ITO, Ward-1, Mahaboobnagar, Mahabubnagar V. G.Kashi Vishwanath, Mahabubnagar, Mahabubnagar Dist

ITA 56/HYD/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6359 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 11-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 14-01-2016
• Court: TRIBUNAL
• Department Lawyers: A SEETHARAMA RAO
• Keywords: Tax effect
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 56/HYD/2016 ASSESSMENT YEAR : 2011-12 THE INCOME TAX OFFICER, WARD-1, MAHABOOBNAGAR VS SHRI G. KASHI VISHWANATH, GADWAL, MAHABOOBNAGAR DIST., [PAN: AEXPG9931R] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI A. SEETHARAMA RAO, DR FOR ASSESSEE : NONE DATE OF HEARING : 12-07-2016 DATE OF PRONOUNCEMENT : 12-07-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-4, HYDERABAD, DATED 26-11-2015. REVENUE IS AGGRIEVED ON THE DETERMINATI ON OF ESTIMATION OF INCOME AT 3% WHICH RESULTED IN REDUCING TH E INCOME OF ASSESSEE BELOW THE INCOME RETURNED. 2. BRIEFLY STATED, ASSESSEE HAS DONE RETAIL WINE BUSI NESS IN THE NAME OF PROPRIETARY CONCERN M/S. GADWAL WINES. HE F ILED RETURN OF INCOME ADMITTING INCOME OF RS. 55,04,860/-. IN THE SCRUTINY ASSESSMENT COMPLETED BY THE ASSESSING OFFICER (AO) U/ S. 143(3) I.T.A. NO. 56/HYD/2016 SHRI G. KASHI VISHWANATH :- 2 -: R.W.S. 147 DT. 27-03-2014, AO REJECTED THE BOOKS OF A CCOUNT AND ESTIMATED THE PROFIT AT 5% OF THE COST OF GOODS SOLD THER EBY DETERMINING TAXABLE INCOME AT RS. 83,48,346/-. AO RE LIED ON THE CO-ORDINATE BENCH DECISION IN THE CASE OF M/S. AMARA VATHI WINES, HYDERABAD IN ITA NO. 1196/HYD/2011 DT. 08-06-2012. 3. BEFORE THE LD. CIT(A), ASSESSEE WHILE OBJECTING TO THE ESTIMATION SUBMITTED THAT ITAT IN THE CASE OF KANAKADURGA WINES IN ITA NO. 591/HYD/2011 DT. 28-07-2011 AND M/S. SAI VENKATESWARA WINES, SECUNDERABAD IN ITA NO. 1198/HY D/2015 DT. 20-11-2015 HAS ALLOWED THE ESTIMATION OF INCOME AT 3 % OF THE COST ON GOODS SOLD. IT WAS SUBMITTED THAT SAME RATE OF PROFIT CANNOT BE ADOPTED IN THE CASE ON EVERY ASSESSEE IN SI MILAR BUSINESS. LD. CIT(A) FOLLOWING THE DECISION OF M/S. SAI VENKATESWARA WINES, SECUNDERABAD IN ITA NO. 1198/HY D/2015 (SUPRA), DIRECTED THE AO TO ESTIMATE THE INCOME OF ASS ESSEE AT 3% ON THE COST OF GOODS SOLD. 4. REVENUE WHILE NOT CONTESTING THE REDUCTION OF GP RAT E HOWEVER, HAS RAISED THE GROUND CONTESTING THAT THE ORDE R OF CIT(A) RESULTED IN REDUCING INCOME OF ASSESSEE BELOW THE INC OME RETURNED. THE GROUND RAISED BY REVENUE IS AS UNDER: 2. THE CIT(A) ERRED IN GIVING DIRECTION TO THE AS SESSING OFFICER FOR ESTIMATING THE PROFIT OF THE ASSESSEE @ 3% OF THE COST OF GOODS SOLD AS AGAINST THE INCOME ADMITTED BY THE AS SESSEE @ 3.2% OF THE COST OF GOODS SOLD WHICH HAS THE EFFECT OF R EDUCING THE INCOME OF THE ASSESSEE BELOW THE INCOME RETUNED. ASSESSEE WAS NOT REPRESENTED BY ANYBODY AND AT THE DIR ECTION OF THE BENCH, DR HAS FURNISHED THE FOLLOWING WORKING TO U NDERSTAND THE IMPLICATIONS OF THE ORDER OF THE CIT(A): I.T.A. NO. 56/HYD/2016 SHRI G. KASHI VISHWANATH :- 3 -: RS. RS. 1. COST OF GOODS SOLD : PURCHASES LESS: CLOSING STOCK 17,00,22,198 30,55,285 16,69,66,913 2. NET PROFIT ADMITTED BY THE ASSESSEE IN RETURN OF INCOME 55,24,032 3. PERCENTAGE OF NET PROFIT ADMITTED BY THE ASSESSEE WORKS OUT TO 3.30% 4. NET PROFIT @ 3% OF COST OF GOODS SOLD BY ASSESSEE AS PER DIRECTION OF CIT(A) WORKS OUT TO 50,09,007 5. DIFFERENCE (4 - 2) ( - ) 5,15,025 THUS, AS CAN BE SEEN FROM THE ABOVE, THE REVENUE IS AGGRIEVED THAT THE DIRECTION OF THE CIT(A) WHICH HAS RES ULTED IN REDUCING THE INCOME TO AN EXTENT OF RS. 5,15,025/-. 5. THE DIRECTION OF THE CIT(A) IS IN TUNE WITH THE CO- ORDINATE BENCH DECISIONS IN SIMILAR CASES. THAT MAY BE THE RE ASON WHY REVENUE HAS NOT CONTESTED THE REDUCTION OF GP FROM 5% TO 3%. HOWEVER, THERE IS NOTHING ON RECORD EITHER FROM THE AO S ORDER OR FROM THE ORDER OF THE CIT(A) THAT ASSESSEES DECLARED G P AT 3.3%. HAD AO STATED THE SAME IN HIS ORDER THAT ASSESSEE DECLAR ED 3.3%, CIT(A) COULD HAVE REDUCED THE ESTIMATION TO THAT EXTENT OR AT LEAST WOULD HAVE GIVEN A DIRECTION TO ACCEPT THE RETURNED IN COME, IN CASE THE ESTIMATION AT 3% RESULTS IN REDUCING THE INCOME TO LES S THAN THE INCOME RETURNED. IT IS THE MISTAKE ON THE PART OF THE AO NOT TO MENTION THE RATE OF PROFIT ADMITTED BY ASSESSEE. FURTHER THIS COULD HAVE BEEN RECTIFIED BY THE CIT(A) HAD AO PREFERRED AN APPLICATION U/S. 154. BUT REVENUE PREFERRED AN APPEAL ON THE SM ALL AMOUNT OF RS. 5,15,025/- WHICH HAS TAX EFFECT OF LESS THAN RS . 2 LAKHS. 6. VIDE CIRCULAR NO.21/2015 DATED 10 TH DECEMBER, 2015, BEARING F.NO.279/- MISC.142/2007-ITI(PT), THE CBDT W ITH A VIEW TO I.T.A. NO. 56/HYD/2016 SHRI G. KASHI VISHWANATH :- 4 -: REDUCE UNNECESSARY LITIGATION ON THEIR PART, HAS ISSU ED A CIRCULAR, WHEREIN THEY HAVE REVISED THE MONETARY LIMITS FOR FILI NG OF APPEALS BY THE DEPARTMENT BEFORE THE INCOME TAX APPELLATE TRIB UNAL, HIGH COURTS AND SUPREME COURT. INSOFAR AS THE TRIBUNAL IS CONCERNED, THE MONETARY LIMIT SPECIFIED IS RS.10 LAKHS. CBDT SPE CIFIED THAT WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMIT SP ECIFIED THEREIN, THE CONCERNED AUTHORITY HAS TO WITHDRAW ITS APP EAL OR IT NEED NOT PRESS THE SAME. IT IS FURTHER SPECIFIED THAT T HE TAX EFFECT INDICATED THEREIN IS APPLICABLE TO ALL PENDING APPEALS , THOUGH THEY ARE FILED BY THE REVENUE PRIOR TO THE ISSUANCE OF THE SAID CIRCULAR. IT WAS ALSO CLARIFIED THAT THE ASSESSING OFFICER HAS T O CALCULATE THE TAX EFFECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RES PECT OF THE DISPUTED ISSUE(S) IN THE CASE OF EVERY ASSESSEE. IF, IN THE CASE OF AN ASSESSEE, THE DISPUTED ISSUE ARISES IN MORE THAN ONE Y EAR(S), APPEAL(S) CAN BE FILED IN RESPECT OF SUCH ASSESSMEN T YEAR(S) IN WHICH TAX EFFECT IN RESPECT OF THE DISPUTED ISSUE EXCEED S THE MONETARY LIMIT SPECIFIED, IN OTHER WORDS, IF THERE ARE A NUMBER OF YEARS, IF THE TAX EFFECT IS LESS THAN THE SPECIFIED LIM IT IN ONE YEAR, APPEAL CANNOT BE FILED OR THE SAME HAS TO BE WITHDRAW N FOR THAT YEAR, FOR WANT OF TAX EFFECT. HOWEVER, AN EXCEPTION IS MADE TO THIS DIRECTION WITH REGARD TO A COMBINED ORDER PASSED BY THE FIRST APPELLATE AUTHORITY. THAT IS, IF IN ONE OF THE YEARS THE TAX EFFECT IS MORE THAN RS.10 LAKHS AND THE REVENUE DECIDES TO FILE AN APPEAL, IN RESPECT OF OTHER YEARS COVERED BY THE SAID ORDER A LSO, REVENUE IS ELIGIBLE TO FILE APPEAL, EVEN THOUGH THE TAX EFFECT IN E ACH OF THOSE YEARS IS LESS THAN RS.10 LAKHS. IT WAS ALSO CLARIFIE D THAT MERELY BECAUSE THE APPEAL IS DISMISSED FOR WANT OF TAX EFFEC T, IT DOES NOT COME IN THE WAY OF THE DEPARTMENT IN FILING APPEAL FO R OTHER YEAR(S), AND IT DOES NOT MEAN THAT THE DEPARTMENT HAS ACQU IESCED THE ISSUE. I.T.A. NO. 56/HYD/2016 SHRI G. KASHI VISHWANATH :- 5 -: 7. THE ABOVE CIRCULAR WAS SPECIFICALLY MADE APPLICA BLE TO ALL PENDING APPEALS. IN THE PRESENT CASE, TAX EFFECT ON AC COUNT OF THE RELIEF GRANTED BY THE CIT(A) WHICH LED TO THE FILING OF THE PRESENT APPEAL BY THE REVENUE, IS ADMITTEDLY, LESS THAN RS.10 LAKHS. THE TAX AMOUNT INVOLVED HEREIN DOES NOT PERMIT THE AO TO PREF ER AN APPEAL EVEN UNDER THE OLD CIRCULAR APPLICABLE AT THE TIME OF PREFERRING APPEAL. 8. THE LEGISLATURE IN ITS WISDOM HAS INTRODUCED S.268 A OF THE INCOME TAX ACT, 1961, WHEREBY THE BOARD IS EMPOWERED TO ISSUE ORDERS/INSTRUCTIONS/DIRECTIONS TO THE INCOME-TAX AUTHORITI ES, FIXING THE MONETARY LIMITS FOR THE PURPOSE OF REGULATING THE FI LING OF APPEALS. IN THE LIGHT OF THE CIRCULAR DATED 10-12-201 5, ISSUED BY THE CBDT IN EXERCISE OF THE POWERS CONFERRED IN IT BY SUBSECTION (1) OF S.268A, WE ARE OF THE VIEW THAT THE APPEAL FILED HE REIN SHOULD NOT HAVE BEEN PRESSED BY THE REVENUE. 9. CONSEQUENTLY, SINCE TAX EFFECT IS BELOW RS. 10 LAKH S, THE APPEAL IS TREATED AS NOT MAINTAINABLE, ACCORDINGLY THE SAME IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 12 TH JULY, 2016 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 12 TH JULY, 2016 TNMM I.T.A. NO. 56/HYD/2016 SHRI G. KASHI VISHWANATH :- 6 -: COPY TO : 1. THE INCOME TAX OFFICER, WARD-1, DEO OFFICE ROAD, PALSAB GUTTA, MAHABOOBNAGAR. 2. SHRI G. KASHI VISHWANATH, PROP: M/S. GADWAL WINE S, GADWAL, MAHABUBNAGAR DIST., 3. CIT (APPEALS)-4, HYDERABAD. 4. PR.CIT-4, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.