Tanneeru Madhava Rao, Khammam V. Ncome Tax Officer, Ward-1, Kothagudem

ITA 42/Hyd/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6475 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 23-07-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 04-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 42/HYD/2018 ASSESSMENT YEAR: 2014-15 SRI TANNEERU MADHAVA RAO, ENKOOR (M), KESUPALLI (V), KHAMMAM DIST., [PAN: AQKPT2965M] VS THE INCOME TAX OFFICER, WARD-1, KOTHAGUDEM (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS, AR FOR REVENUE : SHRI NILANJAN DEY, DR DATE OF HEARING : 23-07-2018 DATE OF PRONOUNCEMENT : 27-07-2018 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-7, HYDERABAD, DATED 20-10-2017, CONFIRMING THE ACTION OF THE ASSESSING OFF ICER (AO) IN REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE NET PROFIT AT 5%. 2. BRIEF FACTS OF THE CASE ARE THAT, ASSESSEE IS AN IND IVIDUAL, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UND ER CONSIDERATION, ADMITTING TOTAL INCOME AT RS. 9,00,850/-. IN THE SCRUTINY ASSESSMENT PROCEEDINGS, AFTER VERIFICATION O F VARIOUS DETAILS, AO WAS OF THE OPINION THAT THE BOOKS OF ACCOUNT I.T.A. NO. 42/HYD/2018 :- 2 - : CANNOT BE RELIED UPON AND RESORTED TO ESTIMATION OF NE T PROFIT AT 5% OF THE PURCHASE OR STOCK PUT TO SALE AT RS. 5,32,9 3,799/ WHICH WORKED OUT TO RS. 26,64,690/-. AGGRIEVED, ASSES SEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER C ONSIDERING ASSESSEES SUBMISSIONS AND FOLLOWING VARIOUS DECISI ONS OF CO- ORDINATE BENCHES, CONFIRMED THE ESTIMATION AT 5%. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 3. EVEN THOUGH ASSESSEE WAS CHALLENGING THE REJECTION OF BOOKS OF ACCOUNT, LD. COUNSEL RESTRICTED THE ARGUMENTS TO THE GROUNDS RAISED AT NOS. 3 & 4 I.E., ESTIMATION OF INCO ME AT 5% IS ON HIGHER SIDE AND VARIOUS CO-ORDINATE BENCHES HA VE DETERMINED THE PROFIT AT 3% OF THE STOCK PUT TO SALE. LD. COUNSEL FILED THE DECISIONS OF CO-ORDINATE BENCH IN T HE FOLLOWING CASES: I. SECUNDERABAD WINES VS. ITO IN ITA NO. 181/HYD/2016, DT. 20-07-2016; II. ITO VS. M/S. MALLIKHARJUNA BAR & RESTAURANT IN ITA NO . 186/HYD/2012, DT. 28-06-2012; III. SHRI G. SUDARSHAN VS. ITO IN ITA NO. 126/HYD/2012, DT. 04-05-2012; IV. ITO VS. M/S. SAPTAGIRI WINES IN ITA NO. 03/HYD/2012 , DT. 04-05-2012; V. ITO VS. M/S. SRI MATHA WINES (ITA NO. 137/HYD/2012) & ITO VS. M/S. SRI SHIVA GANGA WINES (ITA NO. 138/HYD/2012), DT. 04-05-2012; I.T.A. NO. 42/HYD/2018 :- 3 - : 4. LD.DR, HOWEVER, SUBMITTED THAT LD.CIT(A) HAS FAIRLY CONSIDERED AS ESTIMATED BY THE AO AND RELIED ON VARIO US CO- ORDINATE BENCH DECISIONS AS MENTIONED BY CIT(A) IN THE IMPUGNED ORDER. 5. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS PLACED ON RECORD. AT THE TIME OF HEARING, LD. COUNSEL FOR ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN FAV OUR OF ASSESSEE BY THE DECISION OF CO-ORDINATE BENCH IN THE C ASE OF SECUNDERABAD WINES VS. ITO IN ITA NO. 181/HYD/2016, DT. 20-07-2016, WHEREIN THAT BENCH HAS FOLLOWED THE DECISI ON OF A BENCH OF THIS TRIBUNAL IN THE CASE OF SRI VENKATES WARA WINES IN ITA NO. 1206/HYD/2015, DT. 27-11-2015, WHER EIN AFTER TAKING INTO CONSIDERATION SIMILAR CIRCUMSTANCES, THE TRIBUNAL HAS UPHELD THE ESTIMATION OF INCOME AT 3% OF T HE COST OF THE GOODS SOLD. 5.1. IN THE CASE OF SURAJ HARJANI VS. ITO IN ITA NO. 1745/HYD/2017, DT. 11-04-2018, THE CO-ORDINATE BENCH H AS HELD AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PE RUSED THE MATERIAL ON RECORD. THERE IS NO DISPUTE WITH REFER ENCE TO THE FACT THAT BOOKS OF ACCOUNT ARE TO BE REJECTED AND THE INCOME IS TO BE ESTIMATED. AO ESTIMATED THE INCOME @ 5% RELYING ON VARIOUS CO- ORDINATE BENCH DECISIONS, WHICH WAS CONFIRMED BY THE CIT(A). HOWE VER, PERUSING THE VARIOUS ORDERS INDICATE THAT A UNIFORM NET PROFIT C ANNOT BE ADOPTED IN EACH AND EVERY CASE OF SIMILAR BUSINESS. THE ESTIMA TION OF NET PROFIT MAY BE ON THE BASIS OF THE FACTS INVOLVED IN EACH A ND EVERY CASE. IN ALL THE ORDERS RELIED UPON BEFORE US, ESTIMATION OF INCOME IS VARYING FROM 2.5% TO 5%. THE LATEST ORDER BY THE SMC BENCH IN THE GROUP CASE OF BADRI SRINIVAS VS. ITO (SUPRA) IS @ 3%. IN THE SAID CASE, THE BENCH HAS CONSIDERED THE ISSUE AS UNDER: I.T.A. NO. 42/HYD/2018 :- 4 - : 11. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S AND PERUSED THE RECORD. A.O. AS WELL AS LD. CIT (A) HAVE RELIED UPON THE DECISIONS OF THE ITAT RENDERED IN 2011 / 2012 WHEREAS THE ASSESSING O FFICER, UNDER SIMILAR CIRCUMSTANCES, MADE SCRUTINY ASSESSMENTS WHE REIN THE STRINGENT CHANGE IN POLICY AS WELL AS IMPACT OF THE H IGH COURT DIRECTIONS WERE TAKEN INTO CONSIDERATION FOR THE PUR POSE OF ESTIMATING THE NET INCOME @ 3% AND IN FACT IN THE LAT ER DECISIONS OF THE TRIBUNAL, THE NET INCOME WAS ESTIMATED @ 3% OF T HE COST OF GOODS SOLD. UNDER THESE CIRCUMSTANCES, CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL, CITED (SUPRA), I DIRECT THE A.O. TO ADO PT 3% OF THE COST OF THE GOODS SOLD AS THE INCOME OF THE ASSESSEES. 5.1. KEEPING IN VIEW THE LATEST ORDER OF THE SMC BE NCH AND THE REASONS GIVEN THEREIN, WE ARE OF THE OPINION THAT E STIMATION OF INCOME @ 3% WOULD BE REASONABLE ON THE FACTS OF THE CASE. HOWEVER, AO IS DIRECTED TO KEEP IN MIND THAT THE ESTIMATED INCOME DOES NOT FALL LESS THAN THE PROFIT DECLARED BY ASSESSEE, IN WHICH CASE THE PROFIT DECLARED BY ASSESSEE SHOULD BE ACCEPTED. SUBJECT TO ABOVE DIRECTION, AO IS DIRECTED TO ESTIMATE THE PROFIT @ 3% OF THE C OST OF STOCK PUT TO SALE AND RE-DETERMINE THE TOTAL INCOME, ACCORDIN GLY. 5.2. IN THE OTHER CASES ALSO RELIED UPON BY THE LD. CO UNSEL, THE CO-ORDINATE BENCHES HAVE FIXED THE RATE OF NET PROF IT AT 3%. RESPECTFULLY FOLLOWING THE SAME, I DIRECT THE AO TO AD OPT 3% OF THE COST OF THE GOODS SOLD AS INCOME OF ASSESSEE, SUBJ ECT TO NOT BEING LESS THAN THE RETURNED INCOME. SINCE ASSESSEE D ID NOT PRESS FOR THE GROUNDS ABOUT REJECTION OF BOOKS OF ACCO UNT, THE GROUNDS PERTAINING TO THAT EXTENT ARE REJECTED. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JULY, 2018 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 27 TH JULY, 2018 TNMM I.T.A. NO. 42/HYD/2018 :- 5 - : COPY TO : 1. SRI TANNEERU MADHAVA RAO, C/O. SEKHAR & CO., 133 /4, RASHTRAPATHI ROAD, SECUNDERABAD. 2. THE INCOME TAX OFFICER, WARD-1, KOTHAGUDEM. 3. CIT (APPEALS)-7, HYDERABAD. 4. PR.CIT-7, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.