Adari Jagannadha Rao, Anakapalle V. THE CIT(A) - 2, Anakapalle

ITA 376/VIZ/2015

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9959 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 26-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SHANKAR NARAYANA
• Assessee Lawyers: K S S SARMA
• Keywords: Rejection of books of accounts

Judgement Text

ITA NO.376/VIZAG/2015 ADARI JAGANNADHA RAO, ANAKAPALLI 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER ./I.T.A.NO.376/VIZAG/2015 ( / ASSESSMENT YEAR: 2011-12) ADARI JAGANNADHA RAO, ANAKAPALLI VS. ITO, WARD - 1, ANAKAPALLI [PAN: ADKPA3447L ] ( / APPELLANT) ( ! / RESPONDENT) / APPELLANT BY : SHRI K.S.S. SARMA, AR / RESPONDENT BY : SHRI RAVI SHANKAR NARAYANA, DR / DATE OF HEARING : 01.08.2016 / DATE OF PRONOUNCEMENT : 12.08.2016 / 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 4.8.2015 FOR THE ASSE SSMENT YEAR 2011- 12. ITA NO.376/VIZAG/2015 ADARI JAGANNADHA RAO, ANAKAPALLI 2 2. FACTS ARE IN BRIEF THAT THE ASSESSEE HAS CARRIED ON IMFL (INDIAN MADE FOREIGN LIQUOR) BUSINESS AND FILED A RETURN OF INCOME BY DECLARING TOTAL INCOME OF ` 5,43,370/-. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (H EREINAFTER CALLED AS 'THE ACT') AND THE CASE OF THE ASSESSEE WAS SELECTE D FOR SCRUTINY AND AFTER DUE PROCESS ASSESSMENT WAS COMPLETED BY ESTIM ATING PROFIT FROM THE LIQUOR BUSINESS AT 20% OF THE STOCK PUT TO SALE WHICH WORKED OUT TO ` 26,83,058/- AND DETERMINED THE TOTAL INCOME OF ` 32,26,438/- ( ` 26,83,058/- + ` 5,43,370/-). ASSESSEE HAS CARRIED MATTER BEFORE T HE CIT(A). THE LD. CIT(A) HAS SCALED DOWN THE ESTIMAT ION MADE BY THE A.O. AND OBSERVED THAT IT IS REASONABLE TO ESTIMATE THE INCOME OF THE ASSESSEE AT 10%OF PURCHASES. ON BEING AGGRIEVED AS SESSEE CARRIED MATTER IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUN SEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEA L IS COVERED BY THE COORDINATE BENCH OF THE TRIBUNAL AND SUBMITTED THAT SAME MAY BE FOLLOWED. 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. THE ONLY ITA NO.376/VIZAG/2015 ADARI JAGANNADHA RAO, ANAKAPALLI 3 ISSUE FOR CONSIDERATION IS THE ESTIMATION OF PROFIT FROM LIQUOR BUSINESS OF THE ASSESSEE. THE A.O. HAS ESTIMATED AT 20% AND TH E CIT SCALED DOWN IT TO 10%. THE VERY SAME ISSUE OF ESTIMATION OF PR OFIT IN THE TRADE OF IMFL WAS CONSIDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF TANGUDU JOGISETTY IN ITA NO.96/VIZAG/2016 BY ORD ER DATED 2.6.2016 AND HELD THAT ESTIMATION OF 5% NET PROFIT ON PURCHA SE IS REASONABLE AND DIRECTED THE A.O. TO ESTIMATE THE NET PROFIT OF 5% ON TOTAL PURCHASES NET 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 FUR THER 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 ITA NO.376/VIZAG/2015 ADARI JAGANNADHA RAO, ANAKAPALLI 4 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 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. 4. IN VIEW OF THE ABOVE, I AM OF THE OPINION THAT I T IS REASONABLE TO ESTIMATE THE INCOME OF THE ASSESSEE AT 5% OF THE PU RCHASE PRICE AS AGAINST THE ESTIMATION DONE BY THE CIT(A). ACCORDI NGLY, I DIRECT THE A.O. TO RE-COMPUTE THE INCOME AT 5% OF THE PURCHASE PRICE. ITA NO.376/VIZAG/2015 ADARI JAGANNADHA RAO, ANAKAPALLI 5 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 12 TH AUG16. SD/- ( . ) (V. DURGA RAO) /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 12.08.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT ADARI JAGANNADHA RAO, C/O K.S.S. SARMA, CA, 12-5-25(A), NEW COLONY, ANAKAPALLE-531 001 2. / THE RESPONDENT THE ITO, WARD-1, ANAKAPALLE. 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