Sri Gaya Wines, Hyd, Hyderabad V. ITO, Ward-9(3), Hyderabad

ITA 816/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53805 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: RAJASEKHAR RAO
• Keywords: Rejection of books of accounts
• Section: 147; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.M. & SMT. ASHA VIJAYARAGHAVAN, J.M. ITA NO.816/HYD/2011 ASSESSMENT YEAR 2006-07 M/S GAYATRI WINES, HYDERABAD (PAN ABDFS1656A) VS THE ITO, WARD 9(3), HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI RAJASEKHAR RAO RESPONDENT BY : SHRI B.V. PRASAD REDDY DATE OF HEARING : 14.12.2011 DATE OF PRONOUNCEMENT : 16.12.2011 ORDER PER ASHA VIJAYARAGHAVAN, JM: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) VIJAYAWADA DATED 28.2.2011 AND PERTA INS TO THE ASSESSMENT YEAR 2006-07. 2. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS A DEALER IN SALE OF IMFL AND DISCLOSED AN INCOME OF RS.41,344/-. THE ITO WARD 9(3) PASSED ORDER U/S 147 OF THE IT ACT, 1961 ASSESSING INCOME AT RS. 26,32,850/- AGAINST THE RETURN OF INCOME AT RS.41,344/-. THE ASSESSING OFF ICER REJECTED THE BOOKS OF ACCOUNTS AND ADOPTED THE MAXIMUM GROSS MARGINS PRES CRIBED BY THE PROHIBITION EXCISE DEPTT. TO ARRIVE AT THE OPTIMUM CHARGEABLE SALES. IN THIS PROCESS, THE ASSESSING OFFICER FIXED THE MAXIMUM GROSS PROFITS AT 27% ON COST OF GOODS SOLD THEREBY INCREASING THE SALES AND ESTIMATED THE PROFIT BY HIGHER AMOUNT OF RS.39,84,520/-. ITA NO.816/HYD/2011 M/S GAYATRI WINES, HYD 3. THE CIT(A) WAS OF THE OPINION THAT WHAT IS ESTI MATED IS ONLY THE GROSS PROFIT RATE AND VIDE HIS APPELLATE ORDERS REDUCED T HE PERCENTAGE TO 24%. THE ASSESSING OFFICER VIDE HIS ORDERS ALSO DISALLOWED A SUM OF RS.8,42,000/- BEING THE FIRST INSTALMENT OF LICENCE FEES AND RS.1 ,39,756/- BEING DISCOUNT ALLOWED TO CUSTOMERS ON THE GROUND THAT THEY ARE NO T EVIDENCED BY PROPER PROOF. THE CIT(A) CONFIRMED THE ABOVE ADDITIONS. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US AN D RAISED THE FOLLOWING GROUNDS: 2. BOTH THE ASSESSING OFFICER AND THE CIT(A) VIJAY AWADA HAVE BEEN UNFAIR AND UNJUST IN FIXING THE ACHIEVABLE GROSS MA RGINS BY ADOPTING THE HIGHEST PRESCRIBED MARGINS. CIT(A) VIJAYAWADA HAS U NFORTUNATELY RELIED UPON CERTAIN ERRONEOUS DATA IN HIS ASSESSEE ORDER, WHICH HAS AN ADVERSE EFFECT ON HIS CONCLUSIONS. PERHAPS THIS IS BY INADVERTENCE. 3. DISALLOWANCES TOWARDS LICENSE FEE AND DISCOUNT ARE AGAINST THE LAW. THE LICENSE FEE IS THE FIRST INSTALMENT PAID TO GOV T. OF AP AS BIDDING FEE AT THE TIME OF PARTICIPATION IN THE OPEN TENDER. T HESE TWO ADDITIONS ARE BAD IN LAW AND AGAINST THE NORMAL TRADE PRACTICES. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI M.V. RAJA SEKHARA RAO SUBMITTED BEFORE US THE ORDER OF THE TRIBUNAL, HYDE RABAD B BENCH DATED 28.7.2011 IN THE CASE OF M/S KANAKA DURGA WINES, HY DERABAD IN ITA NO.591/HYD/2011. THE TRIBUNAL HAS CONSIDERED SIMILA R ISSUES WHEREIN THE TRIBUNAL VIDE ITS ORDER DATED 28 TH JULY, 2011 HELD AS FOLLOWS: 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FACT THAT THE MAXIMUM RETAIL PRICE OF THE LIQUOR PRODUCTS IS FIXE D AT 30% OVER THE COST PRICE OF THE ASSESSEE AS PER THE UNDERSTANDING WITH APBCL. IT IS ALSO AN ADMITTED FACT ABOUT ITS INABILITY TO MAINTAIN TH E CASH SALES BILLS AND ITA NO.816/HYD/2011 M/S GAYATRI WINES, HYD ACCORDINGLY ONE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE CANNOT BE RELIED UPON. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT THE LOWER AUTHORITIES ARE CORRECT AND JUS TIFIED IN REJECTING THE BOOKS OF ACCOUNTS UNDER SECTION 145 OF THE ACT. W E FIND THAT THE ASSESSING OFFICER HAS RIGHTLY ADOPTED THE SALE PRIC E AT 30% OVER THE COST OF PURCHASE TO ARRIVE AT THE UNDERSTATEMENT OF SALE S OF RS.93,65,993/- BY THE ASSESSEE. BUT AT THE SAME TIME, THE ENTIRE UNDERSTATEMENT OF SALES CANNOT BE TREATED AS UNDISCLOSED INCOME OF TH E ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IT IS WELL SETTLED LAW T HAT THE BEST GUIDE FOR ESTIMATION OF INCOME AFTER REJECTING THE BOOKS OF A CCOUNT IS EITHER PAST HISTORY OF THE ASSESSEE OR ANY OTHER COMPARABLE CAS ES. THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY DEMONSTRATED BEFOR E US THAT THE ASSESSEES NET PROFIT IN THE PAST IS BETWEEN 0.12% TO 0.28% OF SALES. THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MANJIT SINGH BAGGA VS. ITO IN ITA NO.371 AND OTHERS DATED 30 TH SEPTEMBER, 2010 HELD THAT THE ESTIMATION OF NET PROFIT AT 3% IS REASONABLE. IN VIEW OF THIS MATTER, ENDS OF JUSTICE WOULD BE MET IF WE ESTIMATE THE NET PROFIT OF THE ASSESSEE AT 3% OF THE PURCHASES OR STOCK PUT FOR SA LE DURING THE YEAR UNDER CONSIDERATION AS AGAINST THE ESTIMATION OF 5% MADE BY THE CIT(A). ACCORDINGLY, THE GROUND RAISED BY THE REVE NUE ON THIS ISSUE IS REJECTED AND CROSS OBJECTION FILED BY THE ASSESSEE ON THIS ISSUE IS ALLOWED. 6. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ITA NO.591/H/2011 AND CO.NO.40/H/2011, WE DIRECT THE AS SESSING OFFICER TO COMPUTE THE INCOME OF THE ASSESSEE AT 3% OF THE STO CK PUT UP FOR SALE. 7. WITH RESPECT TO GROUND NO.2 THAT THE DISALLOWAN CE OF LICENSE FEE AND DISCOUNT MADE BY THE ASSESSING OFFICER AND CONFIRME D BY THE CIT(A), WE ARE OF THE OPINION THAT ONCE THE BOOKS OF ACCOUNTS ARE REJECTED, THE VERY SAME BOOKS OF ACCOUNTS CANNOT BE A BASIS FOR MAKING ANY ADDITION AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF INDWELL CO NSTRUCTIONS VS. CIT (232 ITA NO.816/HYD/2011 M/S GAYATRI WINES, HYD ITR 776), MOREOVER, WHEN THE PROFIT IS ESTIMATED B Y REJECTING THE BOOKS OF ACCOUNT, ALL THE EXPENDITURE INCLUDING OTHER HEADS OF EXPENDITURE ARE DEEMED TO BE ALLOWED. THEREFORE, ONCE THE PROFIT I S ESTIMATED THERE SHOULD NOT BE ANY FURTHER ADDITION ON THIS COUNT. THEREFO RE THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 16.12.2011 SD/- SD/- (CHANDRA POOJARI) ( (ASHA VIJAYA RAGHAV AN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 16 TH DECEMBER, 2011 COPY FORWARDED TO: 1. SHRI V. MALYAL & CO., OFFICE NO.209, 1-8-702/35, WI NDSOR PLAZA, NALLAKUNTA, HYDERABAD-44. 2. THE ITO, WARD 9(3), HYDERABAD 3. THE CIT(A) - VIJAYAWADA 4. THE CIT, HYDERABAD 5. THE DR, ITAT, HYDERABAD NP/