SURAJ HARJANI,HYDERABAD vs. INCOME TAX OFFICER, WARD-11(3), HYDERABAD

PER B. RAMAKOTAIAH, A.M. :

This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-5, Hyderabad, dated 22-08-2017, confirming the estimation of income at 5% on the liquor put to sale.

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contended before the Ld.CIT(A) that the Tribunal in the case of Venkateswara Wines, Nizamabad has held that profit can be estimated @ 2.5% and requested the CIT(A) to adopt the same. However, Ld.CIT(A) relying on various other cases of the Tribunal, confirmed the action of AO in determining the profit @ 5% of the cost of stock put to sale. Hence, assessee is aggrieved.

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the fact that books of account are to be rejected and the income is to be estimated. AO estimated the income @ 5% relying on various Co-ordinate Bench decisions, which was confirmed by the CIT(A). However, perusing the various orders indicate that a uniform net profit cannot be adopted in each and every case of similar business. The estimation of net profit may be on the basis of the facts involved in each and every case. In all the orders relied upon before us, estimation of income is varying from 2.5% to 5%. The latest order by the SMC Bench in the group case of Badri Srinivas Vs. ITO (supra) is @ 3%. In the said case, the Bench has considered the issue as under:

“11. I have carefully considered the rival submissions and perused the record. A.O. as well as Ld. CIT (A) have relied upon the decisions of the ITAT rendered in 2011 / 2012 whereas the Assessing Officer, under similar circumstances, made scrutiny assessments wherein the stringent change in policy as well as impact of the High Court directions were taken into consideration for the purpose of estimating the net income @ 3% and in fact in the later decisions of the Tribunal, the net income was estimated @ 3% of the cost of goods sold. Under these circumstances, consistent with the view taken by the Tribunal, cited (supra), I direct the A.O. to adopt 3% of the cost of the goods sold as the income of the assessees”.

5.1. Keeping in view the latest order of the SMC Bench and the reasons given therein, we are of the opinion that estimation of income @ 3% would be reasonable on the facts of the case. However, AO is directed to keep in mind that the estimated income does not fall less than the profit declared by assessee, in which case the profit declared by assessee should be accepted. Subject to above direction, AO is directed to

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estimate the profit @ 3% of the cost of stock put to sale and re-determine the total income, accordingly.

Order pronounced in the open court on 11th April, 2018

Sd/- Sd/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER

Hyderabad, Dated 11th April, 2018

TNMM

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