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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Smt. P. Madhavi Devi & Shri B. RamakotaiahShri Kuna Anjibabu Goud
Per Smt. P. Madhavi Devi, J.M.
This is assessee’s appeal for the A.Y 2013-14. In this appeal, the assessee is aggrieved by the order of the learned CIT (A)-6, Hyderabad, dated 7.4.2017. The assessee has raised the following grounds of appeal: “1. Your appellant is an individual carrying on the business of running a wine shop for purchase and sale of IMFL supplies solely by APBCL a State Govt. Agency.
The learned assessing officer completed the assessment after applying 5% as net profit to the cost of Goods sold during the year and making an addition of Rs. 41,70,601/- to the Income returned.
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ITA No 976 of 2017 Kuna Anjibabu Goud Hyderabad.
The first Appellate Authority has erred in confirming the additions made by the assessing officer
Your appellant submits that he has been maintaining proper books of accounts which have been subject to audit U / s 44 AB of the Income Tax Act which were duly examined by the assessing officer to his satisfaction.
The learned assessing officer has not considered the facts of the case laws that the Hon'ble Income Tax Appellant Tribunal held in
i) Appeal No. ITA / 517 H - 13, Bench, Hyderabad in the case of Sai Cine Wines, Hyderabad Vs. ITO Ward 6(3) dated 18-12- 2015.
ii) Appeal No. 1198/Hyd/2015 in the case of M/s Sai Venkateshwara Wines, Secunderabad and in
iii) Appeal No. 725/Hyd/2015 in the case of Venkateshwara Wines, Nizamabad that adoption of 5% as net profit is incorrect and adopted 3% and 2.5% respectively.
Your appellant submits that the addition to the Income returned is incorrect, arbitrary and application of section 145 of the Income Tax Act. is bad in law hence the addition may be deleted.
Your appellant craves leave to add, amend and alter any of the Grounds at the time of hearing”.
Brief facts are that the assessee, an individual, filed his return of income for the A.Y 2013-14 on 28.09.2013 declaring an income of Rs.15,84,430 from trading of liquor. The return of income was selected for scrutiny under CASS and accordingly
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ITA No 976 of 2017 Kuna Anjibabu Goud Hyderabad.
notice u/s 143(2) was issued and served on the assessee on 6.9.2014. In response to the said notice, the assessee, represented by its Counsel, appeared and furnished the necessary details. The AO observed that the assessee has failed to produce the books of account, sale bills and bills/invoices/vouchers for the expenditure claimed and stated that it is difficult to raise the sale bills in this line of business as it is very difficult to issue the bills for the sale due to heavy rush of public at the sale counters. The AO held that it is difficult to arrive at the real profit of the business without the sale bills and since the expenditure is also not verifiable, the trading results cannot be accepted. He therefore, estimated the income of the assessee at 5% of the goods put to sale. Aggrieved, the assessee preferred an appeal before the CIT (A) who confirmed the order of the AO and the assessee is in second appeal before us.
The learned Counsel for the assessee relied upon the decisions of this Tribunal in the cases referred to in Ground No.4.
The learned DR, on the other hand, supported the orders of the AO and the CIT (A).
Having regard to the rival contentions and the material on record, we find that the only issue before us is the estimation of profit from the business of trading in liquor. The CIT (A) has considered the issue at length and as per the information accessed from the public domain has held that the trade margin in such cases is 20% and that the gross profit shown by the assessee at 13.5% is very less compared to the above. She has
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ITA No 976 of 2017 Kuna Anjibabu Goud Hyderabad.
also held that if trade margin is taken at 20%, the gross profit of the business should be estimated at 2.35 crores and if all the expenses debited to the P&L A/c by the assessee amounting to Rs.1.05 crores were to be allowed, the net profit would work out to Rs.85.00 lakhs which is higher than the net profit assessed at Rs.49.88 lakhs by the AO. Thus, we find that the CIT (A) has given cogent reasons for upholding the estimation of book profit at 5%. In the case law relied upon by the learned Counsel for the assessee, the Tribunal has considered that uniformity in the profit cannot be adopted in each and every case of similar business and that the estimation of net profit must be on the basis of facts involved in each and every case. Since in the case before us, the AO and the CIT (A) have brought out as to how the assessee’s profit as per its own books of account is much more than the net profit assessed by the AO, we see no reason to interfere with the same. 6. In the result, assessee’s appeal is dismissed. Order pronounced in the Open Court on 12th January, 2018. Sd/- Sd/- (B.Ramakotaiah) (P. Madhavi Devi) Accountant Member Judicial Member
Hyderabad, dated 12th January 2018. Vinodan/sps Copy to: 1 M/s. Pissay & Co. CAs, 701, 7th Floor, Paigah Plaza, Basheerbagh Hyderabad 500063 2 I.T.O Ward 10(1) 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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