MADHURA WINES,HYDERABAD vs. INCOME TAX OFFICER, WARD-6(5), 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.

“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 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.

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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