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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
ITA No 283 of 2018 Madhura Wines Hyderabad.
IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad Before Smt. P. Madhavi Devi, Judicial Member AND Shri S.Rifaur Rahman, Accountant Member ITA No.283/Hyd/2018 (Assessment Year: 2014-15) M/s. Madhura Wines Vs Income Tax Officer Hyderabad Ward 6 ( 5 ) PAN: AAVFM3296K Hyderabad (Appellant) (Respondent) For Assessee : Shri S. Rama Rao For Revenue : Shri Nilanjan Dey, DR Date of Hearing: 08.11.2018 Date of Pronouncement: 15.11.2018 O R D E R Per Smt. P. Madhavi Devi, J.M. This is assessee’s appeal for the A.Y 2014-15 against the order of the CIT (A)-6, Hyderabad, dated 03.10.2017. The assessee has raised the following grounds of appeal: “ 1. The order of the learned CIT (A) is erroneous both on facts and in law. 2. The learned CIT (A) erred in rejecting the books of account and resorting to estimation of income. 3. The learned CIT (A) erred in upholding the estimation of profit at 5% without considering the circumstances in which the trade was carried on during the financial year 2013-14. 4. The learned CIT (A) erred in rejecting the ground that the remuneration and interest paid to partners is an allowable deduction even after resorting to estimation of income.
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ITA No 283 of 2018 Madhura Wines Hyderabad.
The learned CIT (A) erred in confirming charging of interest u/s 234B of Rs.1,64,934 and u/s 234D of Rs.1,08,543/-. 6. Any other ground or grounds that may be urged at the time of hearing”.
Brief facts of the case are that the assessee, engaged in the business of running a retail wine shop, filed its return of income for the A.Y 2014-15 on 31.08.2014 declaring total income of Rs.6,80,940. During the assessment proceedings u/s 143(3) of the Act, the AO required the assessee to produce the books of account. The assessee submitted that it is not in a position to produce the books of account and admitted the income on estimation basis. The AO estimated the income at 5% of the cost of goods put to sale at Rs.49,87,489. Aggrieved, the assessee filed an appeal before the CIT (A) who upheld the order of the AO. Aggrieved, the assessee is in second appeal before us.
As regards grounds 2 and 3 with regard to estimation of income, we find that this issue is covered in favour of the assessee by various decisions of the Tribunal wherein we have upheld the estimation of income at 3% of the cost of goods put to sale. The relevant portion of the order of the Tribunal in the case of Sri Venkateswara Wines, Secunderabad in ITA No.1206/Hyd/2015 is reproduced hereunder for the sake of ready reference.
“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 W ines, Nizamabad (supra), the
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ITA No 283 of 2018 Madhura Wines Hyderabad.
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 W ines, 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”. 4. Respectfully following the decision of the Coordinate Bench (to which both of us are signatories), the AO is directed to estimate the net profit at 3% of the cost of goods put to sale. The assessee’s appeal is accordingly allowed.
As regards Grounds 4, we find that the assessee is seeking deduction of the remuneration and the interest paid to the partners from the interest which is estimated @ 3% of the cost of the goods put to sale. In all the cases where we have estimated the income @ 3% of the cost of the goods put to sale; the contention of the respective assessees has been considered to hold that the net income of the assessee from business is 3% of the cost of the goods put to sale. Thus, the estimation itself takes care of the expenses such as remuneration and interest paid to
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ITA No 283 of 2018 Madhura Wines Hyderabad.
the partners of the assessee-firm. Therefore, we find no reason to interfere with the order of the CIT (A) on this issue.
In the result, assessee’s appeals is partly allowed.
Order pronounced in the Open Court on 15th November, 2018.
Sd/- Sd/- (S.Rifaur Rahman) (P. Madhavi Devi) Accountant Member Judicial Member Hyderabad, dated 15th November, 2018. Vinodan/sps Copy to: 1 M/s. Madhura Wines, 8-3-224/3/6 G-2 Madhura Nagar, Yousufguda, Hyderabad 500038 2 ITO Ward 6(5) IT Towers, AC Guards, Hyderabad 3 CIT (A)-6 Hyderabad 4 Pr. CIT – 6 Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order
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