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Income Tax Appellate Tribunal, HYDERABAD BENCH “B”, HYDERABAD
Before: V. DURGA RAO & SHRI S. RIFAUR RAHMAN
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “B”, HYDERABAD BEFORE V. DURGA RAO, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA Nos. 2109 & 2110/Hyd/2017 Assessment Years: 2013-14 & 2014-15 Sri Narsi Reddy Pylla, Vs. ITO, Hyderabad. Ward-15(2), PAN: AKHPP 1127 G Hyderabad. (Appellant) (Respondent) Assessee by: Sri A. Kiran Manohar Revenue by: Smt. M. Narmada, DR Date of hearing: 07/03/2019 Date of pronouncement: 13/03/2019 ORDER PER V. DURGA RAO, J.M.:
Both the appeals are filed by the assessee against the different orders of the CIT(A)-7, Hyderabad commonly dated 20/10/2017 for the assessment years 2013-14 and 2014-15.
In ITA No.2109/H/2017, the assessee has raised the following grounds of appeal:
“1. The order of the CIT(A) is erroneous both on facts and on law. 2. The Ld. CIT(A) erred in confirming the action of the Assessing Officer in rejecting the books of account. 3. The Ld. CIT(A) erred in estimating the income at 5%, without appreciating the facts stated before him.”
Brief facts of the case are that the assessee, an individual, carrying on retail trading of liquor, filed return of income admitting total income of Rs. 3,21,660/-. During the assessment proceedings u/s 143(3) of the Act, the A.O. observed that the assessee carrying on the business of sale of IMFL brands and made turnover of Rs. 5,18,69,321/- with a net profit of Rs. 1,81,400/- and requested the A.O. to confirm the estimation of income @ 3% on the cost of goods put to sale. On observing that the assessee is not maintaining proper book of account and therefore, failed to produce before him when called for, A.O. proceeded to estimate the income at 5% of the stock put to sale.
Aggrieved, assessee carried the matter in appeal before the CIT(A), who confirmed the order of the A.O. and the assessee is in further appeal before the Tribunal by raising the above mentioned grounds of appeal.
The Learned Counsel for the Assessee submitted that similar issue had come up for consideration before this Tribunal in a number of cases, wherein the Tribunal has estimated the profit from sale of liquor @ 3% of the stock put to sale. He therefore prayed that similar direction may be given to the A.O.
Learned Departmental Representative, however, supported the orders of the authorities below.
Having regard to the rival contentions and the material on record, we find that the assessee is involved in retail business of liquor and therefore, could not furnish the relevant books of account properly. Therefore, A.O. has estimated the income @ 5% of the cost of goods put to sale and the CIT(A) has confirmed the same. In similar circumstances, this Tribunal, in the case of Sri Venkateswara Wines, Secunderabad in ITA No.1206/Hyd/2015 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 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 ITA.No.1206/Hyd/2015 Sai Venkateswara Wines, Secunderabad 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." 5.1. In the case before us, the assessee is agreeable to the estimation of income at 3% of the cost of goods sold. As the facts before us are similar to the facts before the Tribunal in the case of Venkateswara Wines, Nizamabad (supra) and the uniform rate of profit cannot be adopted in the case of every assessee in similar business, we allow ground No.2 of the assessee”.
Respectfully following the decision of the Coordinate Bench, the AO is directed to estimate the net profit at 3% of the cost of goods put to sale. Accordingly, Grounds raised by the assessee are allowed. 9. In the result, appeal filed by the assessee is allowed.
ITA No. 2110/Hyd/2017 (A.Y. 2014-15)
In this appeal, assessee has raised the following grounds of appeal:-
“1. The order of the CIT(A) is erroneous both on facts and in law. 2. The Ld. CIT(A) erred in confirming the action of the Assessing Officer in rejecting the books of account. 3. The Ld. CIT(A) erred in estimating the income at 5% without properly appreciating the facts stated before him. 4. The Ld. CIT(A) erred in confirming the action of the Assessing Officer in separately adding incentives received of Rs. 1,50,500/- and Rs. 51,400/- representing sae of cartons particularly when the Assessing Officer resorted to estimation of income by rejecting the book results.”
Grounds No.1 to 3 relates to the correctness of estimation of income @ 5%, where the assessee is engaged in the business of liquor and where the assessee is not maintaining the proper books of account. Similar issue had come up for consideration before this Tribunal in a number of cases, wherein the Tribunal has estimated the profit from sale of liquor @ 3% of the stock put to sale. In similar circumstances, this Tribunal, in the case of Sri Venkateswara Wines,
Secunderabad in ITA No.1206/Hyd/2015 has held that uniform rate of estimation of income in all the cases is not proper and considering the factual matrix of this case, we respectfully follow the consistent view taken by the ITAT and direct the A.O. to estimate the profit @ 3% of the stock put to sale. Accordingly, grounds no. 1 to 3 raised by the assessee are allowed. 12. Ground no.4 relates to addition of Rs. 1,50,500/- and Rs. 51,400/-. The case of the assessee is that the assessee has received incentives to the extent of Rs. 1,50,500/- and sale of cartons of Rs. 51,400/- and the same cannot be added to the total income of the assessee when the income is estimated. The assessee could not furnish any details to substantiate the claim of incentives neither before the A.O. nor before the CIT(A). Even before us, assessee could not improve his case and no details of documentary evidence were submitted. Therefore, we see no reason to interfere with the decision of the CIT(A) and the ground raised by the assessee is dismissed.
In the result, appeal filed by the assessee is partly allowed. Pronounced in the open Court on 13th March, 2019.
Sd/- Sd/- (S. RIFAUR RAHMAN) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 13th March, 2019
OKK
Copy to:- 1) C/o. B.V. Prasad, 8-3-903/8A, Nagarjuna Nagar, Yellareddyguda, Ameerpet, Hyderabad-500073. 2) ACIT, Ward 15(1), Hyderabad. 3) The CIT(A)-7, Hyderabad 4) The Pr. CIT-7, Hyderabad 5) The DR, ITAT, Hyderabad 6) Guard File