Sampath Gaddagunti, Hyderabad V. Income Tax Officer, Ward-9(4), Hyderabad

ITA 968/Hyd/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1296 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 13-03-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 14-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D J PRABHAKAR ANAND
• Assessee Lawyers: S RAMA RAO
• Keywords: Business income
• Section: 234B; 68; 144

Judgement Text

ITA NO 968 OF 2018 SAMPATH GADDAGUNTI HYDERABAD. PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B SMC BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO.968/HYD/2018 (ASSESSMENT YEAR: 2013-14) SHRI SAMPATH GADDAGUNTI HYDERABAD PAN:AEDPG7121H VS INCOME TAX OFFICER WARD 9(4) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SHRI D.J. PRABHAKAR ANAND O R D E R THIS IS ASSESSEES APPEAL FOR THE A.Y 2013-14 AGAIN ST THE ORDER OF THE CIT (A)-7, HYDERABAD, DATED 14.03. 2018. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1) THE ORDER OF THE LEARNED CIT (A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2) THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTI ON OF THE ASSESSING OFFICER IN COMPLETING THE ASSESSMENT EX-P ARTE U/S 144 OF THE I.T.ACT WITHOUT PROVIDING PROPER OPPORTUNITY. 3) THE LEARNED CIT (A) ERRED IN REJECTING THE BOOKS OF ACCOUNT AND RESORTING TO ESTIMATION OF INCOME 4) THE LEARNED CIT (A) ERRED IN UPHOLDING THE ESTIM ATION OF PROFIT AT 5% WITHOUT CONSIDERING THE CIRCUMSTANCES IN WHICH THE TRADE WAS CARRIED ON DURING THE FINANCIAL YEAR 2012-13. 5) THE LEARNED CIT (A) ERRED IN CONFIRMING THE ACTI ON OF THE ASSESSING OFFICER IN TREATING THE DEPOSITS MADE INT O STATE BANK OF HYDERABAD, SAROORNAGAR BRANCH, HYDERABAD OF DATE OF HEARING : 13.03.2019 DATE OF PRONOUNCEMENT: 15.03.2019 ITA NO 968 OF 2018 SAMPATH GADDAGUNTI HYDERABAD. PAGE 2 OF 5 RS.3,80, 191 J - AS THE INCOME OF THE APPELLANT U/S 68 OF THE I.T.ACT. 6) THE LEARNED CIT (A) ERRED IN TREATING THE INTERE ST OF RS.2,98,627/- SEPARATELY AS THE INCOME OF THE APPEL LANT ASSESSABLE UNDER THE HEAD/'OTHER SOURCES' WHEN THE BOOK RESULTS ARE REJECTED AND THE NET INCOME IS ESTIMAT ED. 7) THE LEANED CIT (A) ERRED IN CONFIRMING CHARGING OF INTEREST U/S 234B I OF RS.2,69,928/- 8) ANY OTHER GROUND OR GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 2. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT PRESSIN G GROUND OF APPEAL NO.6. THEREFORE, THE SAID GROUND IS REJECTED AS NOT PRESSED. 3. AS REGARDS THE OTHER GROUNDS OF APPEAL, BRIEF FA CTS ARE THAT THE ASSESSEE, AN INDIVIDUAL, ENGAGED IN THE BU SINESS OF RETAIL TRADE IN LIQUOR IN THE NAME AND STYLE OF M/S. SRINI VASA WINES, FILED HIS RETURN OF INCOME ON 29.09.2013 DECLARING TOTAL INCOME OF RS.NIL AND CLAIMED CARRY FORWARD LOSSES OF RS.10,27 ,448/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND THE A SSESSEE WAS REQUIRED TO FURNISH THE BOOKS OF ACCOUNT. HOWEVER, THE ASSESSEE DID NOT APPEAR BEFORE THE AO. THEREFORE, THE AO COM PLETED THE ASSESSMENT U/S 144 OF THE I.T. ACT. THE AO OBSERVED THAT THE ASSESSEE HAS GOT LICENSE TO RUN THE LIQUOR SHOP AND THAT THE TOTAL SALES WERE RS.5,34,01,380/- AS AGAINST THE PURCHASE OF RS.4,59,96,928/- AND THE CLOSING STOCK WAS SHOWN AT RS.24,79,047/-. HE OBSERVED THAT THE GROSS PROFIT W ORKS OUT TO 22% ON THE STOCK PUT TO SALE AND THAT AS PER THE GO VT. NORMS, THE LICENSEES ARE ALLOWED MARGIN ON SALE OF IMFL ITEMS OF ORDINARY AND PREMIUM LIQUOR RANGING FROM 20% TO 27%. HE THER EFORE, ITA NO 968 OF 2018 SAMPATH GADDAGUNTI HYDERABAD. PAGE 3 OF 5 ESTIMATED THE NET PROFIT OF THE ASSESSEE AT 5% OF T HE COST OF GOODS PUT TO SALE. 4. FURTHER, HE ALSO OBSERVED THAT THE ASSESSEE HAS MADE CASH DEPOSITS INTO HIS BANK A/C AND SINCE THERE WAS NO EXPLANATION FROM THE ASSESSEE ABOUT THE SOURCES FOR THE DEPOSITS, HE BROUGHT A SUM OF RS.3,08,181/- TO TAX U/S 68 OF THE I.T. ACT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A), WHO DISMISSED THE SAME AND THE ASSESSEE IS IN SECON D APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IN SIMILAR CASES, THIS TRIBUNAL HAS BEEN ESTIMATING TH E INCOME OF THE ASSESSEE AT 3% OF THE COST OF GOODS PUT TO SALE. HE THEREFORE, PRAYED THAT SINCE THE ASSESSEE IS NOT MAINTAINING B OOKS OF ACCOUNT, SIMILAR ESTIMATION MAY BE MADE IN THE CASE OF THE ASSESSEE AS WELL. 6. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE FACTORS SUCH AS LOCATION OF THE SHOP, THE NATURE OF BUSINES S, VOLUME OF TRADE ETC., SHOULD BE CONSIDERED FOR ESTIMATION OF INCOME. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, I FIND THAT THOUGH THE LEARNED DR STATES THAT THE LOCATION OF THE SHOP AND ALSO THE VOLUME OF TRADE I S TO BE LOOKED INTO, NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO JUS TIFY THE SAID ARGUMENT AND THE ESTIMATION OF INCOME @5% OF THE CO ST OF GOODS ITA NO 968 OF 2018 SAMPATH GADDAGUNTI HYDERABAD. PAGE 4 OF 5 PUT TO SALE. IN SIMILAR CASES, THE COORDINATE BENCH ES OF THIS TRIBUNAL (TO WHICH I AM A SIGNATORY) HAVE HELD 3% O F THE COST OF GOODS PUT TO SALE AS A REASONABLE NET PROFIT. THE R ELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IN THE CASE OF SRI VEN KATESWARA WINES, SECUNDERABAD IN ITA NO.1206/HYD/2015 IS REPR ODUCED HEREUNDER: 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF A CCOUNT AND THEREFORE, THE ESTIMATION OF INCOME IS JUSTIFIED. IT IS ONLY THE R ATE AT WHICH THE INCOME IS TO BE ESTIMATED IS BEFORE US. A.O. HAS ESTIMATED THE INCO ME AT 5% OF THE COST OF GOODS SOLD, WHILE THE ASSESSEE IS SEEKING THE ESTIMATION AT 3% OF THE COST OF GOODS SOLD. WE FIND THAT IN THE CASE OF VENKATESWARA WINES, NIZ AMABAD (SUPRA), THE COORDINATE BENCH OF THIS TRIBUNAL HAS TAKEN NOTE OF THE DECISION OF HON'BLE HIGH COURT OF TELANGANA AND ANDHRA PRADESH IN THE CASE O F CIT VS. KAMLEKAR SHANKAR LAL (SUPRA) TO HOLD AS UNDER : '6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE AO HAS CALLED FOR BOOKS OF ACCOUNT OF THE ASSES SEE BUT THE ASSESSEE HAD FAILED TO PRODUCE THE SAME. THEREFORE, AO HAD ESTIMATED TH E INCOME OF THE' ASSESSEE AT 2.5% OF THE TURNOVER. THE CIT WANTS THE SAME TO BE ESTIMATED AT 5% OF THE TOTAL TURNOVER BECAUSE THE TRIBUNAL IN THE CASE OF AN ASS ESSEE CARRYING ON THE SAME BUSINESS OF SALE OF IMFL HAS ESTIMATED THE INCOME A T 5% OF THE TURNOVER. THIS, IN OUR VIEW, IS NOT JUSTIFIED AS HELD BY THE COORDINAT E BENCH OF THIS TRIBUNAL. THE ITA.NO.1206/HYD/2015 SAI VENKATESWARA WINES, SE CUNDERABAD UNIFORM NET PROFIT CANNOT BE ADOPTED IN EACH AND EVERY CASE OF SIMILAR BUSINESS. ESTIMATION OF NET PROFIT MUST BE ON THE BASIS OF FACTS INVOLVED I N EACH AND EVERY CASE. THEREFORE, IN OUR VIEW, THERE IS NO ERROR COMMITTED BY THE AU IN ESTIMATING THE PROFIT AT 2.5% OF THE TOTAL TURNOVER. THUS GROUNDS OF APPEAL NO.2 & 3 ARE ALLOWED.' 5.1. IN THE CASE BEFORE US, THE ASSESSEE IS AGREEAB LE TO THE ESTIMATION OF INCOME AT 3% OF THE COST OF GOODS SOLD. AS THE FACTS BEFORE U S ARE SIMILAR TO THE FACTS BEFORE THE TRIBUNAL IN THE CASE OF VENKATESWARA W INES, NI ZAMABAD (SUPRA) AND THE UNIFORM RATE OF PROFIT CANNOT BE ADOPTED IN THE CAS E OF EVERY ASSESSEE IN SIMILAR BUSINESS, WE ALLOW GROUND NO.2 OF THE ASSESSEE. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH (TO WHICH I AM A SIGNATORY), THE AO IS DIRECT ED TO ESTIMATE THE NET PROFIT AT 3% OF THE COST OF GOODS PUT TO SA LE. THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. ITA NO 968 OF 2018 SAMPATH GADDAGUNTI HYDERABAD. PAGE 5 OF 5 9. AS REGARDS THE CREDITS MADE INTO THE BANK A/C, T HE ASSESSEE SUBMITTED BEFORE THE CIT (A) THAT IT WAS O PERATING BANK A/C FOR WITHDRAWAL OF AMOUNTS FOR MEETING PETTY CAS H EXPENSES REQUIRED IN THE DAY-TO-DAY BUSINESS AND THAT NO MAJ OR CUSTOMER RECEIPTS/PAYMENTS ARE ROUTED THROUGH THE SAME. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E HAD DECLARED LOSS, BUT BY ESTIMATION OF INCOME AT 3%, T HE TAXABLE INCOME HAS INCREASED AND THE CASH DEPOSITS SHOULD B E SUBSUMED INTO THE SAID ADDITION. 10. THE LEARNED DR SUPPORTED THE ORDERS OF THE AO A ND THE CIT (A). 11. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS EXPLAINED THE DEPOSITS TO BE FOR MEETING PETTY CASH EXPENSES AND SINCE THE BU SINESS INCOME OF THE ASSESSEE HAS BEEN ESTIMATED, THE SOURCES FOR THE DEPOSITS ARE ALSO TREATED AS EXPLAINED. THE ADDITION IS ACCO RDINGLY DELETED. 12. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2019. SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 15 TH MARCH, 2019. VINODAN/SPS COPY TO: 1 SRI SAMPATH GADDAGUNTI, H.NO.13-101/P, P&T COLONY , DILSUKHNAGAR, HYDERABAD 2 ITO WARD 9(4) IT TOWERS, AC GUARDS, HYDERABAD 3 CIT (A)-7, HYDERABAD 4 PR. CIT 7 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER