GURUCHARAN SINGH,HYDERABAD vs. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-7(1), HYDERABAD

The assessee has raised six grounds in his appeal however, the crux of the issue is that: (i) The ld. CIT (A) has erred in confirming the addition made by the Ld. AO who had estimated the profit of the assessee on sale of liquor @ 5% of the turnover of Rs. 19,22,54,144/- which works out to Rs. 96,12,707/- (ii) The Ld. CIT (A) has erred in confirming the addition made by the Ld. AO for Rs. 20 lakhs towards unaccounted income on investments.

The brief facts of the case are that the assessee is an individual engaged in the business of trading in IMFL in the name and style of M/s. Kuldeep Wines. The assessee filed his return of income for the AY 2013-14 on 30/09/2013 declaring total income of Rs. 79,07,700/. Thereafter, the case was taken up for scrutiny and assessment was completed vide order dated 15/3/2016 wherein the Ld. AO made certain additions along with the additions mentioned herein above. On appeal, the ld. CIT (A) dismissed the appeal of the assessee.

During the course of assessment proceedings, the ld. AO observed that the assessee had not maintained the books of accounts, bills, Vouchers and other particulars required for completing the assessment. Therefore, the Ld. AO estimated the income of the assessee @ 5% drawing strength from the decision of the Hyderabad Bench of the Tribunal cited in his order. The Ld. AO also made an addition of Rs. 20 lakhs with respect to income earned from GSB & Co., without further discussions. On appeal the Ld. CIT (A) confirmed the order of the Ld. AO because even before him the assessee could not produce any evidence or details to justify his stand.

Before us, Ld. AR pleaded that an estimate of 3% of the turnover may be made on the income earned by the assessee with respect to trading in IMFL as decided by the Hyderabad Bench of the Tribunal in various other cases. The Ld. DR on the other hand prayed for sustaining the order of the Ld. CIT (A).

We have heard the rival submissions and carefully perused the materials on record. We wonder as to why the traders of IMFL are unable to maintain their books of accounts, bills, vouchers etc., that is required for completing the assessment. This has become a common phenomenon in our Jurisdiction. Further, a blind estimate without knowing the background of the industry will not be appropriate. It is a well-known fact that the entire purchases made by the IMFL traders are from Government corporations / companies. The MRP rate is also fixed by the Government. Accordingly the commission or the margin of profit on sale of IMFL is also determined by the Government. These are public documents which the Revenue can always obtain from the public domain or from the Government Corporations / companies who sell the IMFL to the traders. From this information the Ld. AO can fairly estimate the gross profit of the IMFL traders and thereafter estimate the net profit. Once this exercise is due diligently carried out by the Revenue then probably estimation of income on the trading of IMFL can be determined in a more realistic manner. Needless to mention that neither discount is ever offered on sale of IMFL unless specifically proved with evidence nor could be sold more than the MRP fixed by the State Government which will be in violation of the relevant Act. Therefore, in the interest of justice, we hereby remit back the entire matter to the file of the ld. AO to consider the issue afresh in the light of our above-mentioned observations and thereafter pass appropriate order in accordance with law and merit.

With respect to the other addition made and sustained by the Revenue for Rs. 20 lakhs also we remit back the matter to the file of the Ld. AO for de novo consideration because there are no proper discussions towards the same either by the Ld. AO or by the Ld. CIT (A).

In the result, the appeal of the assessee is allowed for statistical purposes as indicated herein above.

Before parting, it is worthwhile to mention that this order is pronounced after 90 days of hearing the appeal, which is though against the usual norms, we find it appropriate, taking into consideration of the extra-ordinary situation in the light of the lock-down due to Covid-19 pandemic. While doing so, we have relied in the decision of Mumbai Bench of the Tribunal in the case of DCIT vs. JSW Ltd. In and 6103/M/2018 for AY 2013-14 order dated 14th May 2020.