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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B” BENCH: HYDERABAD
Before: SHRI V. DURGA RAO & SHRI RIFAUR RAHMAN
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B” BENCH: HYDERABAD BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA. No.1140/Hyd/2018 Assessment Year: 2014-15 Doonuru Sanjeeva Reddy, vs. Income Tax Officer, Proprietor Golden Wines, Range-11(1), Hyderabad. Hyderabad. PAN: AGOPD 8934 E (Appellant) (Respondent) For Assessee: Shri T. Srinivasa Murthy For Revenue : Shri Rajeev Benjwal, DR Date of Hearing : 05.03.2019 Date of Pronouncement : 13.03.2019 ORDER PER V. DURGA RAO, JM. This appeal filed by the assessee is directed against the order passed by the Ld. CIT(A)-5, Hyderabad and it pertains to A.Y. 2014-15. The assessee has raised the following grounds of appeal:
The Appellate Authority erred in not appreciating the tact at declaration at 3.17% Net profit on the purchase value of liquor put to retail sale in spite of the fact that. there is exorbitant increase in the Annual Excise License Fee and restrictions put on freedom of trade in the Excise Policy of granting Retail Liquor License in the orders of Commissioner of Income Tax (Appeals)-5 in Appeal No .0248/20 I 6-1 7 doled 16-03-2018 served on the appellant on 02-04-2017 through Post (herein offer referred to as the impugned order) and the same is illegal arbitrary and against the cannons of law to the extent of the income addition by estimation of 5% to net Profit of Rs.12,35,920/- [Difference between assessed income of Rs.40,00,700/- and income declared of Rs.2,77, 64,780/-] disputed in this Appeal.
The Appellate Authority has erred in not appreciating the fact 0' submission of the Audited Books at accounts along with vouchers before the Assessing Authority excepting sale bills as evidenced by para No.4 of the Assessment Order. 3. The Appellate Authority has not reviewed the facts and circumstances at the case relied on by the Assessing Authority i.e Kanaka Durga Wines ITA No. 591/Hyd/2011, dl. 28/07/2011 for the Assessment year 2004-05, more particularly, the Excise Policy of the relevant year with regard to Excise License fee and the other conditions at issue of Excise License. The facts and circumstances are not comparable to the Assessment year 2014-15. The major change is The Excise License Fee for 2004-05 is Rs.12,30,000/- per year with complete freedom of trade to purchase any amount of stock and whereas tor the Assessment year 2014-15, the Excise License fee is Rs.1,04,00,000/- per annum and the Appellant cannot lift the stock more than 6 times to the license Fee but the MRP is remaining unaltered the same with 20 to 27% depending upon the class of liquor. 4. The Appellate Authority has erroneously concluded that, (page No. 13 first para) "the license fee increase has also simultaneously resulted in increase in MRP" which is not correct. 5. The Appellate authority has not appreciated that fact that, the total expenditure incurred by the Appellant as per Profit & Loss Account, Rs.20,32,799/- which is just 2.092% of the sale turnover and whereas the Excise Licence & Excess Lifting fee of Rs.1,22,37,779/-which is 12.60% of sales and the Appellant has declared 3.17% of net profit on the purchase value put to sale. 6. The Appellant rely on the decisions of ITAT orders relating to estimation of net profit on the value of goods put to sale for retail liquor trade where the books of accounts relating to sale bills were not available, @ 3% in the following cases: - (a) for the assessment year 2011-12 in the case of Secunderabad Wines Vs ITO Ward 10(4) Hyderabad, in ITA NO.181/HYd/2016 dated 20-07-2016 (b) For the Assessment year 2011-12 in the case of Sai Venkateswara Wines Vs ITO Ward 10(2) Hyderabad in ITA No.1198/HyD/20 15 dt 20-11-2015 (c) For the Assessment year 2010-11 in the case of Venkateswara Wines Vs ITO Ward 1 Nizamabad in ITA No.725/HyD/2015 dt 0409-2015
The Appellate Authority erred in relying on the Honorable ITAT i.e.. Jurisdictional Tribunal Orders relating to the assessment years wherein the Excise Policy and fee and terms and conditions are not at all comparable to the assessment year 2013-14.
The Honorable Appellate Authority erred in not appreciating the fact of increase in the Annual Excise license Fee from to RS.l,04,00,000/-(Rs.29,714/- per day) on account of the Excise Policy of the State in the relevant Financial Year and also restriction imposed on the Retail liquor Shop from purchasing only 6 times to the license Fee and any additional purchases were subjected to additional levy of 14.5% Excess lifting fee on which the appellant will not be able to get any margin after meeting the cost of excise License Fee. As such the Appellant authority has erred in confirming 5% Net Profit on the liquor put to sale and accordingly the impugned order is liable to be set aside while considering 3.17% net profit declared by the Appellant to meet the ends of justice. 9. Any other ground/s urged at the time of hearing of the appeal may kindly be permitted as main grounds of appeal.” 2. Brief facts of the case are that the assessee, an individual, engaged in retail liquor business, filed the return of income for the A.Y. 2014-15 admitting an income of Rs. 27,64,780/-. During the course of scrutiny proceedings, assessee was asked to furnish books of accounts and bills / vouchers for verification. Considering the assessee’s failure to furnish the evidence in support of his claim that the profit in this line of business is around 3%, as shown in the books of account, A.O. relied upon the decision of the ITAT in the case of M/s. Kanakadurga Wines in ITA No.217/Hyd/2011, dated 18/05/2012 and estimated the profit @ 5% on cost of stock put to sale amounting to Rs. 40,92,272/- and completed the assessment u/s 143(3) of the Act determining the assessed income at Rs. 40,00,700/-. 3. Aggrieved, assessee preferred an appeal before the CIT(A), who confirmed the decision of the A.O. of estimating the profit @ 5% of the
cost of stock put to sale. Further aggrieved, assessee is in appeal before the Tribunal by raising the above mentioned grounds of appeal.
At the time of hearing, Learned Counsel for the Assessee submitted that the issue involved in this appeal is covered in favour of the assessee by the decision of 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. 5. 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”. 7. 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. 8. In the result, appeal filed by the assessee is allowed.
Order 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, Sr.PS Copy to 1. T. Srinivasa Murthy, Advocate, 3-5-1107, 4th Floor, Narayanaguda, Hyderabad-29. 2. Income Tax Officer, Ward-11(1), 10th Floor, Signature Towers, Botanical Gardens, Kondapur, R.R. District. 3. CIT (A)-5, Hyderabad. 4. Pr. CIT-5, Hyderabad. 5. DR, ITAT, Hyderabad. 6. Guard File