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Income Tax Appellate Tribunal, HYDERABAD BENCH “B”, HYDERABAD
Before: SHRI D. KARUNAKARA RAO & SHRI V. DURGA RAO
PER V. DURGA RAO, A.M.:
Both these appeals filed by the assessee are directed against the orders of CIT(A) – 6, Hyderabad for the AYs 2013-14 & 2014-15. As identical issues are involved in both these appeals, they were clubbed and heard together and therefore, a common order is passed for the sake of convenience.
Brief facts of the case as taken from AY 2013-14 are, the assessee is the proprietor of M/s K.V.K. Wines engaged in retail trading of alcoholic liquor, filed his return of income for the AY 2013- 14 on 21/09/2013 admitting income of Rs. 11,62,560/-, which was processed u/s 143(1) of the Income-tax Act, 1961 ( in short ‘the Act’). Subsequently, the case was selected for scrutiny u/s CASS and accordingly notices u/s 143(2) and 142(1) were issued and served on the assessee. In response to the said notice, the AR of the assessee
2 ITA Nos. 312 & 613/Hyd/18 Dharmendar Reddy Pathuri, Hyd. filed the required information called for, namely, books of account, etc.
2.1 During the course of assessment proceedings, the AO observed that the assessee could not produce the invoices/bills particularly sale invoices. In the absence of the same, the assessee was asked about the basis for recording of sales in the books of account and was asked to substantiate the same with the sale invoices/bills issued. In response to the same, it was replied that in the line of wine shop business, it is difficult to maintain sale bills and hence the assessee has not maintained any sale bills. The AO, therefore, proceeded to estimate the income of the assessee @5% net of all deductions including interest and remuneration paid to partners.
When the assessee preferred an appeal before the CIT(A), the CIT(A) directed the assessee to estimate the profits @ 4% of cost of goods put to sale.
Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal:
“1. The order of the learned CIT(Appeals) confirming the order of the AO is erroneous both on facts and in law in so far as it is prejudicial to the assessee. 2. The learned CIT(A) erred in confirming the estimation of income at 4% on Stock put to sale by merely following some the decisions of the I.T.A.T., that are rendered on the basis of earlier Excise Act without appreciating the submissions on the new excise policy and a later decision of the I.T.A.T., in the case of Late Shri Mushkam, Adilabad in ITA No.94/Hyd/2017, Dt.28-4-2017.”
Considered the rival submissions and perused the material on record. The coordinate benches of this Tribunal consistently taking a view that estimation of income at 3% of the cost of the goods sold is reasonable in this line of business. In the case of Sri Venkateswara
3 ITA Nos. 312 & 613/Hyd/18 Dharmendar Reddy Pathuri, Hyd. Wines in ITA No. 1206/Hyd/2015, dated 27/11/2015 for AY 2011-12, the coordinate bench has held as under:
“5. Having regard to the rival contentions and the material on record, we find that the assessee has not maintained any books of account and therefore, the estimation of income is justified. It is only the rate at which the income is to be estimated is before us. A.O. has estimated the income 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, Nizamabad (supra), the Coordinate Bench of this Tribunal has taken note of the decision of Hon'ble High Court of Telangana and Andhra Pradesh in ITA.No.1198/Hyd/2015 Sai Venkateswara Wines, Secunderabad the case of 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 assessee but the assessee had failed to produce the same. Therefore, AO had estimated the 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 assessee carrying on the same business of sale of IMFL has estimated the income at 5% of the turnover. This, in our view, is not justified as held by the Coordinate Bench of this Tribunal. The 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 in 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."
Therefore, we direct the AO to adopt 3% of the cost of goods of liquor sold as the income of the assessee. Accordingly, grounds raised by the assessee on this issue are partly allowed.
As the facts and grounds in AY 2014-15 are materially identical to that of AY 2013-14, following the conclusions drawn therein we direct the AO to adopt 3% of the cost of goods of liquor sold as the income of the assessee. Accordingly, grounds raised in this AY are partly allowed.
4 ITA Nos. 312 & 613/Hyd/18 Dharmendar Reddy Pathuri, Hyd.
In the result, both the appeals under consideration are partly allowed. Pronounced in the open Court on 4th December, 2019.
Sd/- Sd/- (D. KARUNAKARA RAO) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 4th December, 2019 Kv
Copy to:-
Dharmendar Reddy Pathuri, C/o S/Shri K. Vasantkumar, AV Raghuram, P. Vinod & M. Neelima Devi, Advocates, 610 Babukhan Estate, Basheerbagh, Hyderabad – 500 001. 2. ITO, Ward – 10(4), Hyderabad. 3. CIT(A) – 6, Hyderabad 4. Pr. CIT – 6, Hyderabad 5. The DR, ITAT, Hyderabad 6. Guard file