M/s Vijaya Durga Wines, Hyderabad V. Deputy Commissioner of Income Tax, Hyderabad

ITA 848/HYD/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53835 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 09-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: M V RAJA SEKH AR RAO
• Keywords: Rejection of books of accounts
• Section: 147; 145; 148

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.848/HYD/2011 ASSESSMENT YEAR 2006-07 M/S VIJAYA WINES HYDERABAD (PAN AAFFV4741A) VS THE DCIT, CENTRAL CIRCLE 7 HYDERABAD APPELLANT RESPONDENT APPELLANT BY : SHRI M.V. RAJASEKHAR RAO RESPONDENT BY : SHRI B.V. PRASAD REDDY DATE OF HEARING : 15.12.2011 DATE OF PRONOUNCEMENT : 27.12.2011 ORDER PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER PASSED BY THE CIT(A) VI, HYDERABAD DATED 31 .1.2011 AND IT PERTAINS TO THE ASSESSMENT YEAR 2006-07. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 27.10.200 6 ADMITTING TOTAL INCOME OF RS.34,661/- AND THE SAME WAS PROCESSED U/ S 143(1). LATER IT WAS NOTICED BY THE ASSESSING OFFICER THAT THERE WAS UND ERSTATEMENT OF SALES TO THE TUNE OF RS.26,29,941/- AND THEREFORE THE ASSESS MENT WAS REOPENED U/S 147 BY ISSUE OF NOTICE U/S 148 ON 29.10.2008. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND ADOPTED THE MAXI MUM GROSS MARGINS PRESCRIBED BY THE PROHIBITION EXCISE SUPERINTENDENT , RR DISTRICT TO ARRIVE AT THE OPTIMUM CHARGEABLE SALES. IN THIS PROCESS, THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT, BY ADOPTING THE MARGINS FIXED BY THE GOVT. AT 24% ITA NO.848 OF 2011-12-23 VIJAYA WINES, HYDERABAD OF COST OF GOODS SOLD, AND THEREBY INCREASED THE SA LES AND ESTIMATED THE PROFIT BY HIGHER AMOUNT AT RS.21,78,388/- . 3. AGGRIEVED ASSESSEE PREFERRED APPEAL. THE CIT(A ), FOLLOWING HIS APPELLATE ORDER IN THE CASE OF M/S. KANAKA DURGA WIN ES FOR THE ASSESSMENT YEAR 2004-05, DIRECTED THE ASSESSING OFF ICER TO RECOMPUTE THE TAXABLE INCOME OF THE ASSESSEE BY ESTIMATIN G THE NET PROFIT AT 5% OF THE STOCKS PUT TO SALE, WHETHER PREMIUM NO N-PREMIUM OR BEER ITEMS, DURING THE YEAR. HE ALSO DIRECTED TH AT AS THE BOOKS ARE REJECTED, THE INCOME IS TO BE ESTIMATED NET OF ALL DEDU CTIONS. 4. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFO RE US AND RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) DECISION TO DIRECT THAT THE NET PROF IT SHOULD BE ESTIMATED AT 5% OF STOCKS PUT TO SALE AS AGAINST 30%(20% ON P REMIUM ITEMS SOLD AND 25% ON BEER ITEMS) SOLD ADOPTED BY ITO STILL DO ES NOT MEET THE ENDS OF JUSTICE AND DOES NOT COMPARE WITH THE COMPA RABLE MARKET CASES AND SUBSEQUENT YEARS RESULTS. 2. THE ASSESSEE HUMBLY INVITES THE TRIBUNALS ATTE NTION TO DECISION IN ITA NO.371 & 391/H/2009 (ASSESSMENT YEAR 2004-05) O RDERS DATED 30.9.2010, HYDERABAD A BENCH, WHEREIN THE ESTIMATIO N OF PROFITS IS RESTRICTED TO 3% ON PURCHASES. 3. THE ASSESSEE BEGS FOR ESTIMATION OF PROFITS AT 3% IN THE LIGHT OF FACTS EXPLAINED IN DETAILED SUBMISSIONS. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI M.V. RAJA SEKHARA RAO SUBMITTED BEFORE US THE ORDER OF THE TRIBUNAL DATED 28.7.2011 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07, IN ITA NO .864/HYD/2011, ITA NO.848 OF 2011-12-23 VIJAYA WINES, HYDERABAD WHEREIN THE TRIBUNAL, NOTED THE EARLIER ORDER OF TH E TRIBUNAL DATED 28 TH JULY, 2011 IN THE CASE OF M/S KANAKA DURGA WINES, HYDERAB AD IN ITA NO.591/HYD/2011, WHEREIN IT WAS 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 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. ITA NO.848 OF 2011-12-23 VIJAYA WINES, HYDERABAD FOLLOWING THE ABOVE ORDER, IT WAS SUBMITTED THAT TH E TRIBUNAL DIRECTED THE ASSESSING OFFICER TO COMPUTE THE INCOME OF THE ASSE SSEE AT 3% OF STOCK PUT FOR SALE. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT(A). 7. WE HEARD THE PARTIES. WE FIND THAT THE ISSUE I N DISPUTE IN THIS APPEAL IS SQUARELY COVERED BY THE DECISIONS OF THE TRIBUNA L IN SIMILAR CASES, MORE PARTICULARLY, IN ASSESSEES OWN CASE FOR THE ASSESS MENT YEAR 2006-07. RESPECTFULLY FOLLOWING, THEREFORE, THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.864/H/2011 AND CO.NO.47/H/2011 F OR THE ASSESSMENT YEAR 2006-07, WE DIRECT THE ASSESSING OFFICER TO C OMPUTE THE INCOME OF THE ASSESSEE AT 3% OF THE STOCK PUT UP FOR SALE. 8. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27.12.2011 SD/- SD/- (CHANDRA POOJARI) ( (ASHA VIJAYA RAGHA VAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 27 DECEMBDER 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/