BHASKAR MOLAGAMUDI,TIRUPATHI vs. ITO, WARD -1(3), TIRUPATHI

There is a delay of 39 days in filing both the appeals before this Tribunal. The assessee has filed an application for condonation of delay which is supported by the affidavits of the assessee. The learned Authorised Representative of the Assessee has submitted that the assessee is a Distributor of Milk of M/s. Hutsun Agro Product Ltd., and is a small businessman having no specialised knowledge of taxation or appeal proceedings. The assessee was depending upon the professional advise so received and bonafidely believe that no effective remedy was available against the order passed by the learned CIT(A). Thereafter, upon further enquiry and discussion with other professionals, the assessee was advised to obtain independent legal opinion regarding the correct course of action against the orders passed by the authorities below and therefore, the assessee approaches the present Counsel for taking further steps to challenge the order of the learned CIT(A). Since it was a case of estimation of income by the Assessing Officer at the rate of 8% as against the declared income at 2.38% of the sales which is the normal margin profit in the business of distribution of milk products therefore, the Counsel asked the assessee to collect the entire evidence including the distribution agreement with milk company. In the process, the delay of 39 days is caused in filing the present appeals. Thus, the learned Authorised Representative of the Assessee has submitted that the delay in filing the appeals is neither intentional nor deliberate but due to the reasons explain by the assessee and the delay may be condoned.

On the other hand, the learned DR has raised no objection if the delay of 39 days in filing the appeals is condoned.

I have considered the rival submissions and carefully perused the reasons explained by the assessee in the application which is supported by the affidavit of the assessee. Having considered the reasons explained by the assessee as well as the facts and surrounding circumstances, when assessee comes from a remote area, the delay of 39 days in filing these two appeals is condoned.

The assessee has raised the following grounds of appeal:

The learned Authorised Representative of the Assessee has submitted that in the assessment framed under section 143(3) the Assessing Officer has estimated the income of the assessee @ 8% which is highly arbitrary and unjustified when the margin/commission of the assessee being a distributor of the milk is only 1 to 3% of the gross receipts and therefore, the assessee has offered the correct income of Rs.2,29,710/- in the return of income. The Assessing Officer has rejected the claim of the assessee and estimated the income at the rate of 8% under section 44AD of the Act without considering the fact that in the business of distribution of milk and milk products, the margin is ranging from 1 to 3% of the gross receipts and therefore, the Assessing Officer has erred in making the addition by estimating the income at the rate of 8% of the gross receipts. He has referred to the Distribution Agreement placed at Page nos.49 to 56 of the paper book and submitted that the assessee has no choice to charge the rate as the milk is being sold at the MRP as prescribed by the Company and not above MRP which is specifically mentioned in Clause-10(8) of the agreement. In support of his contention, he has relied upon the Order of ITAT, Hyderabad in the case of Shri Mamillapalli Bhajannarayana Murthy, Khammam vs. ITO, Ward-1, Khammam in ITA.No.656/Hyd./2024, dated 02.09.2024 placed at Page-9 of the paper book. Thus, the learned Authorised Representative of the Assessee has submitted that the income of the assessee maybe estimated at a reasonable and proper rate by considering the facts as well as the decision of this Tribunal.

On the other hand, the learned DR submitted that in the absence of any documentary evidence filed by the assessee for claiming the expenditure, the Assessing Officer has estimated the income at the rate of 8% of the gross receipts as per the provisions of section 44AD of the Act. He has relied upon the orders of the authorities below.

I have considered the rival submissions as well as relevant material on record. The assessee is a distributor of milk and milk products of M/s. Hutsun Agro Product Ltd., vide Distribution Agreement dated 30.12.2020. Thus, as per the said Distribution Agreement, the assessee has to sell the products only as per the MRP decided by the Company from time to time and not the above MRP. It is also a matter of fact that in the business of distribution of milk and milk products, the margin of the distribution is very thin ranging from 1 to 3%. An identical issue has been considered by this Tribunal in the case of Shri Mamillapalli Bhajannarayana Murthy, Khammam vs. ITO, Ward-1, Khammam (supra), in Para-5 as under:

Though the assessee has raised additional grounds for the assessment year 2018-2019 challenging the validity of notice u/sec.148 for want of proper approval u/sec.151 of the Act, however, since the appeals have been decided on merits in favour of the assessee therefore, additional ground raised by the assessee becomes academic in nature and is not taken up for adjudication.

In the result, both the appeals of the assessee are partly allowed. A copy of this common order be placed in the respective case files