Padala Sai Kumar, Pithapuram V. THE ITO, Tuni

ITA 62/VIZ/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8948 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 16-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MURTHY NAIK
• Keywords: Rejection of books of accounts; Unexplained expenditure
• Section: 143(3)

Judgement Text

ITA NO.62/VIZ/2016 (PADALA SAI KUMAR) 1 IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A.NO.62/VIZ/2016 (ASSESSMENT YEAR: 2011-12) PADALA SAI KUMAR, D.NO. 1-47-22/1, DHARMARAJU STREET, SEETHAYYAGARI THOTA, PITHAPURAM. VS. ITO, WARD-1, TUNI. [PAN: BHVPP 4356 F] (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C. SUBRAHMANYAM FCA DEPARTMENT BY : SHRI MURTHY NAIK SR.DR DATE OF HEARING : 18.04.2017 DATE OF PRONOUNCEMENT : 18.04.2017 / O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-2, VISAKHAPATNAM, DATED 26/10/2015 FOR THE ASSESSMENT YEAR 2011-12. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF IMFL (INDIAN MADE FOREIGN LIQUOR), FILED HIS RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS.4,35,560/-. THE RETURN FIELD BY THE ASSESSEE WAS PROCESSED U/SEC. 143(1) OF THE ACT. LATER, CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND AFTER DUE PROCESS, ASSESSMENT WAS COMPLETED U/SEC. 143(3) OF THE ACT BY ESTIMATING THE PROFIT AT 20% OF STOCK PUT TO SALE. ITA NO.62/VIZ/2016 (PADALA SAI KUMAR) 2 3. ON APPEAL, LD. CIT(A) HAS SCALED DOWN THE PROFIT FROM 20% TO 10% AND DIRECTED THE A.O. TO RE-COMPUTE THE INCOME OF THE ASSESSEE AT 10% OF THE PURCHASE PRICE. 4. ON BEING AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE COORDINATE BENCH OF THE TRIBUNAL, IN THE SIMILAR LINE OF THE BUSINESS, HAS CONSIDERED THE VERY SIMILAR ISSUE AND RESTRICTED THE ESTIMATION AT 5% OF THE PURCHASE PRICE, IN ITA NOS.65&66/VIZAG/2012 DATED 3.3.2014 IN THE CASE OF T.APPALASWAMY AND SUBMITTED THAT SAME MAY BE FOLLOWED. 6. THE LD. D.R. HAS SUPPORTED THE ORDERS PASSED BY THE AUTHORITIES BELOW. 7. I HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 8. THE VERY SAME ISSUE OF ESTIMATION OF PROFIT 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 ORDER DATED 2.6.2016 AND HELD THAT ESTIMATION OF 5% NET PROFIT ON PURCHASE IS REASONABLE AND DIRECTED THE A.O. TO ESTIMATE THE NET PROFIT AT 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES 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 ITA NO.62/VIZ/2016 (PADALA SAI KUMAR) 3 NET PROFIT 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 THE ASSESSEE. IT IS FURTHER SUBMITTED THAT THE CASE LAW RELIED UPON BY THE ASSESSEE 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 TRADING IN ARRACK, WHEREAS IT IS IN THE BUSINESS OF DEALING IN IMFL. THE ASSESSEE FURTHER CONTENDED THAT IMFL TRADE WAS CONTROLLED BY THE STATE GOVERNMENT THROUGH 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 FIXED 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 RELYING UPON THE DECISION OF A.P. HIGH COURT IN THE CASE OF CIT VS. R. NARAYANA RAO IN ITA NO.3 OF 2003 WHICH IS RENDERED UNDER DIFFERENT FACTS. THE A.P. HIGH COURT 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 UNDER DIFFERENT FACTS TO ESTIMATE THE NET PROFIT. ON THE OTHER HAND, THE LD. A.R. FOR THE ASSESSEE, RELIED UPON THE DECISION OF ITAT, VISAKHAPATNAM BENCH 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 IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FINDS THAT THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HELD THAT ESTIMATION OF 5% NET PROFIT ON PURCHASES IS REASONABLE. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: 3. WE HAVE HEARD THE PARTIES, PERUSED THE ORDERS OF 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 HIGH 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 THAT 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 OTHER CASES HAVE HELD THAT PROFIT IN CASE OF BUSINESS IN INDIAN MADE FOREIGN LIQUOR HAS TO BE ESTIMATED AT 5% OF THE PURCHASES MADE BY THE ASSESSEE. THEREFORE, FOLLOWING THE DECISION OF THE ITAT HYDERABAD BENCH, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER 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 ASSESSING OFFICER SHOULD ALSO BEAR IN MIND THAT IN NO CASE THE INCOME DETERMINED 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 IS QUITE HIGH. ON THE OTHER HAND, THE ASSESSEE RELIED UPON THE ITA NO.62/VIZ/2016 (PADALA SAI KUMAR) 4 DECISION OF COORDINATE BENCH AND THE COORDINATE BENCH UNDER SIMILAR CIRCUMSTANCES ESTIMATED THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. NO CONTRARY 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 DIRECT THE A.O. TO ESTIMATE THE NET PROFIT OF 5% ON TOTAL PURCHASES NET OF ALL DEDUCTIONS. ORDERED ACCORDINGLY. 9. RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL, I SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) AND REMIT MATTER BACK TO THE A.O. TO ESTIMATE THE PROFIT FROM THE BUSINESS OF THE ASSESSEE BY APPLYING THE RATE OF 5% OF THE PURCHASES MADE NET OF ALL OTHER DEDUCTIONS. 10. IN REGARD TO UNEXPLAINED EXPENDITURE, THE AUTHORISED REPRESENTATIVE HAS SUBMITTED THAT HE DOES NOT WANT TO PRESS THIS GROUND. IN VIEW OF THE SUBMISSION OF THE AUTHORISED REPRESENTATIVE, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN OPEN COURT ON THIS 18 TH DAY OF APRIL, 2017 SD/- (V. DURGA RAO) JUDICIAL MEMBER DATED : 18.04.2017 VR/- COPY TO:- 1. THE APPELLANT PADALA SAI KUMAR, D.NO. 1-47-22/1, DHARMARAJU STREET, SEETHAYYAGARI THOTA, PITHAPURAM. 2. THE RESPONDENT ITO, WARD-1, TUNI. 3. THE CIT-2, VISAKHAPATNAM 4. THE CIT(A)-2, VISAKHAPATNAM 5. DR, ITAT, VISAKHAPATNAM 6 . GUARD FILE BY ORDER