M/s PAL Wines, Hyderabad V. ITO, Ward 5(2), Hyderabad

ITA 587/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69758 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 25-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K SATAPATHY
• Assessee Lawyers: A V RAGHURAM
• Keywords: Assessment record
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.587/HYD/2013 ASSESSMENT YEAR 2008-2009 M/S. PAL WINES HYDERABAD. PAN AACFP1593P VS. ITO, WARD 5 (2) HYDERABAD (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI A.V.RAGHURAM (AR) FOR RESPONDENT : SHRI A.K.SATAPATHY (DR) DATE OF HEARING : 29.07.2013 DATE OF PRONOUNCEMENT : 30.08.2013 ORDER PER SMT. ASHA VIJAYARAGHAVAN, J.M. THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER O F THE COMMISSIONER PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 SEEKING TO SET ASIDE THE ASSESSMENT DATED 28.12.2010 MADE UNDER SECTION 143(3). THE REASON FOR THE COMMISSIONER EXERCISING THE REVISIONAL POWER UND ER SECTION 263 IS EXPLAINED AS UNDER : I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSION A ND HAVE ALSO PERUSED THE ASSESSMENT RECORD. AS STATED BY THE ASS ESSEE, THE ISSUE OF G.O.MS.NO.184 DATED 7.2.2005 STATING DIFFE RENT MARGINS FOR SELLING LIQUOR PRODUCTS WAS RAISED BY THE ASSES SING OFFICER. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS ALSO SUBMITTED THAT LIQUOR MARKET IS A VERY COMPETITIVE MARKET AND IT IS NOT POSSIBLE TO SELL LIQUOR WITH THE MARGIN AS PER G.O.MS.NO.184. THE RESULT IS THAT THE ASSESSEE IS FORCED TO SELL A T LOWER MARGIN. HOWEVER, IT IS UNDISPUTED FACT THAT SALE OF LIQUOR AT LOWER PRICE IS NOT AVAILABLE FROM THE RECORD MAINTAINED BY THE ASS ESSEE BECAUSE THE ASSESSEE HAS NOT MAINTAINED ANY SALE BILLS, THO UGH THE SALES ARE REGISTERED IN THE REGISTER. AGAINST THIS BACKGR OUND, IT IS NOT POSSIBLE TO VERIFY AND ACCEPT THE ASSESSEES CLAIM OF SALE OF LIQUOR AT A LOWER PRICE. SO, THERE WAS NEED TO REJECT THE BOOKS AND ESTIMATE THE INCOME ON THE BASIS OF MATERIALS AVAIL ABLE ON RECORD RELATING TO RETAIL LIQUOR TRADE. THE ASSESSING OFFI CER HAS REJECTED THE BOOKS AND BUT HAS NOT ADOPTED MARGIN OF 23.5% A S PER 2 G.O.184. HE HAS ADDED RS. 7 LAKHS WITHOUT ANY BASIS AND WITHOUT ANY MATERIAL EVIDENCE DISREGARDING THE MARG IN SET BY THE GOVERNMENT FOR SALE OF LIQUOR. FURTHER, THE CONTENT ION THAT LIQUOR TRADE IS A VERY COMPETITIVE BUSINESS IS NOT BORNE O UT OF MARKET CONDITIONS. DUE TO HIGH DEMAND THERE IS SYSTEM OF C ASH AND CARRY IN LIQUOR TRADE. THIS DOES NOT SUPPORT THE ASSESSEE S CONTENTION THAT LIQUOR IS SOLD AT A MUCH LOWER PRICE THAN THAT PRESCRIBED BY THE GOVERNMENT. IN VIEW OF THE ABOVE FACTS, THE ORD ER OF THE ASSESSING OFFICER HAS BECOME ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF REVENUE, AS THE ORDER IS NOT PASSED AFT ER PROPER VERIFICATION OF FACTS. THE ORDER IS THEREFORE LIABL E FOR REVISION UNDER SECTION 263. 2. THE ASSESSEE ON THE OTHER HAND OBJECTS ON THE GRO UND THAT THE REVISION IS WITHOUT JURISDICTION AS THE ISSUE HAS BE EN CONSIDERED IN THE COURSE OF ASSESSMENT AND THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS AND HENCE THE ORDER IS NOT AMENABLE TO REVISIONAL JURISDICTION. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS MENTIONED AS UNDER : AS PER G.O.MS.NO.184 DATED 07.02.2005 OF GOVERNMEN T OF A.P. THE RETAILER MARGIN SHALL BE 27% ON ORDINARY, 20% ON MEDIUM AND PREMIUM VARIETIES OF INDIAN LIQUOR AND 25% ON BEER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO FURNISH THE Q UANTITATIVE AND CATEGORIES OF LIQUOR BOUGHT AND SOLD. IN RESPONSE T O THE ABOVE A LETTER WAS FILED ON 28.10.2010 STATING THAT THEY MAINTAINED TH E DETAILS AND WERE RETURNED TO THE DEPARTMENT ON COMPLETION OF EXCISE YEAR AND THEY COULD NOT HOLD ANY RECORDS. IT WAS ALSO STATED IN THE LETTER THAT THE DAYS SALES WERE NOTED ON A PAPER AND THEN RECORDED IN THE CASH BOOK. IT IS EVIDENT FROM THE ABOVE THAT THE SALE BILLS WERE NOT ISSUED. IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THE SALES WERE MADE FOR LESS THAN THE MARGIN MENTIONED IN THE G.O., A LETTER DAT ED 9.12.2010 WAS ISSUED PROPOSING TO ESTIMATE THE SALES AS PER THE M ARGIN MENTIONED IN G.O. IN RESPONSE TO THE ABOVE, A LETTER WAS FILED ON 16. 10.2010 STATING THAT AS PER G.O. THE DEALER CANNOT SELL MORE THAN THE PR ESCRIBED MARGIN AND IT NEVER SAID THAT THE DEALER CANNOT SELL THE P RODUCTS FOR LESS THAN THE PRESCRIBED MARGINS. IT WAS FURTHER STATED THAT THE LIQUOR SALE IS A VERY COMPETITIVE MARKET AND TO SURVIVE IN THE BUSIN ESS, THEY HAVE TO SELL THE PRODUCT AS PER PREVAILING MARKET CONDITION S. IT WAS ALSO STATED THAT IT WAS VERY DIFFICULT IN THIS TRADE TO ISSUE SALE BILLS TO THE RETAIL CUSTOMERS AND THERE WERE BREAKAGES AND LEAKA GES AND OTHER INCIDENTAL EXPENSES TO RUN THE LIQUOR SHOP. THE EXPLANATION FILED BY THE ASSESSEE HAS BEEN EXAM INES. ASSESSEES CONTENTION THAT THE G.O. NEVER STATED THAT THE DEAL ER CANNOT SELL THE PRODUCT FOR LESS THAN THE PRESCRIBED MARGIN IS NOT ACCEPTABLE. THE 3 ASSESSEE IN ITS LETTER FILED ON 28.10.2010 HAS ADMI TTED THAT IT HAS NOT ISSUED ANY SALE BILLS. ASSESSEES CONTENTION THAT T HE LIQUOR SALE IS A COMPETITIVE MARKET AND TO SURVIVE IN THE BUSINESS T HE LIQUOR IS TO BE SOLD AT LOWER RATES, BREAKAGES AND INCURRING OF OTH ER EXPENSES APPEARS TO BE REASONABLE. THEREFORE, AN AMOUNT OF R S.7,00,000/- IS ADDED TO THE INCOME RETURNED ON ACCOUNT OF VARIATIO N IN SALE PRICE. 3. THE ASSESSING OFFICER WAS VERY MUCH AWARE OF THE PROFITABILITY MENTIONED IN THE G.O. BUT THE ASSESSEE HAD CONTENDE D THAT HE HAD SOLD LIQUOR AT LESS THAN THE PRESCRIBED MARGINS. THE ASS ESSING OFFICER HAS STATED THAT ASSESSEES CONTENTION THAT LIQUOR SALES IS A CO MPETITIVE MARKET AND TO SURVIVE IN THE BUSINESS THE LIQUOR IS TO BE SOLD AT LOWER RATES. HE ALSO OBSERVED THAT BREAKAGES AND INCURRING OF OTHER EXPEN SES APPEARS TO BE REASONABLE. HOWEVER, HE HAD MADE AN ADHOC ADDITION OF RS.7,00,000/- TO THE INCOME RETURNED BY THE ASSESSEE. 4. IT IS THE CONTENTION OF THE ASSESSEE THAT THE AS SESSING OFFICER AFTER HAVING CONSIDERED THE APPLICATION OF THE G.O.MS.NO. 184 DATED 2.2.2005, ESTIMATED THE INCOME OF THE ASSESSEE BY ADDING RS.7, 00,000/- TO THE RETURNED INCOME AND IT IS NOT OPEN TO THE CIT TO SU BSTITUTE HIS VIEWS TO THAT OF THE ASSESSING OFFICER. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE ASSESSING OFFICER HAS EST IMATED THE INCOME OF THE ASSESSEE ON SALE PRICE AT RS. 7 LAKHS AS TURNOVER O F RS.3.28 CRORES. HOWEVER, THERE IS A TRIBUNAL DECISION ON THIS ISSUE IN ITA. NO.127/HYD/2012 ETC., DATED 18 TH MAY, 2012 IN THE CASE OF RAVINDRA REDDY KOPPULA, NAL GONDA AND OTHERS WHEREIN THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO ESTIMATE THE INCOME AS FOLLOWS : WE FIND THAT THE COORDINATE BENCHES OF THIS TRIBU NAL HAVE BEEN CONSISTENTLY FOLLOWING THE SAID DECISION OF TH E TRIBUNAL RELIED UPON BY THE CIT, IN THEIR RECENT ORDERS IN S IMILAR KIND OF WINE GROUP CASES. HOWEVER, TAKING INTO CONSIDERAT ION THE SUBMISSIONS OF THE DR, INTER ALIA, THAT ESTIMATE OF NET PROFIT ABOVE 5% OF THE PURCHASES MADE BY THE ASSESSEE IS T O BE ADOPTED, WE DIRECT THE ASSESSING OFFICER TO ESTIMAT E NET PROFIT AT 5% OF THE PURCHASES OR STOCK PUT FOR SALE DURING THE YEAR SUBJECT TO THE ASSESSED INCOME NOT LESS THAN RETURN ED INCOME. THE ORDER OF THE CIT TO THIS EXTENT, IS MODIFIED AC CORDINGLY. 4 6. BEING SO, IT WOULD BE APPROPRIATE TO FOLLOW THAT ORDER OF THE TRIBUNAL CITED (SUPRA) AND TO ESTIMATE INCOME. HENCE, THE LE ARNED CIT(A) WAS JUSTIFIED IN INVOKING THE JURISDICTION UNDER SECTION 263 OF TH E INCOME TAX ACT. ACCORDINGLY, WE MODIFY THE ORDER OF THE CIT AND DIREC T THE ASSESSING OFFICER TO ESTIMATE THE INCOME AS DECIDED BY THE TRIBUNAL IN THE CASE CITED (SUPRA). 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2013. SD/- SD/- (CHANDRA POOJARI) (SMT. ASHA VIJAYAR AGHAVAN) ACCOUNTANT MEMBER JUDICIA L MEMBER HYDERABAD, DATE 30 TH AUGUST, 2013. VBP/- COPY TO 1. M/S. PAL WINES, C/O. K.VASANT KUMAR & A.V.RAGHU RAM, ADVOCATES, 610, 6 TH FLOOR, BABUKHAN ESTATE, BAHSEERBAGH, HYDERABAD-1. 2. I.T.O. WARD 5(2), HYDERABAD. 3. COMMISSIONER OF INCOME TAX, HYDERABAD. 4. ADDL. CIT, RANGE-5, HYDERABAD. 5. D.R. A BENCH, ITAT, HYDERABAD.