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Income Tax Appellate Tribunal, HYDERABAD BENCHES “SMC” HYDERABAD
Before: SHRI K.NARASIMHA CHARY
आदेश / ORDER Aggrieved by the order dated 30/02/2024 passed by the learned Commissioner of Income Tax (Appeals)- Na�onal Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), in the case of Sri Vidya Gangam, (“the assessee”) for the assessment year 2016-17, assessee preferred this appeal. 2. Brief facts of the case are that facts of the case are that the assessee is carrying on the business of retail trading in Indian made foreign liquor. She filed her return of income for the assessment year 2016-17 on 27/8/2016 declaring a total income of ₹ 6,69,290/-. During scru�ny assessment, learned Assessing Officer found that the assessee was maintaining the sales bills and therefore it was difficult to determine the profit. Learned Assessing Officer, therefore, followed the decision of the Tribunal in the case of Kanakadurga Wines vs. ITO in /Hyd/ 2011 and other cases wherein the es�mate of net profit was done at the rate of 3% to 5% of the purchases, and es�mated the income of the assessee at 5% of the stock put for sale and added a sum of ₹ 15,85,133/- towards business income.
In appeal, Ld. CIT(A) held that since the assessee has not been maintaining the cash memos for cash sales, learned Assessing Officer rightly followed the decision of the jurisdic�onal ITAT and es�mated the income at 5% of the turnover, and there are no grounds to interfere with such es�mate. He accordingly confirmed the addi�on on account of business income.
Assessee, therefore, preferred this appeal contending that the rate of es�ma�on of the net profit in liquor trade varies from case to case and there is no rule that 5% of the turnover shall invariably be fixed in liquor trade de hors the varia�on in facts. He submi�ed that there are also judgements of the Tribunal where the net profit was es�mated at 3% of the turnover in the sale, and therefore keeping in view the levy of privileged fee from the year 2012, es�mate of net profit at 3% would meet the ends of jus�ce.
Per contra, Ld. DR submi�ed that had the assessee maintained the sales bills, which are vital to arrive at the turnover of a businessman, the es�mate has become impera�ve, and therefore, the best judgement exercised by the learned Assessing Officer by es�ma�ng the profit of the assessee at 5% of the turnover cannot be found fault with.
I have gone through the record in the light of the submissions made on either side. Insofar as the es�mate is concerned learned Assessing Officer placed reliance on the decision of the Tribunal rendered in the case of M/s. Kanakadurga Wines (supra) and other cases. As observed by the Hon'ble High Court, the profit percentage to be adopted differs from case to case. Apart from that fact, subsequently the privilege fees is introduced and according to the learned AR it reduced the profit margin. Having regard to the facts and circumstances of the case and taking a holis�c view, we are of the considered opinion that the es�mate of net profit of the assessee at 3% of the turnover would meet the ends of jus�ce. We accordingly direct the learned Assessing Officer to recompute the income of the assessee.