Appeal details
Counselvise Citation
[2017] 128 COUNSELVISE.COM (IT) 6585 (ITAT-VISAKHAPATNAM)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 10 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-01-2017
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
DB
Assessment Year
2010-2011
Appeal Filed On
04-03-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI G. MANJUNATHA, HONBLE ACCOUNTANT MEMBER ITA NO. 70 / VIZ /201 4 (ASST. YEAR : 20 1 0 - 1 1 ) G OONA RAMA SWAMY, PROP. : GODAVARI WINES, D.NO. 16 - 5 - 51, RAMNIVAS, ARASAVILLI ROAD, SRIKAKULAM . V . ITO, WARD - 1, SRIKAKULAM. PAN NO. AAEHG 6876 J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI M.K. SETHI - DR DATE OF HEARING : 29 / 1 1 /201 6 . DATE OF PRONOUNCEMENT : 12 / 01 /201 7 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , VISAKHAPATNAM , DATED 30 /0 1 /201 4 FOR THE ASSESSMENT YEAR 2010 - 11 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT ASSESSEE IS AN HUF CARRYING ON BUSINESS IN PURCHASE AND SALE OF IMFL (INDIAN MADE FOREIGN LIQUOR) , FILED HIS RETURN OF INCOME BY DECLARING 5,10,180/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 . LATER, CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED 2 ITA NO. 70 / VIZ /201 4 U/S 143(3) OF THE ACT BY ESTIMATING NET PROFIT AT 20% OF THE STOCK PUT TO SALE. 3. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION OF 34,19,607/ - MADE BY THE ASSESSING OFFICER . 4 . ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE TRIBUNAL. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL WHERE THE TRIBUNAL HAS SCALED DOWN THE ESTIMATION OF PROFIT FROM 10% TO 5% IN THE CASE OF TANGUDU JOGISETTY IN ITA NO .96/VIZAG/2016 BY ORDER DATED 2.6.2016. 5 . ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORTED THE ORDER S PASSED BY THE AUTHORITIES BELOW. 6 . WE HAVE HEARD BOTH TH E PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORI TIES BELOW. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS ESTIMATION OF PROFIT IN RESPECT OF IMFL BUSINESS CARRIED BY THE ASSESSEE. IN THIS RESPECT, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF TANGUDU JOGISETTY (SUPRA) HAS CONSIDERED THE PROFIT LEVEL IN THE LINE OF BUSINESS AND DECIDED THAT 5% OF PURCHASE PRICE IS REASONABLE PROFIT MARGIN IN THE LINE OF IMFL BUSINESS AND DIRECTED THE A.O. TO RE - COMPUTE THE PROFIT OF THE ASSESSEE. 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. 3 ITA NO. 70 / VIZ /201 4 ESTIMATED NET PROFIT OF 20% ON STOCK PUT FOR SALE. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT MAINTAINED PR OPER 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 REJE CTED THE BOOKS OF ACCOUNTS AND ESTIMATED 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 CARRIE D 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, W HEREAS 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 AS SESSEE 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 D ECISION 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, VISAKHAP ATNAM 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 SIMIL AR 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 4 ITA NO. 70 / VIZ /201 4 NUMBER OF O THER 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 DIR ECT 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 SHOU LD 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 DECISION OF COORDINATE BENCH AND THE COORDINATE BENCH UNDER SIMILAR CIRCUMSTANCES ESTIMATED THE NET PROFIT OF 5% ON TOTAL PURCH ASES 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. 7 . IN VIEW OF THE ABOVE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL, I DIRECT THE A.O. TO ESTIMATE THE PROFIT OF THE ASSESSEE AT 5% OF PURCHASE PRICE. ACCORDINGLY, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 8 . THE SECOND GROUND OF APPEAL RELATING TO ADDITION OF 9,90,000/ - TOWARDS CASH CREDITS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE AS SESSING OFFICER HAS NOTED THAT HE FOUND SOME LIABILITIES INCLUDING UNSECURED LOAN OF 9,90,000/ - . THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVE THE UNSECURED LOANS WITH NECESSARY CONFIRMATION LETTERS. IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER TH AT HIS WISE HAS TAKEN THE LOANS AND SUBSEQUENTLY SHE EXPIRED AND SUBMITTED THAT IT IS 5 ITA NO. 70 / VIZ /201 4 DIFFICULT TO EXPLAIN THE DETAILS. HOWEVER, IN THE ASSESSMENT PROCEEDINGS ARE IN PROGRESS, THE ASSESSEE HIMSELF ADMITTED THAT THE ABOVE SAID LOANS CAN BE TREATED AS INCOME IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, THE ASSESSING OFFICER ADDED AN AMOUNT OF 9,90,000/ - AS UNSECURED CREDITORS IN THE HANDS OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. 9. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER O F INCOME TAX (APPEALS) AND SUBMITTED THAT THE LOANS WERE BORROWED BY HIS WIFE AND NO DETAILS WERE AVAILABLE WITH HIM. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 10 . BEFORE US , THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO SHOW THAT THE AMOUNT OF 9,90,000/ - AS BORROWED BY HIS WIFE EXCEPT REITERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW . WE FIND NO INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 11 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 1 2 T H DAY OF JANUARY , 201 7 . S D / - S D / - ( G. MANJUNATHA ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 2 T H JANUARY , 201 7 . VR/ - 6 ITA NO. 70 / VIZ /201 4 COPY TO: 1 . THE ASSESSEE - GOONA RAMA SWAMY, PROP. : GODAVARI WINES, D.NO. 16 - 5 - 51, RAMNIVAS, ARASAVILLI ROAD, SRIKAKULAM. 2 . THE REVENUE - ITO, WARD - 1, SRIKAKULAM. 3 . THE CIT - 2 , VISAKHAPATNAM. 4 . THE CIT(A) , VISAKHAPATNAM. 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., VISAKHAPATNAM
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