Venkateswara Wines, Nizamabad, Hyderabad V. ITO, Ward-1, Nizamabad, Nizamabad

ITA 725/HYD/2015

• Counselvise Citation: 72522514 RSA 2015
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 28-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S MO HARANA
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Opportunity of being heard; Maximum Marginal Rate
• Section: 143(3); 263

Judgement Text

ITA NO.725 OF 2015 VENKATESWARARA WINES NIZAMABAD PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.725/HYD/2015 (ASSESSMENT YEAR: 2010-11) VENKATESWARA WINES NIZAMABAD PAN: AAAAV 7030 Q VS. INCOME TAX OFFICER WARD-1, NIZAMABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A. SAI PRASAD FOR REVENUE : SHRI S. MOHARANA, CIT (DR) DATE OF HEARING : 27. 0 8 .2015 DATE OF PRONOUNCEMENT : 04 .09. 2015 O R D E R PER SMT.P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR A.Y 2010-11. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT U /S 263 OF THE I.T. ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, WHICH IS ENGAGED IN THE BUSINESS OF SALE OF INDIAN MADE FORE IGN LIQUOR, FILED ITS RETURN OF INCOME FOR THE RELEVANT A.Y ON 15.10.2010 ADMITTING TOTAL INCOME OF RS.4,77,090. DURING THE A SSESSMENT PROCEEDINGS U/S 143(3) OF THE I.T. ACT, THE AO REQU IRED THE ASSESSEE TO PRODUCE ITS BOOKS OF ACCOUNT. ASSESSEE, HOWEVER, DID NOT PRODUCE THE BOOKS OF ACCOUNTS AND TOOK THE PLEA THAT THE BOOKS ARE MAINTAINED ON COMPUTER AND THAT NO DAILY SALE BILLS ARE MAINTAINED. THE AO INFORMED THE ASSESSEE THAT I N CASE OF FAILURE TO PRODUCE THE BOOKS, ASSESSMENT WILL BE CO MPLETED BASED ON THE MATERIAL AVAILABLE ON RECORD BY ESTIMATING T HE INCOME AT ITA NO.725 OF 2015 VENKATESWARARA WINES NIZAMABAD PAGE 2 OF 4 2.50% OF THE TURNOVER. ASSESSEE, HOWEVER, FAILED TO PRODUCE THE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS. THEREFORE, A O PROCEEDED TO ESTIMATE THE INCOME AT 2.50% OF THE TURNOVER AND BROUGHT IT TO TAX. 3. SUBSEQUENTLY, ON PERUSAL OF THE RECORD, THE CIT FOUND THAT THE AO HAS ESTIMATED THE INCOME OF THE ASSESSEE AT 2.5% OF THE TURNOVER, WHILE THE TRIBUNAL IN THE CASE OF M/S. MA YURU WINES & OTHERS (ITA NO.148 TO 177/HYD/2012) HAD ESTIMATED T HE INCOME OF THE ASSESSEE THEREIN FROM RETAIL LIQUOR BUSINESS AT 5% OF THE TOTAL TURNOVER. THEREFORE, HE WAS OF THE OPINION TH AT THERE IS SHORT COMPUTATION OF INCOME BY RS.7,37,950 IN THE C ASE OF THE ASSESSEE. HE FURTHER OBSERVED THAT IN THE RETURN OF INCOME, ASSESSEE HAD CLAIMED TO BE A REGISTERED FIRM, WHERE AS IN THE AUDIT REPORT, THE STATUS OF THE ASSESSEE WAS CLAIME D AS AOP. HE OBSERVED THAT AS PER THE PROVISIONS OF SECTION 167B OF THE ACT, THE AOP ATTRACTS THE MAXIMUM MARGINAL RATE AND SINC E THE AO HAS FAILED TO VERIFY THE CORRECT STATUS OF THE ASSE SSEE, HE WAS OF THE OPINION THAT THE ASSESSMENT MADE BY THE AO IS B OTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE. HE THEREFORE, ISSUED A NOTICE U/S 263 OF THE I.T. A CT. AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, THE CIT CONCLUDED THAT THE NET PROFIT FROM THE BUSIENSS OF THE ASSESS EE SHOULD BE AT 5% OF THE TURNOVER AND THE STATUS OF THE ASSESSEE ALSO SHOULD BE DETERMINED. HE, THEREFORE, DIRECTED THE AO TO REDO THE ASSESSMENT AFRESH AFTER GIVING THE ASSESSEE A REASO NABLE OPPORTUNITY OF BEING HEARD AND AFTER PROPER EXAMINA TION OF THE FACTS. 4. AGGRIEVED BY THE SAID ORDER OF THE CIT U/S 263, THE ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE AO HAS ESTIMATED THE NE T PROFIT FROM ITA NO.725 OF 2015 VENKATESWARARA WINES NIZAMABAD PAGE 3 OF 4 THE IMFL BUSINESS OF THE ASSESSEE @ 2.5% OF THE TUR NOVER ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PRODUCE ITS BOOKS OF ACCOUNT AND THE BILLS AND VOUCHERS. HE SUBMITTED TH AT THE AO HAS ADOPTED ONE OF THE POSSIBLE VIEWS WHILE THE CIT HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN THE CASE OF M AYURU WINES & OTHERS (SUPRA) TO ESTIMATE THE PROFIT AT 5% OF THE TOTAL TURNOVER. HE SUBMITTED THAT THE ESTIMATION OF INCOME DEPENDS ON CASE TO CASE AND A UNIFORM PROFIT RATE CANNOT BE ADOPTED IN EACH AND EVERY CASE. IN SUPPORT OF THIS CONTENTION, HE PLACE D RELIANCE ON THE DECISION OF THE B BENCH OF THIS TRIBUNAL IN THE CASE OF SRI GOVINDARAJULU PUJARI VS. INCOME TAX OFFICER (ITA NO.935/HYD/2014) DATED 6.2.2015) AND ALSO THE DECIS ION OF THE HON'BLE HIGH COURT OF TELENGANA AND ANDHRA PRADESH IN THE CASE OF CIT VS. SHRI KAMLEKAR SHANKAR LAL VIDE ITTA NO.2 1 OF 2013 DATED 23.07.2013. COPIES OF THE SAME ARE ALSO FILED BERFORE US. 5. THE LEARNED DR HOWEVER, SUPPORTED THE ORDERS OF THE CIT. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE AO HAS CALLED FOR BOOKS OF ACCOUNT OF THE ASSESSEE BUT THE ASSESSEE HAD FAILED TO PRODUCE THE SAME. THEREFORE, AO HAD ESTIMATED THE INCOME OF THE ASSES SEE AT 2.5% OF THE TURNOVER. THE CIT WANTS THE SAME TO BE ESTIM ATED AT 5% OF THE TOTAL TURNOVER BECAUSE THE TRIBUNAL IN THE CASE OF AN ASSESSEE CARRYING ON THE SAME BUSINESS OF SALE OF I MFL HAS ESTIMATED THE INCOME AT 5% OF THE TURNOVER. THIS, I N OUR VIEW, IS NOT JUSTIFIED AS HELD BY THE COORDINATE BENCH OF TH IS TRIBUNAL. THE UNIFORM NET PROFIT CANNOT BE ADOPTED IN EACH AN D EVERY CASE OF SIMILAR BUSINESS. ESTIMATION OF NET PROFIT MUST BE ON THE BASIS OF FACTS INVOLVED IN EACH AND EVERY CASE. THEREFORE , IN OUR VIEW, THERE IS NO ERROR COMMITTED BY THE AO IN ESTIMATING THE PROFIT AT ITA NO.725 OF 2015 VENKATESWARARA WINES NIZAMABAD PAGE 4 OF 4 2.5% OF THE TOTAL TURNOVER. THUS GROUNDS OF APPEAL NO. 2 & 3 ARE ALLOWED. 7. AS REGARDS THE STATUS OF THE ASSESSEE BEING AOP OR A FIRM, THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ADMITTE D THAT THE SAME HAS NOT BEEN VERIFIED BY THE AO DURING THE ASS ESSMENT PROCEEDINGS. THEREFORE, ACCORDING TO HIM, THE ASSES SMENT ORDER IS ERRONEOUS TO THAT EXTENT. AS RIGHTLY POINTED OUT BY THE CIT, THE AOP ATTRACTS THE MAXIMUM MARGINAL RATE OF TAX AND T HEREFORE, NON VERIFICATION OF THE SAME ALSO MAKES THE ASSESSM ENT ORDER ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE. IN VIEW OF THE SAME, WE REJECT THE GROUND OF APPEAL NO.4. 8. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2015. S D/ - S D/ - (B. RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 4 TH SEPTEMBER, 2015. VNODAN/SPS COPY TO: 1. VENKATESWARA WINES, C/O. CH. PARTHASARATHY & CO. 1- 1- 298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1 ASHOKANAGAR, HYDERABAD-500020 2. INCOME TAX OFFICER WARD-1 NIZAMABAD 3. PR. COMMISSIONER OF INCOME TAX-5 HYDERABAD 4. JCIT, NIZAMABAD RANGE, NIZAMABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER