENT. THE ASSESSEE HAS EXPLAINED THAT CLOSING CAPITAL OF ` 10,80,742/- AS ON 31.3.2010, UNSECURED LOANS OF ` 10,35,000/- AND THE AMOUNT OF ` 7,40,000/- BEING UNSECURED CREDITS, WHICH IS OFFERED FOR TAXATION. THE A.O. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, HE HAS OBSERVED THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE HIS CASE IN RES PECT OF UNSECURED LOAN OF ` 10,35,000/-. ACCORDINGLY, A.O. MADE AN ADDITION O F ` 10,35,000/- AND ALSO MADE ADDITION OF ` 7,40,000/- WHICH IS OFFERED BY THE ASSESSEE. ACCORDINGLY, ASSESSMENT WAS COMPLETED. 7. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE CIT(A). 8. THE LD. CIT(A) SIMPLY CONFIRMED THE ORDER OF THE A.O. BEFORE ME, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE A.O. MADE ` 10,35,000/- AS WELL AS ` 7,40,000/- IN RESPECT OF UNSECURED LOANS AND SUBMITTED THAT ASSESSEE MAY BE ALLOWED TO CLAIM SET OFF AGAINST THE AMOUNT OF ` 7,40,000/- OFFERED BY HIM. THE LD. COUNSEL FOR TH E ASSESSEE HAS FURTHER SUBMITTED THAT NEITHER A.O. NO R CIT(A) PROPERLY ITA NO.344/VIZAG/2015 SRI DUPPALAPUDI SRINIVASA RAO, RAJAM 6 EXAMINED THE ISSUE. THE ISSUE MAY BE REMITTED BACK TO THE FILE OF CIT(A). 9. ON THE OTHER HAND, THE LD. D.R. SUPPORTED THE OR DER PASSED BY THE AUTHORITIES BELOW. 10. AFTER HEARING BOTH THE SIDES, I FIND THAT NEITH ER A.O. NOR CIT(A) PROPERLY EXAMINED THE CLAIM OF THE ASSESSEE IN RESP ECT OF ADDITION OF ` 10,35,000/- & ` 7,40,000/-, THEREFORE, THE ORDER OF THE LD. CIT(A) IS SET ASIDE AND DIRECTED THE CIT(A) TO CONSIDER THE REQUE ST OF THE ASSESSEE FOR SET OFF, AFTER EXAMINING ALL THE DETAILS, DE-NOVO, IN ACCORDANCE WITH LAW. THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 30 TH AUG16. SD/- ( . ) (V. DURGA RAO) /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 30.08.2016 VG/SPS ITA NO.344/VIZAG/2015 SRI DUPPALAPUDI SRINIVASA RAO, RAJAM 7 '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SHRI K.V.R.K. SARMA, B.COM., BL, D.NO.13-3/1-1, NEAR INDIAN BANK, SUJATHANAGAR, VISAKHAPATNAM-530 051. 2. / THE RESPONDENT THE ITO, WARD-1, SRIKAKULAM-532 001. 3. ) / THE CIT-2, VISAKHAPATNAM 4. ) ( ) / THE CIT(A)-2, VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM