Sri Palavalasa Srinivasa Rao., Srikakulam V. The ITO, Srikakulam

ITA 344/VIZ/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6502 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 12-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C DAS
• Assessee Lawyers: N O N E
• Keywords: Unexplained investment

Judgement Text

ITA NO.344/VIZAG/2016 SRI PALAVALASA SRINIVASA RAO, SRIKAKULAM DIST. 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . # % , ' BEFORE SHRI D. MANMOHAN, VICE PRESIDENT & SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./I.T.A.NO.344/VIZAG/2016 ( / ASSESSMENT YEAR: 2011-12) SRI PALAVALASA SRINIVASA RAO SRIKAKULAM DIST. ITO, WARD - 1, SRIKAKULAM [PAN NO. BJIPP0537R ] ( ) / APPELLANT) ( *+) / RESPONDENT) / APPELLANT BY : N O N E / RESPONDENT BY : SHRI K.C. DAS, DR / DATE OF HEARING : 04.12.2017 / DATE OF PRONOUNCEMENT : 06.12.2017 / O R D E R PER D. MANMOHAN, VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST OR DER OF THE CIT(A)-2, GUNTUR AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. THE CASE WAS POSTED FROM TIME TO TIME ON SEVERAL OCCASIONS B UT NONE APPEARED ON BEHALF OF THE ASSESSEE, THOUGH THE NOTICE WAS SE RVED UPON THE ITA NO.344/VIZAG/2016 SRI PALAVALASA SRINIVASA RAO, SRIKAKULAM DIST. 2 ASSESSEE. WE THEREFORE, PROCEED TO DISPOSE OF THE APPEAL EX-PARTE, QUA THE ASSESSEE. 2. FOLLOWING GROUNDS WERE URGED BEFORE THE TRIBUNAL : 1) THE IMPUGNED APPELLATE ORDER DATED 09-05-2016 PASSE D BY THE LEARNED CIT (APPEALS)-2, GUNTUR, CAMP AT VISAKHAPAT NAM IS UNJUST AND UNCALLED FOR. 2) THE LEARNED CIT(APPEALS) OUGHT TO HAVE CONSIDERED T HE GROUNDS AND CONTENTIONS RAISED BY THE APPELLANT AND ALSO OU GHT TO HAVE CONSIDERED THE JUDICIAL PRONOUNCEMENT DELIVERED BY THE HON'BLE ]TAT, VISAKHAPATNAM IN THE CASE OF MR.T. APPALA SWA MY IN WHICH IT WAS HELD THAT THE INCOME FROM BUSINESS IN IMEL AND B EER SHOULD BE ESTIMATED AT 5% ON PURCHASES AND OUGHT TO HAVE E STIMATED THE INCOME OF THE APPELLANT FROM WINE BUSINESS AT 5%, I N THE INTEREST OF JUSTICE AND THERE BY OUGHT TO HAVE DELETED THE A DDITION OF RS.15,68,728/- INSTEAD OF RS.10,45,818/-. 3) THE LEARNED CIT (APPEALS) OUGHT TO HAVE AFFORDED ON E MORE OPPORTUNITY AND FURTHER TIME TO THE APPELLANT TO FU RNISH THE NECESSARY INFORMATION AND DOCUMENTARY EVIDENCES IN RESPECT OF UNSECURED LOANS AGGREGATING TO RS. 1,66,000/- AND O UGHT NOT HAVE MADE THIS ADDITION, IN THE INTEREST OF JUSTICE. 4) THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECIA TED THE FACT THAT THE APPELLANT HAS GOT ABUNDANT AND SUFFICIENT SOURC ES TO MEET THE ALLEGED UNEXPLAINED INVESTMENT OF RS. 29,16,869/-, IN THE INTEREST OF JUSTICE. 5) THE LEARNED CIT (APPEALS) OUGHT TO HAVE APPRECIA TED THE FACT THAT ONCE THE LEARNED ASSESSING OFFICER RESORTED TO ESTI MATION OF INCOME FROM BUSINESS IN IMFL AND BEER OF THE APPELLANT THA N ADDITION TOWARDS ALLEGED UNEXPLAINED INVESTMENT WAS NOT AT A LL WARRANTED, IN THE INTEREST OF JUSTICE. 3. ASSESSEE IS ADMITTEDLY ENGAGED IN THE BUSINESS O F PURCHASE AND SALE OF IMFL. FOR THE YEAR UNDER CONSIDERATION, IT DECLARED SALE OF ` 1.50 CRORES ON WHICH GROSS PROFIT WAS SHOWN AS ` 46,42,490/- AND NET PROFIT OF ` 3,06,506/-, WHICH WORKS OUT TO A NET PROFIT OF 2.0 3%. SINCE THE ITA NO.344/VIZAG/2016 SRI PALAVALASA SRINIVASA RAO, SRIKAKULAM DIST. 3 BOOKS WERE NOT PROPERLY MAINTAINED WITH NECESSARY E VIDENCES, THE A.O. RESORTED TO ESTIMATE OF NET PROFIT AT 20% ON STOCK PUT TO SALE BY OBSERVING THAT THERE IS A COMMON PRACTICE OF SELLIN G LIQUOR AT A PRICE HIGHER THAN WHAT IS DETERMINED AS MRP AND IN FACT T HE SOLE SELLING AGENCY I.E. A.P. BEVERAGES CORPORATION FIXES THE PR ICE IN SUCH A MANNER THAT THE ASSESSEE EARNS A PROFIT OF 20% TO 25%. TH E A.O. ALSO MADE ADDITION OF ` 1,66,000/- TOWARDS UNSECURED LOANS IN THE ABSENCE OF DOCUMENTARY EVIDENCE. 4. ON APPEAL, LD. CIT(A) OBSERVED THAT THOUGH THE I TAT, VISAKHAPATNAM BENCH HAS ESTIMATED THE NET PROFIT UN DER SIMILAR CIRCUMSTANCES AT 5%, TRIBUNAL ADMITTED THAT THERE I S NO UNIFORM NET PROFIT RATE IN EACH AND EVERY CASE AND IT DEPENDS O N VARIOUS CIRCUMSTANCES. HE ACCORDINGLY, ESTIMATED THE INCOM E AT 10% OF THE PURCHASE PRICE. HE ALSO CONFIRMED THE ADDITION OF ` 1.66 LAKHS FOR WANT OF PROPER EVIDENCE. 5. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE LD. D.R. AND CAREFULLY PERUSED THE RECORD. THE ITAT, VISAKHAPATNAM BENCH HAS BEEN CONSISTENTLY TAK ING A VIEW THAT IN THE DISTRICT OF SRIKAKULAM, THE IMFL DEALERS ARE OR DINARILY EARNING INCOME WHICH WORKS OUT TO A GROSS PROFIT MARGIN OF 5% ON P URCHASE PRICE, AND THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVER ED IN THE CASE OF SRI ITA NO.344/VIZAG/2016 SRI PALAVALASA SRINIVASA RAO, SRIKAKULAM DIST. 4 VYSYARAJU SATYANARAYANA RAJU, SRIKAKULAM DIST. IN I TA 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 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 ITA NO.344/VIZAG/2016 SRI PALAVALASA SRINIVASA RAO, SRIKAKULAM DIST. 5 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 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. ITA NO.344/VIZAG/2016 SRI PALAVALASA SRINIVASA RAO, SRIKAKULAM DIST. 6 7. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE HOLD THAT ESTIMATE OF PROFIT AT 5% ON PURCHASE PRICE IS REASONABLE AND WE DIRECT THE A.O. ACCORDINGLY. 8. WITH REGARD TO THE NEXT ISSUE I.E. ADDITION OF ` 1.66 LAKHS TOWARDS UNSECURED LOANS, NO EVIDENCE WHATSOEVER WAS PRODUCE D BEFORE THE TRIBUNAL TO SUPPORT HIS CONTENTION THAT HE HAS PROP ER SOURCES FOR MAKING SUCH INVESTMENT. WE THEREFORE, DO NOT FIND ANY REA SON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ASPECT. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT O N 6 TH DEC17. SD/- SD/- ( . . # % ) ( . ) (D.S. SUNDER SINGH) (D. MANMOHAN) ' /ACCOUNTANT MEMBER /VICE PRESIDENT $ /VISAKHAPATNAM: ( /DATED : 06.12.2017 VG/SPS *$ +$ /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SRI PALAVALASA SRINIVASA RAO, S/ O APPALA SWAMY, PEDDA VEEDHI, REGIDI AMADALAVALASA, SRIKAKULAM DIST. 2. / THE RESPONDENT THE ITO, WARD-1, SRIKAKULAM 3. , / THE PRINCIPAL CIT-2, VISAKHAPATNAM 4. , ( ) / THE CIT (A)-2, GUNTUR 5. $ / , / , $ / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER