Sri Golla Nagaseshulu, Kurnool V. Income Tax Officer, Ward-1, Kurnool

ITA 807/HYD/2014

• Counselvise Citation: 80722514 RSA 2014
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANDI RAMA KRISHNA
• Assessee Lawyers: K NEERAJA
• Keywords: Business income; Opportunity of being heard; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI P.M. JAGTAP , ACCOUNTANT MEMBER & S MT. ASHA VIJAYARAGHAVAN , JUDICIAL MEMBER ITA NO. 8 0 7 /HYD/201 4 ASSESSMENT YEAR : 200 9 - 1 0 SRI GOLLA NAGASESHULU, KURNOOL [ C C NPS 8764 C ] (APPELLANT) VS. THE INCOME TAX OFFICER, WARD - I, KURNOOL (RESPONDENT) APPELLANT BY MS. K.NEERAJA, AR RESPONDENT BY S HRI BANDI RAMA KRISHNA , DR DATE OF HEARING 22 - 1 2 - 201 4 DATE OF PRONOUNCEMENT 24 - 1 2 - 201 4 O R D E R PER P.M. JAGTAP, A .M : TH IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) - I V, HYDERABAD DATED 28 - 02 - 2014 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME FOR OUR CONSIDERATION RELATES TO THE TRA D ING ADDITION MADE BY THE ASSESSING OFFICER (A.O.) BY ESTIMATING THE INCOME OF THE ASSESSEE BY APPLYING A NET PROFIT RAT E OF 5% WHICH HAS BEEN PARTLY SUSTAINED BY THE LD. CIT(APPEALS) BY ADOPTING THE NET PROFIT RAT E OF 2.5%. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO IS ENGAGED IN THE BUSINESS OF TRA DING IN CHICKEN AND EGGS ON WHOLE SALE BASIS. THE RETURN OF INCOME FOR THE YEAR UNDER 2 ITA NO . 8 0 7 /HYD/201 4 CONSIDERATION WAS FILED BY HIM DECLARING TOTAL INCOME OF RS. 1,99,539/ - AND AGRICULTURAL INCOME OF RS.75,000/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTI CED BY THE A.O. THAT THE GROSS PROFIT OF RS.4,47,233/ - AND NET PROFIT OF RS.2,05,000/ - DECLARED BY THE ASSESSEE FROM THE BUSINESS OF WHOLESALE TRADING OF CHICKEN AND EGGS ON A TOTAL TURNOVER OF RS.10.26 CRORES WAS VERY LOW. IN THIS REGARD, EXPLANATION OF FERED BY THE ASSESSEE BEFORE THE A.O. WAS THAT THE NORMAL NET PROFIT EARNED IN SUCH TYPE OF BUSINESS IS ONLY 0.25%. IN THE ABSENCE OF ANY FACTS AND FIGURES TO SUBSTANTIATE THIS EXPLANATION, THE A.O. DID NOT ACCEPT THE CASE OF THE ASSESSEE. HE ALSO FOUND T HAT NEITHER THE REGULAR BOOKS OF ACCOUNTS WERE MAINTAINED BY THE ASSESSEE NOR ANY OTHER RELEVANT DETAILS AND DOCUMENTS WERE MAINTAINED TO SUPPORT AND SUBSTANTIATE THE FIGURES REFLECTED IN THE TRADING AND PROFIT AND LOSS ACCOUNT. HE THEREFORE PROCEEDED TO ESTIMATE THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF TRADING I N CHICKEN AND EGGS. IN THIS REGARD, HE FOUND FROM THE RELEVANT DETAILS OF PURCHASE COST AND CORRESPONDING WHOLESALE SELLING PRICE OF LIVE BIRDS FOR THE PERIOD OF MARCH, 2011 THAT THE PROFIT MARGIN OF THE TRADE WAS ABOUT 5%. ACCORDINGLY, APPLYING A NET PROFIT RAT E OF 5% ON THE TOTAL SALES OF RS.10.26 CRORES, HE ESTIMATED THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF TRADING IN CHICKEN AND EGGS , WHICH RESULTED IN SUBSTANTIAL TRADING ADDITIO N. ON APPEAL, THE LD. CIT(APPEALS) DIRECTED THE A.O. TO ESTIMATE THE INCOME OF THE ASSESSEE BY APPLY ING A NET PROFIT RAT E OF 2.5% KEEPING IN VIEW THE EMERGING CONFLICTING POSITIONS AND CONSIDERING THE TOTALITY OF THE FACTS OF THE ASSESSEE S CASE. STILL AGGRIEVED BY THE ORDER OF LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT IN 3 ITA NO . 8 0 7 /HYD/201 4 THE ABSENCE O F ANY REGULAR BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE OR ANY RELEVANT DETAILS AND DOCUMENTS MAINTAINED TO SUPPORT AND SUBSTANTIAL THE FIGURES REFLECTED IN THE TRADING AND PROFIT AND LOSS ACCOUNT, IT IS A FIT CASE TO ESTIMATE THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF TRADING IN CHICKEN AND EGGS AS RIGHTLY HELD BY THE AUTHORITIES BELOW. SUCH ESTIMATE, HOWEVER, SHOULD BE FAIR AND REASONABLE HAVING REGARD TO ALL THE FACTS OF THE CASE INCLUDING ESPECIALLY THE NATURE OF THE BUSINESS OF THE ASSESSEE. I N ORDER TO ASCERTAIN WHAT IS FAIR AND REASONABLE ESTIMATE, IT IS NECESSARY TO SEE THE PAST HISTORY OF ASSESSEES OWN CASE AS WELL AS THE PROFIT NORMALLY DECLARED BY OTHER ASSESSEE S/ CARRYING ON THE SIMILAR BUSINESS. AS SUBMITTED BY THE LD. COUNSEL FOR THE A SSESSEE IN THIS REGARD, THE ASSESSEE IN FACT CARRIED ON THE BUSINESS OF TRADING IN CHICKEN AND EGGS ON WHOLESALE BASIS ONLY FOR A YEAR OR TWO AND CLOSE D THE SAME IMMEDIATELY AFTER THE YEAR UNDER CONSIDERATION. IN SUCH C IRCUMST A NC ES, IT IS ALL THE MORE NEC ESSARY TO FIND OUT THE NET PROFIT DECLARED IN OTHER COMPARABLE CASES. A PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, HOWEVER, SHO W S THAT NEITHER THE A.O. NOR THE LD. CIT(APPEALS) HAS REFERRED TO ANY COMPARABLE CASE AND NOT EVEN THE ASSESSEE HAD MADE AN Y ATTEMPT TO BRING ON RECORD THE NET PROFIT RAT ES DECLARED IN THE COMPARABLE CASES. WE THEREFORE CONSIDER IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO RESTORE THE ISSUE RELATING TO ESTIMATION OF THE BUSINESS INCOME OF THE ASSESSEE T O THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH ON THE BASIS OF TRADING RESULTS DECLARED IN COMPARABLE CASES. NEEDLESS TO OBSERVE THAT THE A.O. SHALL AFFORD PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE DECIDING THIS ISSUE AND WILL ENSURE THAT THE NET PROFIT TO BE ESTIMATE D BY HIM IN NO CASE SHALL E X CEED 2.5% OF THE ASSESEES TURNOVER/SALES. 4 ITA NO . 8 0 7 /HYD/201 4 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER P RONOUNCED IN THE OPEN COURT ON 24 TH DECEMBER, 2014 SD/ - SD/ - ( ASHA VIJAYARAGHAVAN ) ( P.M. JAGTAP ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 24 TH DECEMBER , 2014 TNMM COPY TO: - 1) SHRI GOLLA NAGASESHULU, PROP. RYTHU CHICKEN MARKET, D.NO.44 - 16/9A, PRAKASH NAGAR, OPP: NETAJI THEATRE, KURNOOL. 2) THE INCOME TAX OFFICER, WARD - I, KURNOOL . 3) CIT(A) - IV , HYDERABAD 4 ) CIT - III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD.