GUR SIMRAN DISTILLERIES PRIVATE LIMITED,HYDERABAD vs. ITO, WARD- 2(1), HYDERABAD

ITA 2365/HYD/2025Status: DisposedITAT Hyderabad23 September 2026AY 2008-0911 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that when book results are rejected, the estimation of income should be based on reasonable and proper guidance. The past net profit declared by the assessee is a proper and reasonable criterion. The Tribunal found that the CIT(A) had enhanced the assessment by estimating gross profit at 18.77% based on another company's figures without considering differentiating factors, while ignoring the assessee's own past net profit history, which was not disputed by the department. The Tribunal noted that the Assessing Officer had considered an estimation of income at 1% as reasonable and proper. In the absence of defects in the AO's estimation or material showing the assessee earned more income, using another company's gross profit without considering relevant factors is not justified. Therefore, the impugned order of the CIT(A) was set aside, and the estimation made by the Assessing Officer at 1% during the original assessment was sustained. The appeal filed by the assessee was allowed.

What were the facts?

The assessee, Gur Simran Distilleries Private Limited, is in appeal against the order of the Addl/JCIT(A)-4, Kolkata, for Assessment Year 2008-2009. This is the third round of appeal. Previously, the ITAT had remanded the matter to the CIT(A) for fresh adjudication, directing the CIT(A) to provide reasons/documents for estimating net profit at 18.77% of gross sales and to give the assessee an opportunity to be heard. The CIT(A) had enhanced the assessment by estimating gross profit at 18.77%, while the Assessing Officer had estimated income at 1% of gross sales against the assessee's declared net profit of 0.14%. The impugned order was passed by the CIT(A) pursuant to the Tribunal's directions.

What were the issues?

1. Whether the CIT(A) erred in upholding the AO's action without considering the appellant's submissions, violating principles of natural justice (Grounds 2, 13)? 2. Whether the CIT(A) erred in comparing the appellant with M/s. Khasa Distilleries Private Limited, given the different nature of business (Country Liquor vs. Indian Made Foreign Liquor), production processes, cost structures, and regulatory requirements (Grounds 3, 4, 8, 11)? 3. Whether the CIT(A) failed to furnish reasons for estimating Gross Profit at 18.77% as directed by the ITAT, and failed to provide a detailed explanation of the methodology used, thus violating hierarchical directions (Grounds 5, 6.1, 6.2)? 4. Whether the CIT(A) exceeded its jurisdiction by enhancing the assessment without complying with Section 251(2) of the Act and without affording the appellant an opportunity to respond (Ground 7)? 5. Whether the CIT(A) erred in treating lease charges as direct expenses, which, when corrected as indirect expenses, increases the gross profit ratio to 18.49%, aligning with the comparable case, thus invalidating the estimated income based on an incorrect gross profit of 16.31% (Grounds 9, 10)? 6. Whether the CIT(A) erred in estimating gross profit solely based on comparable cases without a reasonable basis, ignoring the appellant's own financial statements certified by a Chartered Accountant and substantiated explanations for profit differences (Grounds 11, 12)? Assessee's Contentions: The CIT(A) erred by using M/s. Khasa Distilleries' gross profit without considering the appellant's business differences and its own past/future net profit declarations (which were not disputed by the AO). The average of the assessee's declared net profit should be used. Lease charges treated as direct expenses are incorrect. The CIT(A) failed to follow ITAT's directions regarding reasons and opportunity. The comparison with M/s. Khasa Distilleries is arbitrary and violates natural justice. The appellant provided certified financial statements and reasonable explanations. The CIT(A) exceeded jurisdiction. Revenue's Contentions: The learned DR relied upon the orders of the authorities below.

Which sections of the Income-tax Act were involved?

Section 250,Section 251(2)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD

Before: SHRI VIJAY PAL RAO

Pronounced: 23.09.2026

PER VIJAY PAL RAO, VICE PRESIDENT:

This appeal by the Assessee is directed against the Order dated 10.10.2025 of the learned Addl/JCIT-(A)-4, Kolkata, for the assessment year 2008-2009. 2. The Assessee has raised the following grounds of appeal:

1)

1.

The order of the CIT(A) passed u/s 250 of the Act dated 10.10.2025 is erroneous both on facts and in law to the extent the order is prejudice to the interests of th

The order continues below.

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