Gudla Mothilal, Visakhapatnam V. THE ITO, Visakhapatnam

ITA 365/VIZ/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1011 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 05-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S RAVI SANKAR NARAYAN
• Keywords: Rejection of books of accounts

Judgement Text

ITA NO.365/VIZAG/2015 GUDLA MOTHILAL, VISAKHAPATNAM 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.365/VIZAG/2015 ( / ASSESSMENT YEAR: 2011-12) GUDLA MOTHILAL, VISAKHAPATNAM VS. ITO, WARD - 4(2), VISAKHAPATNAM [PAN: APQPG0151F ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI S. RAVI SANKAR NARAYAN, DR / DATE OF HEARING : 01.07.2016 / DATE OF PRONOUNCEMENT : 22.07.2016 / 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 4.8.2015 FOR THE ASSE SSMENT YEAR 2011- 12. ITA NO.365/VIZAG/2015 GUDLA MOTHILAL, VISAKHAPATNAM 2 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS IN THE B USINESS OF IMFL AND FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.7,94,000/-. THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS C OMPLETED BY DETERMINING TOTAL INCOME OF RS.43,73,007/- BY ESTIM ATING THE INCOME AT 20% OF THE STOCK PUT TO SALE AFTER DEDUCTION OF THE INCOME OFFERED BY THE ASSESSEE OF RS.7,94,000/-. IN THE ASSESSMENT O RDER, THE A.O. HAS OBSERVED THAT THE ASSESSEE HAS MADE PURCHASES TO TH E TUNE OF RS.2,18,65,033/- AND DECLARED SALES OF RS.2,90,12,6 06/- AND ADMITTED NET PROFIT OF RS.7,94,000/-. THE A.O. CALLED UPON THE ASSESSEE TO PRODUCE THE BILLS AND VOUCHERS FOR THE LIQUOR SALES SUPPORTING THE EVIDENCES FOR THE EXPENDITURE CLAIMED. THE ASSESSE E FAILED TO PRODUCE THE SALE BILLS AND STOCK REGISTER, THEREFORE, THE A .O. REJECTED THE BOOKS OF ACCOUNTS AS UNRELIABLE AND ESTIMATED THE NET PRO FIT AT 20% OF THE STOCK PUT FOR SALE. 3. ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE CIT (A) AND SUBMITTED THAT THE ESTIMATION MADE BY THE A.O. IS EXCESSIVE A ND THE PROFIT MARGIN IN THE IMFL TRADE WILL BE 3 TO 5% AND PRAYED THAT A DDITION MADE BY THE A.O. MAY BE RESTRICTED FROM 3 TO 5%. THE CIT(A) AF TER CONSIDERING THE EXPLANATION OF THE ASSESSEE RESTRICTED THE DISALLOW ANCE MADE BY THE ITA NO.365/VIZAG/2015 GUDLA MOTHILAL, VISAKHAPATNAM 3 A.O. AT 10% OF THE PURCHASE PRICE AND DIRECTED THE A.O. TO RECOMPUTE THE INCOME. 4. ON BEING AGGRIEVED ASSESSEE CARRIED THE MATTER I N APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE COORDINATE BENCH OF THE TRIBUNAL IN THE SIMILAR LIN ES OF THE BUSINESS CONSIDERED THE VERY SIMILAR ISSUE AND RESTRICTED TH E ESTIMATION AT 5% OF THE PURCHASE PRICE, IN ITA NOS.65&66/VIZAG/2012 DAT ED 3.3.2014 IN THE CASE OF T. APPALASWAMY AND SUBMITTED THAT THE SAME MAY BE FOLLOWED. 6. THE LD. D.R. HAS SUPPORTED THE ORDER PASSED BY T HE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE N RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. 8. THE VERY SAME ISSUE OF ESTIMATION OF PROFIT IN T HE TRADE OF IMFL WAS CONSIDERED BY THE COORDINATE BENCH OF THE TRIBU NAL IN THE CASE OF TANGUDU JOGISETTY IN ITA NO.96/VIZAG/2016 BY ORDER DATED 2.6.2016 AND HELD THAT ESTIMATION OF 5% NET PROFIT ON PURCHASE I S REASONABLE AND DIRECTED THE A.O. TO ESTIMATE THE NET PROFIT OF 5% ON TOTAL PURCHASES NET ITA NO.365/VIZAG/2015 GUDLA MOTHILAL, VISAKHAPATNAM 4 OF ALL DEDUCTIONS. THE RELEVANT PORTION OF THE ORD ER 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. 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 ITA NO.365/VIZAG/2015 GUDLA MOTHILAL, VISAKHAPATNAM 5 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 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. 9. WE RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL, WE SET ASIDE THE ORDER PASSED BY T HE LD. CIT(A) AND DIRECT TO REMIT MATTER BACK TO THE A.O. TO ESTIMATE THE PROFIT FROM THE BUSINESS OF THE ASSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASES MADE NET OF ALL OTHER DEDUCTIONS. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22 ND JUL16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 22.07.2016 VG/SPS ITA NO.365/VIZAG/2015 GUDLA MOTHILAL, VISAKHAPATNAM 6 '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT GUDLA MOTHILAL, D.NO.2-157-3, BU TCHIRAJUPALEM, VISAKHAPATNAM 2. / THE RESPONDENT THE ITO, WARD-4(2), VISAKHAPATN AM 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