Mallaiah Rajender Kumar Kalvakunta, Hyderabad V. Income Tax Officer, Ward-1, Hyderabad

ITA 358/Hyd/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8952 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 03-07-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 21-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K KOMALI KRISHNA
• Assessee Lawyers: A SANDHYA
• Keywords: Business income
• Section: 234B; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMANY , ACCOUNTANT MEMBER ITA NO. 358/HYD/2018 (ASSESSMENT YEAR: 2014 - 15 ) SRI MALLAIAH RAJENDER KUMAR KALVAKUNTA PROP. DIWAKAR WINES FLAT NO.201 SAI KRISHNA RESIDENCY NEW BUS STAND SANGA REDDY 502 001 PAN:AMRPK8302Q VS INCOME TAX OFFICER WARD 1 SIDDIPET (APPELLANT) (RESPONDENT) FOR ASSESSEE : SMT.A.SANDHYA, A.R. FOR REVENUE : SMT. K.KOMALI KRISHNA , D R O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2014 - 15 AGAINST THE ORDER OF THE CIT (A) - 7, HYDERABAD, DATED 21.12.2017 . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE , AN INDIVIDUAL , IS CARRYING ON RETAIL BUSINESS IN LIQUOR. HE FILED HIS RETURN OF INCOME FOR A.Y. 2014 - 15 ON 11.10.2014 ADMITTING TOTAL INCOME OF RS.11,02,350/ - . DURING THE ASSESSMENT PROCEEDINGS U/S 143( 3 ) OF THE ACT, PURSUANT TO SELECTION OF RETURN UNDER CASS, NOTICES FOR HEARING WERE ISSUED TO THE A SSESSEE. HOWEVER, NONE APPEARED FOR THE ASSESSEE. THEREFORE, THE DATE OF HEARING: 03.07. 2019 DATE OF PRONOUNCEMENT: 10 . 0 7 .2019 ITA NO. 358/HYD/2018 A.Y. 2014 - 15 SRI MALLIAH RAJENDER KUMAR KALVAKUNTA VS. ITO, WARD 1 2 A.O. PROCEEDED TO COMPLETE THE ASSESSMENT EX PARTE U/S 144 OF THE ACT. ACCORDINGLY , HE ESTIMATED NET PROFIT OF ASSESSEE AT 5% OF THE STOCK PUT TO SALE CLEAR OF ALL EXPENSES. THEREAFTER , THE AO ALSO NOTICED THAT THE ASSESSEE HAS EARNED INCOME OF RS.35,800/ - FROM SALE OF CARTONS AND RS.9,22,317/ - AS INCENTIVE RECEIVED AND ADMITTED BY ASSESSEE UNDER SEPARATE HEAD. THUS A TOTAL ADDITION OF RS.42,96,712/ - WAS MADE. 3. AGGRIEVED , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO AND ASSESSEE IS NOW IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL. 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED CIT(A) ERRE D IN ESTIMATING THE INCOME AT 5% OF THE COST OF GOODS. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.35,800/ - MADE BY THE AO REPRESENTING THE SALE OF CARTONS AND RS.9,22,317/ - REPRESENTING THE INCENTIVES RECEIVED. THE LEARNED CIT(A) OUGHT T O HAVE SEEN THAT THESE TWO AMOUNTS ARE A PART OF THE BUSINESS RECEIPTS AND CANNOT SEPARATELY BE ADDED WHEN THE NET INCOME IS ESTIMATED. 4. THE LEARNED CIT(A) ERRED IN CONFIRMING CHARGING OF INTEREST U/S 234A OF RS.5,333/ - AND U/S 234B OF RS.1,75,989/ - . 5. ANY OTHER GROUND OR GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS IN THE BUSINESS OF RETAIL TRADE OF LIQUOR, AND IN SIMILAR CASES THIS TRIBUNAL WAS PLEASED TO RESTRICT THE ESTIMAT ION OF NET PROFIT AT 3% OF THE COST OF GOODS PUT TO SALE. SHE SUBMITTED THAT THE INCOME FROM SALE OF CARTONS AND ALSO INCENTIVES IS ALSO PART OF BUSINESS INCOME AND, THEREFORE, WHEN NET INCOME IS ESTIMATED, NO FURTHER ADDITION OF THESE AMOUNTS IS REQUIRED. 5. THE LEARNED DR , ON THE OTHER HAND , SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. ITA NO. 358/HYD/2018 A.Y. 2014 - 15 SRI MALLIAH RAJENDER KUMAR KALVAKUNTA VS. ITO, WARD 1 3 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT IN SIMILAR CASES THIS TRIBUNAL HAS BEEN ESTIMATING NET PROFIT FROM THE SALE OF LIQUOR AT 3% OF THE COST OF GOODS PUT TO SALE. FOR THE SAKE OF CONVENIENCE AND READY REFERENCE, RELEVANT PARAS IN THE CASE OF M/S. SAI VE NKATESWARA WINES IN ITA NO. 1198/HYD/2015, DT. 20 - 11 - 2015 ARE REPRODUCED HERE: 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT AND THEREFORE, THE ESTIMATION OF INCOME IS JUSTIFIED. IT IS ONLY THE RATE AT WHICH THE INCOME IS TO BE ESTIMATED IS BEFORE US. A.O. HAS ESTIMATED THE INCOME AT 5% OF THE COST OF GOODS SOLD, WHILE THE ASSESSEE IS SEE KING THE ESTIMATION AT 3% OF THE COST OF GOODS SOLD. WE FIND THAT IN THE CASE OF VENKATESWARA WINES, NIZAMABAD (SUPRA), THE COORDINATE BENCH OF THIS TRIBUNAL HAS TAKEN NOTE OF THE DECISION OF HONBLE HIGH COURT OF TELANGANA AND ANDHRA PRADESH IN THE CASE O F CIT VS. KAMLEKAR SHANKAR LAL (SUPRA) TO HOLD AS UNDER : 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE AO HAS CALLED FOR BOOKS OF ACCOUNT OF THE ASSESSEE BUT THE ASSESSEE HAD FAILED TO PRODUCE THE SAME. THEREFO RE, AO HAD ESTIMATED THE INCOME OF THE ASSESSEE AT 2.5% OF THE TURNOVER. THE CIT WANTS THE SAME TO BE ESTIMATED AT 5% OF THE TOTAL TURNOVER BECAUSE THE TRIBUNAL IN THE CASE OF AN ASSESSEE CARRYING ON THE SAME BUSINESS OF SALE OF IMFL HAS ESTIMATED THE INCO ME AT 5% OF THE TURNOVER. THIS, IN OUR VIEW, IS NOT JUSTIFIED AS HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL. THE UNIFORM NET PROFIT CANNOT BE ADOPTED IN EACH AND EVERY CASE OF SIMILAR BUSINESS. ESTIMATION OF NET PROFIT MUST BE ON THE BASIS OF FACTS INVO LVED IN EACH AND EVERY CASE. THEREFORE, IN OUR VIEW, THERE IS NO ERROR COMMITTED BY THE AO IN ESTIMATING THE PROFIT AT 2.5% OF THE TOTAL TURNOVER. THUS GROUNDS OF APPEAL NO.2 & 3 ARE ALLOWED. 5.1. IN THE CASE BEFORE US, THE ASSESSEE IS AGREEABLE TO THE ES TIMATION OF INCOME AT 3% OF THE COST OF GOODS SOLD. AS THE FACTS BEFORE US ARE SIMILAR TO THE FACTS BEFORE THE TRIBUNAL IN THE CASE OF VENKATESWARA WINES, NIZAMABAD (SUPRA) AND THE UNIFORM RATE OF PROFIT CANNOT BE ADOPTED IN THE CASE OF EVERY ASSESSEE IN S IMILAR BUSINESS, WE ALLOW GROUND NO.2 OF THE ASSESSEE. 7. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO TO ESTIMATE NET PROFIT AT 3 % OF THE COST OF GOODS PUT TO SALE. THUS GROUND OF APPEAL NO.2 IS ALLOWED. 8. AS REGARDS THE INCOME FROM SALE OF CARTONS AND THE RECEIPT OF INCENTIVES IS CONCERNED, WE FIND THAT THOUGH THEY ARE ALSO EMANATING FROM THE BUSINESS OF ITA NO. 358/HYD/2018 A.Y. 2014 - 15 SRI MALLIAH RAJENDER KUMAR KALVAKUNTA VS. ITO, WARD 1 4 SALE OF LIQUOR, THE INCOME FROM SALE OF CARTONS IS LIKE INCOME FROM SCRAP IS MISCE LLANEOUS SOURCE, AND INCENTIVES ARE ALSO RECEIVED F OR REACHING THE TARGET OF SALE OF LIQUOR. THEREFORE, THEY ARE NOT PART OF ESTIMATED INCOME FROM SALE OF LIQUOR AND THUS HAVE TO BE BROUGHT TO TAX AS THE SE ARE FROM AN OTHER SOURCE. THEREFORE, THE GROUND OF APPEAL NO.3 IS REJECTED. 9. AS REGARDS GROUND NO.4 RELATING TO CHARGING OF INTEREST U/S 234A AND 234B OF THE ACT IS CONCERNED, WE FIND THAT IT IS CONSEQUENTIAL IN NATURE AND AO IS DIRECTED TO GIVE CONSEQUENTIAL RELIEF, I F ANY, TO THE ASSESSEE. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH JULY, 2019 . SD/ - SD/ - ( A.MOHAN ALANKAMANY ) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER D ATED : 10 T H JULY, 2019 . *GMV COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT/ACIT 4. DR 5. GUARD FILE // COPY // BY ORDER ASST. REGISTRAR, ITAT, HYDERABAD BENCHES, HYDERABAD. ITA NO. 358/HYD/2018 A.Y. 2014 - 15 SRI MALLIAH RAJENDER KUMAR KALVAKUNTA VS. ITO, WARD 1 5 1 DRAFT DICTATED ON 03.07. 19 2 DRAFT PLACED BEFORE THE AUTHOR 04.07.19 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 DRAFT APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR.PS 6 KEPT FOR PRONOUNCEMENT 7 FILE SENT TO BENCH CLERK