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Income Tax Appellate Tribunal, HYDERABAD BENCH “A(SMC
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, A.M.:
This appeal filed by the assessee is directed against the order of CIT(A), Tirupati, dated 01/08/2018 for AY 2014-15.
Brief facts of the case are, the assessee, an individual, carrying on retail business of liquor, filed his return of income for the AY 2014-15 on 30/11/2014 declaring income of Rs. 9,36,770/-, which was processed u/s 143(1) of the Income-tax Act, 1961 ( in short ‘the Act’) accepting the income returned. Subsequently, the case was selected for scrutiny and accordingly notice u/s 143(2) was issued to the assessee on 28/08/2015. In response to the said notice, the AR of the assessee filed the required information called for.
2.1 The AO observed that the assessee has not submitted any sales invoice/documentary evidence in support of his claim that sales were made at a discounted price as against the MRP rate fixed by the Government. He opined that when the sales recorded were not
2 ITA No. 2055/Hyd/18 Kolla Madhusudhan, Nellore evidenced by any sale bills, it is difficult to arrive at the real profits of the business.
2.2 In view of the above observations, considering the nature of business carried on by the assessee and explanation given by the assessee for low net profit and the judicial settlement of the issue in the cases who are engaged in the trading of liquor, the AO estimated the income of the assessee @ 5% of the goods put for sale i.e., opening stock + purchases made as reduced by closing stock as shown in the profit & loss account for the year ended 31/03/2014 clear off all the expenditure claimed, the addition of which comes to Rs. 22,95,299/-.
When the assessee preferred an appeal before the CIT(A), the CIT(A) directed the AO to estimate the income at 4% on 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 commissioner of Income Tax (A) is not correct either on facts or in law and in both., 2. The learned Commissioner of Income Tax (A), failed to appreciate the fact that the income directed to be estimated at 4% on cost of goods put to sale is on higher side. 3. The appellant craves leave to add or amend or alter any of the grounds at the time of hearing of appeal.”
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 Wines in ITA No. 1206/Hyd/2015, dated 27/11/2015 for AY 2011-12, the coordinate bench has held as under:
3 ITA No. 2055/Hyd/18 Kolla Madhusudhan, Nellore “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.
In the result, appeal of the assessee is allowed.
Pronounced in the open Court on 3rd July, 2019.
Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 3rd July, 2019 kv
4 ITA No. 2055/Hyd/18 Kolla Madhusudhan, Nellore
Copy to:-
Kolla Madhusudhan, C/o Ch. Parthasarathy & Co., 1-1- 298/2/B/3, 1st Floor, Sowbhagya Avenue, St. No. 1, Ashoknagar, Hyderabad – 500 020. 2. ITO, Ward – 4, 24-2-438, 1st Floor, G.T. road, Dargamitta, Nellore – 524 001 3. CIT(A), Tirupati 4. Pr. CIT, Tirupati 5. The DR, ITAT, Hyderabad 6. Guard file