Shiva Sai Wines, Medak V. Income Tax Officer, Ward-1, Sangareddy

ITA 471/Hyd/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8232 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB-B
• Next Hearing Date: 04-07-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 06-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NILANJAN DEY
• Assessee Lawyers: P RAMAKRISHNA
• Keywords: Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B (SMC) , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO S . 471 & 472 /HYD/201 8 ASSESSMENT YEAR S : 20 13 - 14 & 2014 - 15 SHIVA SAI WINES, MEDAK . PAN A CEFS 1107J VS. INCOME - TAX OFFICER, WARD 1, SANGAREDDY ( APPELLANT ) (RESPONDENT) ASSESSEE BY : S HRI P. RAMA KRISHNA REVENUE BY : S HRI NILANJAN DEY DATE OF HEARING : 0 4 /0 7 /201 9 DATE OF PRONOUNCEMENT : 17 / 0 7 / 201 9 O R D E R PER S . RIFAUR RAHMAN , A .M. : BOTH THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST A COMMON ORDER OF CIT(A) - 2 , HYDERABAD, DATED 22 / 0 12 /201 7 FOR AY S 20 13 - 14 & 2014 - 15 2 . BRIEF FACTS OF THE CASE AS TAKEN FROM AY 2013 - 14 ARE, THE ASSESSEE - FIRM , ENGAGED IN THE BUSINESS OF TRADING LIQUOR, FILED ITS RETURN OF INCOME FOR THE AY 20 13 - 14 ON 2 1 / 0 9 /20 13 DECLARING A TOTAL INCOME OF RS. 7,21,820/ - . DURING THE ASSESSMENT PROCEEDINGS, WHEN THE AO ASKED THE ASSESSEE TO SUBMIT DOCUMENTARY EVIDENCE LIKE SALE BILLS, SALE REGISTER ETC., THE ASSESSEE SUBMITTED REGISTER OF DAILY SALE INVOICES AND THE AO NOTED THAT IT CONTAINS DAILY SALE DETAILS PRODUCT WISE WAS IN CONSOLIDATED FORM BUT DOES NOT CON TAIN DETAILS OF SALES TO INDIVIDUAL CUSTOMERS. IN THE ABSENCE OF INDIVIDUAL SALE BILLS AS CORROBORATIVE EVIDENCE, THE AO ESTIMATED THE PROFIT AT 5% ON THE COST OF GOODS SOLD AND MADE ADDITION OF RS. 24,39,265/ - . IN RESPECT OF AY 2 ITA NO S . 471 & 472 /HYD/1 8 SHIVA SAI WINES, MEDAK. 2014 - 15 ALSO MADE ADDITION OF RS. 28,87,754/ - AFTER ESTIMATING THE PROFIT AT 5% ON THE COST OF GOODS SOLD. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND BEFORE THE CIT(A), CONTENDED THAT THE BOOKS OF ACCOUNT WERE MAINTAINED BY THE ASSESSEE ON DAILY BASIS AND A CONSOLIDATED SALE INVOICE WAS PREPARED BASING ON THE SALE BILLS OF THAT DAY. HE RELIED ON THE DECISION OF HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. PRAYAG WINES, [2014] 364 ITR 660 (ALL.) 4. AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE, THE CIT(A) HELD AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. THOUGH THE AR ARGUED THAT PROPER BOOKS OF ACCOUNT WERE MAINTAINED, IT CANNOT BE VERIFIED FROM THE BOOKS OF ACCOUNT AS TO WHETHER SALE TO THE CUSTOMERS WAS EFFECTED AT THE PRESCRIBED PRICE OR NOT. SINCE THE BILLS DIDN'T CONTAIN THE NAMES AND ADDRESSES OF THE CUSTOMERS, THE A O COUL DN'T HAVE VERIFIED THE SALE CONSIDERATION RECEIVED. THE FACTS OF THE CASE ARE DISTINGUISHABLE TO THE CASE LAW RELIED UPON BY THE APPELLANT. THEREFORE THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNT AND ESTIMATING THE PROFIT CANNOT BE HELD TO BE INVA LID AND GROUND NO.1 OF APPEAL IS DISMISSED. 4.1 COMING TO THE ISSUE OF ESTIMATI ON OF PROFITS, THE CIT(A) FOLLOWING THE DECISION OF ITAT, HYDERABAD IN THE CASE OF M/S SAI VENKATESWARA WINES (ITA NO. 1198/HYD/2015), DIRECTED THE AO TO ESTIMATE THE PROFIT @ 3% OF THE COST OF GOODS SOLD. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSE E IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER (APPEALS) FAILED TO APPRECIATE THE FACT THAT THE APPELLANT HAD MAINTAINED BOOKS OF ACCOUNTS ON DAY TO DAY BASIS AND THERE WAS NO DISPUTE IN CASH BALANCES MAINTA INED BY HIM. IN SUCH CASE, REJECTING THE BOOKS ON SOLE GROUND THAT 'BILLS DID NOT CONTAIN THE NAMES AND ADDRESSES OF THE CUSTOMERS' IS TOTALLY INCORRECT. WHEN THERE WAS NO DISPUTE IN CASH SALES AND BALANCES, THEN, IT IS IMMATERIAL MENTIONING THE ADDRESS OF THE CUSTOMERS. IN SUCH A CASE, WITHOUT CONSIDERING 3 ITA NO S . 471 & 472 /HYD/1 8 SHIVA SAI WINES, MEDAK. OR APPLYING THE RATIO OF THE HON'BLE ALLAHABAD HIGH COURT'S DECISION IN THE CASE OF CIT VS. PRAYAG WINES (2014) 364 ITR 660 (ALL), THE LEARNED COMMISSIONER (APPEALS) ERRED IN PASSING THE IMPUGNED ORDER. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 2 AND THE INCOME TAX O FFICER (ASSESSING AUTHORITY), BOTH ARE ERRED IN PASSING THE ORDER REJECTING THE BOOKS OF ACCOUNTS WITHOUT ANY COGENT REASON. THUS, THE ORDER IS A NON - SPEAKING ORDER AND UNSUSTAINAB LE IN LAW. THE LEARNED AUTHORITY OUGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLANT HAD MAINTAINED BOOKS OF ACCOUNTS ON DAY TO DAY BASIS. THERE WAS NO DISPUTE THAT THE APPELLANT HAD MAINTAINED DAY BOOK / CASH BOOKS AND STOCK RECORDS, CORROBORATING HIS C ASH BALANCE AND STOCKS ON EVERY DAY BASIS. IN SUCH CIRCUMSTANCES, ASSUMPTION OF ESTIMATED INCOME @3% ON PURCHASE VALUE IS TOTALLY INCORRECT. 3. THE LEARNED AUTHORITY ERRED IN PASSING THE ORDER BY MISPLACING THE DECISION OF THE HON'BLE TRIBUNAL. THERE WER E NO CIRCUMSTANCES TO ESTIMATE SUCH PERCENTAGE OF PROFIT BASING ON THE DECISION OF THE HON'BLE ITAT IN MA NO. 217/HYD/2011 IN ITA NO. 462/H/2011. IN THE SAID DECISION, THE HON'BLE TRIBUNAL OBSERVED THAT 'IN THE ABSENCE OF BOOKS OF ACCOUNTS', THE ESTIMATED PROFIT MAY BE FOLLOWED. WHEREAS, IN THE CASE OF APPELLANT, THERE WERE BOOKS OF ACCOUNTS MAINTAINED ON THE DAY TO DAY BASIS AND NO DISPUTE IN THE SAID BOOKS OF ACCOUNTS, EXCEPT 'DOES NOT CONTAIN DETAILS OF SALES TO INDIVIDUAL CUSTOMERS' AS OBSERVED BY THE A SSESSING AUTHORITY. MERELY BECAUSE, NON - MENTIONING OF THE INDIVIDUAL NAMES OF CUSTOMERS, IT CANNOT BE SAID THAT THERE WAS NO CLEAR AND AUTHENTIC EVIDENCE IN RESPECT OF SALES TURNOVER FIGURE ADOPTED BY THE APPELLANT. IT IS A TRADE PRACTICE OF THE RETAIL LIQ UOR BUSINESS, NO INDIVIDUAL BILLS WILL BE RAISED BUT THE SALE INVOICES WILL BE CORROBORATED WITH THE CASH BALANCES ON DAY TO DAY BASIS. HENCE, THE CASE LAW RELIED UPON BY THE ASSESSING AUTHORITY IS DISTINGUISHABLE AND NOT TO BE APPLIED IN THE PRESENT CASE OF THE APPELLANT. 4. THE LEARNED FIRST APPELLATE AUTHORITY FAILED TO APPRECIATE THE FACTS OF THE CASE AND ERRED IN PASSING THE IMPUGNED ORDER ON ESTIMATED INCOME OF 3% OF COST OF GOODS P UT TO SALE, AS THERE WAS NO LEGAL PROVISION IN THE INCOME TAX ACT, 1 961 TO ADOPT SUCH PRACTICE FOR SUCH TRADE. THUS, THERE IS A LACK OF LEGAL BACKING FOR SYSTEM ADOPTED BY THE ASSESSING AUTHORITY. ON SUCH CIRCUMSTANCES, THE IMPUGNED ORDER IS UNSUSTAINABLE IN LAW, 5. THE LEARNED COMMISSIONER OUGHT TO HAVE ACCEPTED THE BO OKS OF ACCOUNTS WHICH SHOWS THE PURCHASE VALUE IS 85.28% OF THE SALE VALUE AND 15.75% OF THE INDIRECT EXPENSES ARE PERTAINING TO THE LICENSE FEE, RENTS AND SALARIES. IT IS ALSO TO BE NOTED THAT 4 ITA NO S . 471 & 472 /HYD/1 8 SHIVA SAI WINES, MEDAK. LICENSE FEE OF RS. 78,00,000/ - AND SPECIAL MARGIN AMOUNT OF RS . 25,63, 183/ - CONSTITUTES 13.69% OF SALE TURNOVER OF RS. 7,56,95,814/ - THEN, THE BALANCE OF 0.95% ON SALE VALUE IS ONLY THE PROFIT FOR THE FIRM. IN SUCH FACTS AND CIRCUMSTANCES, THERE IS NO COGENT REASON TO REJECT BOOKS OF ACCOUNTS AND ADOPT HYPOTHETICAL PROFIT AT THE WHIMS OF THE AUTHORITY IS ARBITRARY, UNTENABLE AND BAD IN LAW. 6. THE APPELLANT CRAVE LEAVE TO FILE FURTHER GROUNDS WHICH ARE IN THE NATURE OF MODIFIED, ALTERED OR FRESH GROUNDS DURING THE COURSE OF APPEAL PROCEEDINGS. 6. BEFORE US, LD. AR CONTENDED THAT THE ASSESSEE HAD MAINTAINED THE BOOKS OF ACCOUNT ON DAY TO DAY BASIS AND THERE WAS NO DISPUTE IN CASH SALES BALANCES MAINTAINED BY THE ASSESSEE, THEREFORE, ESTIMATION OF THE PROFIT @ 3% ON PURCHASE COST IS BAD IN LAW. HE RE LIED ON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PRAYAG WINES (SUPRA). 7. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES AND SUBMITTED THAT THE PRAGYA WINES CASE RELIED ON BY THE ASSESSEE IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE CIT(A) CATEGORICALLY HELD THAT THOUGH THE AR ARGUED THAT PROPER BOOKS OF ACCOUNT WERE MAINTAINED, IT CANNOT BE VERIFIED FR O M THE BOOKS OF ACCOUNT AS TO WHETHER THE SALE TO THE CUSTOMERS WAS EFFECTED AT THE PRESCRIBED PRICE OR NOT AND SINCE THE BILLS DID NOT CONTAIN THE NAMES AND ADDRESSES OF THE CUSTOMERS, THE AO COULD NOT HAVE VERIFIED THE SALE CONSIDERATION RECEIVED. WE ARE IN AGREEMENT WITH THE FINDIN GS OF THE CIT(A). THOUGH THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PRAYAG WINES (SUPRA) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, BUT, IN THAT CASE THE FACTS WERE, THE BOOKS WERE REJECTED DUE TO NOT MAINTAINING SEPARATE CASH MEMO FOR PETTY CASH S ALES BUT MAINTAINED CONSOLIDATED CASH MEMO A T THE END OF THE DAY. IN THAT CASE, ASSESSEE WAS HAVING 28 OUTLETS AND THEY HAVE MAINTAINED CONSOLIDATED CASH MEMOS FOR EACH DAY SALES AND HONBLE 5 ITA NO S . 471 & 472 /HYD/1 8 SHIVA SAI WINES, MEDAK. HIGH COURT HAS REJECTED THE REVENUES PLEA FOR REJECTING THE BOOKS. BUT, IN THE GIVEN CASE, THE SAMPLE CASH MEMO SUBMITTED BY THE ASSESSEE IS NOT PROPER. IT IS NOT TRACEABLE AND THE INFORMATION CAN BE MODIFIED EASILY. T HE REFORE, THE COORDINATE BENCHES OF THIS TRIBUNAL CONSISTENTLY TAKING A VIEW THAT ESTIMATION OF INCOME AT 3% OF THE COST OF THE GOODS SOLD IS REASONABLE IN THIS LINE OF BUSINESS WHEN THE ASSESSEE FAILED TO SUBMIT THE PROPER SALE BILLS, WHICH ARE THE BASIS TO VERIFY THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE. THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) IN DI RECTING THE AO TO ESTIMATE THE PROFIT @ 3% ON THE COST OF GOODS SOLD AND DIS MISS THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE. 9. AS THE FACTS AND GROUNDS ARE MATERIALLY IDENTICAL IN AY 2014 - 15 TO THAT OF AY 2013 - 14, FOLLOWING THE DECISION THEREIN, WE DISMISS THIS APPEAL ALSO. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17 TH JULY , 201 9 . SD/ - SD/ - ( P. MADHAVI DEVI ) (S . RIFAUR RAHMAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 17 TH JULY , 201 9 KV C OPY TO: - 1. SHIV A SAI WINES, C/O P. RAMA KRISHNA, SAI RAM SADAN, 2 - 2 - 1109/11/2, BAGH AMBERPET, HYDERABAD 500 013 2. ITO, WARD 1, SANGAREDDY 3. CIT(A) - 2 , TIRUPATI 4. PR. CIT - 2 , TIRUPATI 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE