Meka Ram Murthy, Tuni V. THE ITO, Tuni

ITA 66/VIZ/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8965 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• 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: M K SETHI
• Keywords: Gross profit estimation; Unexplained expenditure

Judgement Text

ITA NO.66/VIZAG/2016 MEKA RAMA MURTHY, TUNI 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM , BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ./I.T.A.NO.66/VIZAG/2016 ( / ASSESSMENT YEAR: 2011-12) MEKA RAMA MURTHY, TUNI VS. ITO, WARD - 1, TUNI [PAN: ANAPM9588L ] ( / APPELLANT) ( ! / RESPONDENT) / APPELLANT BY : SHRI C. SUBRAHM ANYAM, AR / RESPONDENT BY : SHRI M.K. SETHI, DR / DATE OF HEARING : 03.05.2017 / DATE OF PRONOUNCEMENT : 05.05.2017 / O R D E R PER D. MANMOHAN, VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORD ER PASSED BY THE CIT(A)-2, VISAKHAPATNAM AND IT PERTAINS TO ASSE SSMENT YEAR 2011-12. ASSESSEE RAISED SEVERAL GROUNDS, WHICH AR E TAKEN UP IN SERIATIM. 2. BRIEF FACTS OF THE CASE ARE SET OUT BELOW. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF IMFL SUPPLI ED BY A.P. BEVERAGES ITA NO.66/VIZAG/2016 MEKA RAMA MURTHY, TUNI 2 CORPORATION LIMITED, WHO IS THE SOLE SELLING AUTHOR ITY. FOR THE YEAR, THE ASSESSEE ADMITTED NET PROFIT OF ` 5,70,052/-, WHICH GIVES A PROFIT RATE OF 2.27%, WHICH WAS CONSIDERED AS VERY LOW IN THIS LIN E OF BUSINESS. THE ASSESSEE HAS NOT ALSO MAINTAINED DAILY STOCK REGIST ERS, ETC. THEREFORE, THE A.O. REJECTED THE BOOK RESULTS AND PROPOSED TO ESTIMATE THE INCOME AT 20%. 3. IN RESPONSE TO THE SHOW CAUSE NOTICE, IT WAS SUB MITTED THAT IMFL IS ONLY SUPPLIED TO THE LICENSED SHOPS, WHO ARE SUC CESSFUL IN GETTING THE SHOPS THROUGH AUCTION ON PAYMENT OF LICENSE FEES TO THE STATE EXCISE AUTHORITIES AND THE PURCHASED PRODUCT HAS TO BE SOL D AT MRPS, WHICH WAS FIXED BY BEVERAGES CORPORATION. THE RATE OF PU RCHASE AND RATE OF SALE IS FIXED, WHEREAS THE LICENSE FEE IS VERY HIGH AND THUS, THERE IS LOW GROSS PROFIT. THE A.O. REJECTED THE CONTENTION AND ESTIMATED THE NET PROFIT @ 20% OF PURCHASES PUT TO SALE. THE A.O. AL SO MADE AN ADDITION OF ` 9,77,510/- ON THE GROUND THAT THE ASSESSEE COULD N OT PROVE THE SOURCE OF AVAILABILITY OF THE FUNDS. 4. THE LD. CIT(A) WAS OF THE OPINION THAT THE PROFI T MARGIN IN THIS LINE OF BUSINESS WOULD BE 10% OF PURCHASE PRICE AND DIRECTED THE A.O. ACCORDINGLY. 5. AS REGARDS UNEXPLAINED INCOME, THE LD. CIT(A) OB SERVED THAT THE ASSESSEE HAS NOT MADE ANY EFFORT TO EXPLAIN THE SOU RCE OF FUNDS AND ITA NO.66/VIZAG/2016 MEKA RAMA MURTHY, TUNI 3 MERELY RAISED A TECHNICAL PLEA THAT THE IMPUGNED AD DITION AMOUNTS TO DOUBLE ADDITION, ONCE INCOME HAS BEEN ESTIMATED. I N THIS REGARD, THE LD. CIT(A) OBSERVED THAT EVEN IF THE INCOME IS ESTI MATED, THE A.O. IS ENTITLED TO INVOKE THE PROVISIONS OF SECTION 68/69 OF THE INCOME TAX ACT, 1961 TO MAKE A SEPARATE ADDITION AND IN THIS REGARD , HE RELIED UPON SEVERAL REPORTED DECISIONS. 6. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. AT THE OUTSET, IT MAY BE NOTICED THAT THE APPEAL IS BARRED BY LIMITATION BY 35 DAYS. ASSESSEE FILED A PETITION, SEEKING CONDONATION OF DELAY. HE HAS ALSO FILED AN AFFIDAVIT OF SHRI MEKA RAMA MURTHY TO EXPLAIN THE REASONS ON ACCOUNT OF WHICH THE ASSESSE E COULD NOT FILE THE APPEAL IN TIME. LD. D.R. HAS NOT RAISED ANY SERIOU S OBJECTION IN THIS REGARD. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE AND FOR THE REASONS GIVEN IN THE AFFIDAVIT, I AM OF THE VIEW TH AT THE DELAY IN FILING THE APPEAL IS SUPPORTED BY SUFFICIENT CAUSE. I, TH EREFORE, ADMIT THE APPEAL AND PROCEED TO DISPOSE OF THE APPEAL ON MERI TS. LD. COUNSEL SUBMITTED THAT GROUND NOS.1.0 TO 1.2 CAN BE GROUPED TOGETHER, WHICH ARE WITH REGARD TO THE ESTIMATE OF PROFIT IN IMFL B USINESS. BOTH THE PARTIES ADMITTED THAT UNDER IDENTICAL CIRCUMSTANCES , THE ITAT, VISAKHAPATNAM BENCH CONSISTENTLY ADOPTED PROFIT RAT E OF 5% ON PURCHASES, CLEAR OF ALL DEDUCTIONS, AS A REASONABLE PROFIT IN IMFL ITA NO.66/VIZAG/2016 MEKA RAMA MURTHY, TUNI 4 BUSINESS FOR THE ASSESSMENT YEAR 2011-12 ON ACCOUNT OF SEVERAL FACTORS, SUCH AS HIGHER LICENSE FEES, LIMITATIONS IN SELLING THE LIQUOR AT TAG PRICE, ETC. FACTS BEING IDENTICAL IN THIS YEAR ALSO, I MO DIFY THE ORDER OF THE LD. CIT(A) AND DIRECT THE A.O. TO ADOPT 5% OF PURCHASES AS NET PROFIT CLEAR OF ALL EXPENDITURE. 8. GROUND NOS.1.3 TO 1.6 ARE NOT SERIOUSLY PRESSED FOR CONSIDERATION, BY THE LD. COUNSEL FOR THE ASSESSEE. IN FACT, NO M ATERIAL WAS FURNISHED TO CONTRADICT THE FINDINGS OF THE LD. CIT(A). UNDE R THESE CIRCUMSTANCES, THE SAID GROUNDS ARE REJECTED. IN OTHER WORDS, THE ORDER OF THE LD. CIT(A) CONFIRMING THE ADDITION TOWARDS UNEXPLAINED EXPENDITURE IS APPROVED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 5 TH MAY17. SD/- ( ) (D. MANMOHAN) /VICE PRESIDENT ! /VISAKHAPATNAM: % /DATED : 05.05.2017 VG/SPS ITA NO.66/VIZAG/2016 MEKA RAMA MURTHY, TUNI 5 '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT MEKA RAMA MURTHY, H.NO.5-5-20, B ANK COLONY, KOTHAPETA, TUNI, E.G. DIST. 2. / THE RESPONDENT THE ITO, WARD-1, TUNI 3. ) / THE CIT-2, VISAKHAPATNAM 4. ) ( ) / THE CIT(A)-2, VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM