Income Tax Appellate Tribunal - Hyderabad
Chandrababu Bitragunta, Hyderabad vs Income Tax Officer, Ward-11(1), ... on 29 November, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA No. 2272/Hyd/2017
Assessment Year: 2014-15
Chandrababu Bitragunta, vs. Income-tax Officer,
Hyderabad. Ward - 11(1), Hyderabad.
PAN - AOPPB6867 H
(Appellant) (Respondent)
Assessee by : Shri G. Ramakrishna
Revenue by : Shri Y.V.S.T. Sai
Date of hearing : 09/11/2018
Date of pronouncement : 29/11/2018
O RDE R
PER S. RIFAUR RAHMAN, A.M.:
This appeal filed by the assessee is directed against the order of CIT(A) - 5, Hyderabad, dated 22/09/2017 for AY 2014-15.
2. On perusal of record, we find that there was a delay of 27 days in filing this appeal before us by the assessee. In this connection, the assessee filed a condonation petition wherein it was stated that due to health problems and other disturbances in the family, the delay occurred in filing the appeal and the same may be condoned . An affidavit to this effect was also filed affirming the said reasons therein. Since there was a sufficient cause, we condone the delay and admit the appeal for hearing and adjudication.
3. Brief facts of the case are, the assessee , an individual carrying on trading in liquor, filed his return of income for the AY 2014 -15 on 22/09/2014 admitting income of Rs. 9,38,960/-, which was processed 2 ITA No. 2272/Hyd/17 Chandrababu Bitragunta, Hyd.
u/s 143(1) of the Income-tax Act, 1961. Subsequently, the case was selected for scrutiny under CASS to examine low income from TCS receipts - Liquor. Accordingly, the AO issued notices u/s 143(2) and 142(1) of the Act. In response to the said notices, the assessee furnished the information.
3.1 During the course of scrutiny proceedings, the AO asked the assessee to produce books of account and bills/vouchers for verification. Since the assessee failed to pro duce the books of account and the expenditure vouchers, the AO estimated the net profit in retail wines @ 5% of the purchases or stock put to sale during the year following the decision of the ITAT in the case of M/s Kanakadurga wines in ITA No. 217/Hyd/2 011, dated 18/05/.2012 and assessed the income of the assessee at Rs. 10,84,058/ -.
4. When the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the action of AO.
5. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal:
" 1. The order of the Hon'ble CIT(A) is erroneous in law as well as facts of the case.
2. The Hon'ble CIT(A) ought to have held that the action of the assessing officer with regard to rejection of account books as illegal, improper and without bringing any material on record.
3. The Hon'ble CIT(A) ought to have observed that the assesse maintained regular account books and vouchers and filed audited financial statements along with return of income and therefore the assessing officer ought not to have reje cted the book results declared.
4. The Hon'ble CIT(A) ought to have observed that estimation of profit at 5% in respect of IMFL business was injudicious and illegal and therefore ought to have accepted the book results declared by the assessee.
5. Any other ground will be raised at the time of hearing. "3 ITA No. 2272/Hyd/17
Chandrababu Bitragunta, Hyd.
6. Before us, ld. AR of the assessee submitted that during the AY under consideration, the assessee admitted net profit of Rs. 4,25,583/- from the business of trading in liquor/wines and the total purchases for the year for the said business are Rs. 2,16,73,331/ - while the opening stock was at Rs. 2,60,240/ -. He submitted that the sales are Rs. 2,19,33,571/- and the net profit works out to about 1.96% on cost of goods sold during the year. Therefore, h e submitted that the AO was wrongly estimated the net profit @ 5% on cost of goods sold during the year. He submitted that if an estimated net profit margin is to be applied, the same can be adopted @ 2.5% on cost of goods sold instead of 5% as has been adopted by the AO. For this proposition, he relied on the decision of the ITAT, Hyderabad.
7. Ld. DR, on the other hand, relied on the orders of revenue authorities.
8. Considered the rival submissions and perused the material on record. The coordinate benches of this Tribunal consistently taking a view that estimation of income at 3% of the cost of the goods sold is reasonable in this line of business. In the case of Sri Venkateswara Wines in ITA No. 1206/Hyd/2015, dated 27/11/2015 for AY 2011 -12, the coordinate bench has held as under:
"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 Wines, 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 ITA.No.1198/Hyd/2015 Sai Venkateswara Wines, Secunderabad the case of CIT vs. Kamlekar Shankar Lal (supra) to hold as under :4 ITA No. 2272/Hyd/17
Chandrababu Bitragunta, Hyd.
"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 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."
Therefore, we direct the AO to adopt 3% of the cost of goods of liquor sold as the income of the assessee.
9. In the result, appeal of the assessee is partly allowed.
Pronounced in the open Court on 29 t h November, 2018.
Sd/- Sd/-
(P. MADHAVI DEVI) (S. RIFAUR RAHMAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 29 th November, 2018
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Copy to:-
1) Shri Chandrababu Bitragunta, Flat No. 401, 4 th Floor, Goodwin Dwita Apartment, Pedso - 2 Colony, JJ Nagar, Yapral, Hyd. - 087
2) ITO, Ward - 11(1), Hyderabad.
3) CIT(A) - 5 Hyderabad.
4) Pr. CIT - 5, Hyd.
5) The Departmental Representative, I.T.A.T., Hyderabad.
6) Guard File