Kanaka Durga Wines, Hyderabad V. ITO. Ward-9(3), Hyderabad

MA 217/HYD/2011

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 8048 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K VISHWANATHAN
• Assessee Lawyers: M V RAJASEKHAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, A.CCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER M.A. NO. 217/HYD/2011 (IN ITA NO. 462/HYD/2011 ASSESSMENT YEAR : 2004-05) KANAKA DURGA WINES, APPLICANT HYDERABAD (PAN AAEFK 6595 Q) VS. INCOME-TAX OFFICER-WARD 9(3), RESPONDENT HYDERABAD AND ITA NO. 462/HYD/2011 ASSESSMENT YEAR : 2004-05 KANAKA DURGA WINES, APPELLANT HYDERABAD (PAN AAEFK 6595 Q) VS. INCOME-TAX OFFICER-WARD 9(3), RESPONDENT HYDERABAD APPELLANT BY : MR.M.V. RAJASEKHAR RESPONDENT BY : MR. K. VISHWANATHAN DATE OF HEARING : 04/05/2012 DATE OF PRONOUNCEMENT : 18 /05/2012 ORDER PER ASHA VIJAYARAGHAVAN, J.M.: M.A NO. 217/HYD/2011 THIS MISCELLANEOUS APPLICATION FILED BY THE ASSESSE E ARISES OUT OF THE ORDER OF ITAT A BENCH, HYDERABAD BENCHES, HYDERABAD, IN APPEAL ITA NO. 462/HYD/2011 DATED 21ST SEPTEMBER, 2 011, WHICH WAS PASSED EX-PARTE BY THE ITAT. THE ASSESSEE IN TH E MA, BESIDES M.A. NO. 217/HYD/11 AND ITA NO. 462/HYD/11 M/S KANAKA DURGA WINES. 2 MENTIONING THE REASONS FOR NOT ATTENDING THE HEARIN G OF HIS CASE, REQUESTED THAT NON ATTENDANCE ON THE DATE OF HEARIN G WAS OUT OF INADVERTENCE AND NOT AS THE ASSESSEE WAS DISINTERES TED IN PROSECUTION OF APPEAL. 2. WE HAVE HEARD THE LEARNED COUNSEL OF THE ASSESSE E AND THE LEARNED DR IN THE MATTER. IN VIEW OF THE ABOVE THAT THE ASSESSEE IS INTERESTED IN PROSECUTING ITS APPEAL, THE ORDER OF THE ITAT (SUPRA) IS RECALLED. 3. SINCE THE ISSUE RAISED IN THE CORRESPONDING APPE AL IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF ITAT, H YDERABAD, WE HAVE DECIDED TO DISPOSE OF THE APPEAL, ON MERITS, A LONG WITH THE M.A. AND THE SAME WAS ACCEPTED BY BOTH THE PARTIES. ITA NO. 462/HYD/2011 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E AO IN THE ASSESSMENT ORDER NOTED THAT AS PER AP PROHIBITION A ND EXCISE DOMS NO. 184, DT. 07/02/2005, THE RETAILERS MARGIN WAS FIXED AT 27% ON THE ORDINARY LIQUOR ITEMS, 20% ON THE MEDIUM AND PREMIUM ITEMS AND 25% ON THE BEER ITEMS. IN VIEW OF THE NON -VERIFIABLENESS OF THE SALES FIGURES ADMITTED IN THE PROFIT AND LOS S ACCOUNT AND NON-MAINTENANCE OF SALE BILLS/RECEIPTS, EVENTHOUGH THE ASSESSEE DID NOT SELL ANY ORDINARY LIQUOR PRODUCT, IT WAS PR OPOSED TO ESTIMATE THE PROFIT AT THE RATE OF 27% ON THE COST OF GOODS SOLD. A SHOW CAUSE NOTICE WAS ISSUED IN THIS REGARD, IN REP LY, THE ASSESSEE STATED THAT THE ESTIMATION IS UNFAIR AND IMPRACTICA BLE FOR ADOPTING MARGIN RATE @ 27% UNIFORMALLY ALTHOUGH THE FIRM DID NOT SELL ANY ORDINARY LIQUOR PRODUCT AND IN THIS CONNECTION, IT SUBMITTED DETAILS FOR PRODUCTS PURCHASED FROM APBCL AND FURNISHED THE DETAILS OF PREMIUM ITEMS AS WELL AS BEER ITEMS ACCORDING TO IN VOICE NUMBERS. ACCORDING TO THE STATEMENT, THE COST OF GOODS SOLD IN RESPECT OF THE M.A. NO. 217/HYD/11 AND ITA NO. 462/HYD/11 M/S KANAKA DURGA WINES. 3 PREMIUM ITEMS WORKS OUT TO RS. 1,31,05,405/- AND TH E BEER ITEMS ARE AT RS. 38,39,427/-. THE AO REJECTED THE ABOVE S UBMISSIONS OF THE ASSESSEE AND STATED THAT IN THE ABSENCE OF SALE BILLS AND ALSO THE DOCUMENTARY EVIDENCE IN SUPPORT OF THE GROSS SA LES ADMITTED ON THE DAY TO DAY BASIS WRITTEN IN THE BOOKS OF ACCOUN T, THE PROFIT OF THE ASSESSEE WAS ADOPTED @20% ON THE PREMIUM ITEMS SOLD OF RS. 1,31,05,405/- AND PROFIT IN RESPECT OF BEER ITEMS W AS ADOPTED @ 25% ON THE COST OF GOODS SOLD VALUE OF RS. 38,39,42 7/-. ACCORDING TO THE ABOVE PROFIT PERCENTAGE, THE PROFIT ON THE P REMIUM ITEMS SOLD WAS WORKED OUT TO BE RS. 26,21,081/- AND ON BEER IT EMS WORKED OUT TO RS. 9,59,856/-. IT WAS POINTED OUT BY THE AO THA T THE ASSESSEE HAD ADMITTED THE PROFIT ON THE GOODS SOLD IS MUCH L ESSER THAN THE PROFIT MARGIN ALLOWED BY THE GOVERNMENT OF AP PROHI BITION AND EXCISE DEPARTMENT. THEREFORE, THE SALE PROCEEDS OF THE ASSESSEE WAS DETERMINED AT RS. 2,05,25,769/- AND WHEREAS, TH E ASSESSEE HAD ADOPTED THE SALE PROCEEDS AT RS. 1,93,98,341/-, AND THUS CONCLUDED THAT THERE IS UNDERSTATEMENT OF SALES TO THE EXTENT OF RS. 11,27,428/- AND BROUGHT THE SAME TO TAX. 6. ON APPEAL, THE CIT(A) AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE AND ANALYZING THE ISSUE WITH CASE LAWS, DI RECTED THE AO TO RECOMPUTED THE TAXABLE INCOME BY ESTIMATING THE NET PROFIT AT 5% OF THE STOCKS PUT TO SALE, WHETHER PREMIUM, NON PREMIU M OR BEER ITEMS, DURING THE YEAR. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL:- HONBLE CIT(A)S DECISION TO DIRECT THAT THE NET PR OFIT SHOULD BE ESTIMATED AT 5% OF STOCKS PUT TO SALE AS AGAINST 30 % ADOPTED BY ITO STILL DOES NOT MEET THE ENDS OF JUSTICE AND DOES NOT COMPARE WITH THE PREVIOUS AND SUBSEQUENT TRADING RE SULTS. THE APPELLANT HUMBLY INVITES HONBLE ITAT OFFICES ATTENTION TO DECISION IN ITA NO. 371/HYD/2009, ORDERS DATED 30/0 9/2010, M.A. NO. 217/HYD/11 AND ITA NO. 462/HYD/11 M/S KANAKA DURGA WINES. 4 ITAT, HYDERABAD A BENCH, WHEREIN THE ESTIMATION OF PROFITS IS RESTRICTED TO 3% ON PURCHASES. 8. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE C ANVASSED THAT THE JURISDICTIONAL COORDINATE BENCH IN THE CASE OF MANJITH SINGH BAGGA IN ITA NO. 371/HYD/2009 VIDE ORDER DATED 30 TH SEPTEMBER, 2010 RESTRICTED THE ESTIMATION OF PROFIT TO 3% ON P URCHASES. HE, THEREFORE, PLEADED THAT THE SAME ANALOGY MAY BE FOL LOWED IN ASSESSEES CASE ALSO. 9. ON THE OTHER HAND, THE LEARNED DR, HAS STATED AS FOLLOWS: 1. IN THE CASE OF M/S KANAKADURGA WINES VS. ITO, WA RD-9(3), HYDERABAD(591/HYD/2011, THE HONBLE ITAT HAD UPHELD THE REJECTION OF BOOKS OF ACCOUNT AND ALSO ESTIMATION O F GP@30% OF SALES. 2. THE HONBLE ITAT HAD DIRECTED THAT THE NET PROFI T BE ESTIMATED @ 3% OF PURCHASES. THIS WAS DONE AFTER VE RIFYING THE PREVIOUS HISTORY OF BUSINESS DONE BY THE ASSESS EE. THE HONBLE ITAT HAD FOLLOWED THE SAME DECISION IN SOME OTHER CASES. 3. HOWEVER, IN THESE CASES, THERE IS NO PREVIOUS BU SINESS DONE BY THE ASSESSEE TO VERIFY. THE ASSESSING OFFICER HA S RELIED ON THE BUSINESS PRACTICES IN THIS TRADE WHERE THE SALE PRICE IS MUCH ABOVE THAT FIXED BY THE EXCISE DEPT. I.E. MORE THAN MRP. THE MEDIA HAVE REPORTED NUMEROUS CASES WHERE LIQUOR IS SOLD ABOVE THE MRP. 4. IT IS BROUGHT TO THE KIND NOTICE OF THE HONBLE TRIBUNAL THAT AS PER THE LATEST ACB INVESTIGATION IN THE LIQUOR T RADE, THE SALES ARE MADE MUCH ABOVE MRP BY FORMING CARTELS O F LIQUOR TRADERS. 5. IN THE INTEREST OF SOCIAL JUSTICE, IT IS IMPERAT IVE THAT APPROPRIATE TAXES ARE COLLECTED FROM LIQUOR TRADE. IT IS ESTIMATED THAT LIQUOR TRADE CONTRIBUTES TO RS. 18,0 00 CRORES TO M.A. NO. 217/HYD/11 AND ITA NO. 462/HYD/11 M/S KANAKA DURGA WINES. 5 THE STATE EXCHEQUER BUT PROPORTIONATE DIRECT TAXES ARE NOT REALIZED BY THE INCOME TAX DEPARTMENT. 6. IT IS ALSO SUBMITTED THAT TDS AND TCS RATES HAVE BEEN PRESCRIBED BY THE CBDT AFTER EVALUATING THE PROFIT MARGIN IN EACH TRADE. FOR THE LIQUOR TRADE, A RATE OF 1% TCS (AND INCREASED BY SURCHARGE AND EDUCATION CESS) HAS BEEN PRESCRIBED. IF THIS RATE IS ADOPTED, THE NET PROFIT MARGIN IN THE LIQUOR TRADE EXCEEDS 5%. 7. A PROVISION FOR REFUND IS PROVIDED TO THE ASSESS EE UNDER UNFORESEEN CONDITIONS WHERE THE ASSESSEE INCURS LOS SES OR LESSER PROFITS. BUT AFTER A PERUSAL OF THE FACTS OF THESE CASES, THERE DOES NOT SEEM TO BE A CASE FOR LOSS OR LOW PR OFITS. 8. AS A RESULT OF ESTIMATION OF 3% BEING UPHELD BY THE ITAT, REFUNDS ARE RESULTING IN MANY CASES WHICH IS NOT A SCENARIO ENVISAGED BY THE CBDT WHILE FIXING TCS OF 1% FOR LI QUOR TRADE. 9. UNDER THE CIRCUMSTANCES CITED ABOVE, IT IS REQUE STED THAT THE HONBLE TRIBUNAL BE PLEASED TO DIRECT THAT THE ESTIMATE OF NET PROFIT ABOVE 5% OF THE PURCHASES MADE BY THE AS SESSEE. 10. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW, AFTER TAKIN G INTO CONSIDERATION THE SUBMISSIONS OF THE DR, INTER-ALIA , THAT ESTIMATE OF NET PROFIT ABOVE 5% OF THE PURCHASES MADE BY THE AS SESSEE IS TO BE ADOPTED, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DIRECTING THE AO TO ESTIMATE NET PROFIT AT 5% OF T HE PURCHASES OR STOCK PUT FOR SALE DURING THE YEAR SUBJECT TO THE A SSESSED INCOME NOT LESS THAN RETURNED INCOME. THEREFORE, THE ORDE R OF THE CIT(A) IS HEREBY UPHELD ON THIS COUNT AND DISMISS THE GROU ND OF APPEAL OF THE ASSESSEE. M.A. NO. 217/HYD/11 AND ITA NO. 462/HYD/11 M/S KANAKA DURGA WINES. 6 11. IN THE RESULT, MA IS ALLOWED AND APPEAL IS PART LY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 18/05/2012. SD/- SD/- (CHANDRA POOJARI) (ASHA VIJAYARAGH AVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R HYDERABAD, DATED: 18 TH MAY, 2012. KV COPY TO:- 1) M/S KANAKA DURGA WINES V. MALYAL AND CO., OFFICE NO. 209, 1-8-702/35, WINDSOR PLAZA, NALLAKUNTA, HYDERABAD 500 044. 2) ITO, WARD-9(3), HYDERABAD 3) THE CIT (A)-VI, HYDERABAD 4) THE CIT-VI, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.