What did the Tribunal hold?

The Tribunal noted a difference of opinion among ITAT benches regarding the profit estimation percentage for liquor traders. Following a recent decision, the Tribunal directed the AO to estimate the income at 3% of the cost of sales.

The assessee, a retail liquor trader, appealed against the estimation of profit at 5% of the cost of sales. The Assessing Officer and CIT(A) had relied on previous ITAT orders to arrive at this percentage.

What were the issues?

The primary issue was the correct percentage to be applied for estimating profit on turnover for a retail liquor trader. The dispute centered on whether it should be 3% or 5%.

Satyam Cheerala vs ITO | ITAT Hyderabad 2018

Income Tax Appellate Tribunal, HYDERABAD BENCH “A-SMC”, HYDERABAD

Before: SHRI J. SUDHAKAR REDDY

For Appellant: Shri Kiran for Shri S. Rama Rao

For Respondent: Shri M. Naveen

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH “A-SMC”, HYDERABAD BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA No. 1789/Hyd/2017 Assessment Year: 2014-15 Sri Satyam Cheerala, vs. ITO, Hyderabad. Ward-11(3), Hyderabad. PAN- ACVPC5826H (Appellant) (Respondent) Assessee by : Shri Kiran for Shri S. Rama Rao Revenue by : Shri M. Naveen Date of hearing : 11-05-2018 Date of pronouncement : 11-05-2018 ORDER PER SHRI J. SUDHAKAR REDDY, AM: This appeal is filed by the assessee directed against the order of the Ld. CIT(A)-5, Hyderabad, dated 22.08.2017 for the A.Y 2013-14 passed u/s 250 of the IT Act, 1961 (the Act).

The assessee is a retail trader in liquor. The sole issue that arises for my adjudication is whether the estimation of profit as a percentage of turnover should be 3% or 5%. The Ld. CIT(A) as well as the A.O referred to certain different orders of the Hyderabad Bench of the ITAT delevered in various cases and estimated the profit at the rate of 5% of the cost of sales of stock.

2 ITA No. 1789/Hyd/2017 Shri Satyam Cheerala, Hyderabad. 3. The assesse before us relied on a number of orders of the Hyderabad Bench of the Tribunal, the latest being Shri Late Mushkam, Adilabad in ITA No. 95/Hyd/2017 dated 28.04.2017, for the proposition that, the income has to be estimated @ 3% of the cost of sale of stocks for the year.

After hearing rival contentions I find that there is a cleavage of opinion between different benches of the ITAT on this issue as to whether the percentage should be 3% or 5%. As the decision in the case of Shri Late Mushkam, Adilabad (supra), and in the case of Shri Badri Srinivas and others Vs. ITO in ITA Nos. 1515, 1516, 1517 & 1518/Hyd/2017, dated 08.02.2018 which is the latest order’s on this issue, I prefer to follow the same and direct the A.O to estimate the income of the assessee @ 3% of cost of sales of stock for the impugned assessment year.

In the result this appeal of the assessee is allowed in part. Pronounced in the open court on 11th May, 2018.

Sd/- (J. SUDHAKAR REDDY) ACCOUNTANT MEMBER Hyderabad, Dated: 11th May, 2018.

3 ITA No. 1789/Hyd/2017 Shri Satyam Cheerala, Hyderabad. KRK 1) Shri Satyam Cheerala, 6-3-131/35/A&B, Narsapur X Roads, Balanagar Mandal, Hyderabad - 37 2) The ITO, Ward-11(3), Hyderabad. 3) CIT(A) -5, Hyderabad. 4) The Pr.CIT(A)-5 Hyderabad. 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File

SATYAM CHEERALA,HYDERABAD vs. INCOME TAX OFFICER, WARD-11(3), HYDERABAD

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